Paid Family Leave: What Does the Research Say?

Abstract

Paid family leave policies improve maternal and infant health outcomes, increase female labor force attachment when leave durations are moderate, and modestly improve gender equity in caregiving — but very long leave entitlements can reduce women's earnings and career advancement. The evidence supports well-designed paid leave programs, particularly those with wage replacement and job protection, while cautioning against overly long durations that risk reinforcing gendered career penalties.

Background

The United States is one of the few high-income countries without a national paid family leave policy, relying instead on the unpaid Family and Medical Leave Act and a patchwork of state programs. Proponents argue paid leave improves health outcomes, labor market attachment, and gender equity. Opponents argue it imposes costs on employers and may reduce female hiring. The international evidence from Europe and Australia, and the domestic evidence from California, New Jersey, New York, and other state programs, now allows for empirically grounded assessment of these claims.

The Evidence

Paid leave improves infant and maternal health outcomes. Studies consistently find that access to paid maternity leave is associated with improved birth outcomes, increased breastfeeding rates, lower infant mortality, and reduced postpartum depression. Rossin (2011, Journal of Health Economics) found that FMLA (unpaid leave) implementation in the US was associated with small improvements in birth weight and infant health, suggesting paid leave with higher take-up rates would have larger effects. Scandinavian evidence, where paid leave is longer and more complete, shows larger effects on infant health indicators.

Moderate paid leave improves women's long-term labor market outcomes. This is the more complex finding. Moderate leave durations (3–6 months) with job protection appear to improve female labor force participation and reduce the career penalties associated with childbirth. Rossin-Slater et al. (2013, American Economic Journal: Economic Policy) evaluated California's paid leave program — the first US state program — and found it increased leave-taking among new mothers without reducing their employment or earnings in subsequent years. Similar results were found in New Jersey and Washington state.

Very long leave durations can harm women's career outcomes. The Scandinavian evidence shows a complicated picture: extremely long leave entitlements (more than 12 months) are associated with reduced female wages and career advancement over time, even if they improve immediate health and wellbeing outcomes. Kleven et al. (2019, American Economic Review) documented what they call the "child penalty" in earnings — the earnings gap between mothers and fathers following childbirth — and found it is largest in countries with long maternity leave entitlements, because such policies encourage gender specialization in caregiving. The "daddy quota" — non-transferable paternity leave reserved for fathers — is associated with reduced child penalties.

Take-up rates are lower among low-income workers without adequate wage replacement. In the US state programs, leave-taking was higher among higher-income workers partly because low-income workers cannot afford to take leave at partial wage replacement rates. This means poorly designed paid leave can be regressive, primarily benefiting those who could partially afford leave already. Federal programs with higher replacement rates would more equitably distribute leave-taking.

Employer costs are modest and do not translate to reduced female hiring. Studies examining US state programs found no evidence that paid leave legislation reduced female hiring, despite this being the primary employer concern. Small businesses may bear proportionally higher administrative costs, but these have not been found to translate into reduced employment of women.

Shared/paternity leave modifies gender dynamics. Programs that include dedicated paternity leave — used specifically by fathers — are associated with increased father involvement in childcare that persists beyond the leave period, and modest reductions in the gendered earnings penalty. Iceland's reform to triple-split leave (equal portions for mother, father, and shared) significantly increased paternity leave take-up.

Counterarguments

Small business burden is a legitimate concern. For businesses below FMLA thresholds (fewer than 50 employees), paid leave policies create coverage challenges, particularly in industries with thin margins and limited substitutable labor. Thoughtful design — including payroll insurance mechanisms — can mitigate but not eliminate these costs.

Evidence from universal programs may not transfer to the US context. Scandinavian evidence comes from countries with substantially different labor markets, stronger social trust, and existing universal childcare. US-specific effects may be more modest.

What We Can Conclude

The evidence supports paid family leave as a policy that improves infant and maternal health, maintains female labor force participation when durations are moderate, and can be designed to reduce gender earnings penalties through paternity leave inclusion. The US is an outlier among high-income countries in lacking a national program. Key design parameters matter: wage replacement rates should be high enough for low-income workers to afford taking leave; durations should be moderate (3–6 months of primary caregiver leave) with dedicated paternity leave; and job protection must accompany the leave entitlement.

References

• Rossin, M. (2011). The effects of maternity leave on children's birth and infant health outcomes in the United States. Journal of Health Economics, 30(2), 221–239.
• Rossin-Slater, M., Ruhm, C. J., & Waldfogel, J. (2013). The effects of California's paid family leave program on mothers' leave-taking and subsequent labor market outcomes. Journal of Policy Analysis and Management, 32(2), 224–245.
• Kleven, H., Landais, C., Posch, J., Steinhauer, A., & Zweimüller, J. (2019). Child penalties across countries: Evidence and explanations. AEA Papers and Proceedings, 109, 122–126.
• Dahl, G. B., Løken, K. V., Mogstad, M., & Salvanes, K. V. (2016). What is the case for paid maternity leave? Review of Economics and Statistics, 98(4), 655–670.
• Blau, F. D., & Kahn, L. M. (2013). Female labor supply: Why is the US falling behind? American Economic Review, 103(3), 251–256.