Paid Leave Encourages Female Employees to Stay

A mysterious fact that economists are wrestling with is that the percentage of women in the United States who are working or want to work has been declining, after a decades-long climb.

The drop is small (and less dramatic than the decline of men in the labor force) but is contributing to a dip in overall labor force participation, which policy makers see as an impediment to economic recovery.

A series of changes helped women enter the work force in the last three decades of the 20th century, including the Civil Rights Act, the earned-income tax credit, the birth control pill and technology in the home. But then participation began to drop — even as women in some cases became more qualified workers than men (women earn 59 percent of higher education degrees, for instance).

Stalled policy goes a long way toward explaining why women stop working, and new approaches could help women complete the decades-long transition into the labor force. One of the most powerful tools would be to mandate policies like paid leave, according to a report published this month by the White House Council of Economic Advisers.

In the last decade, the report points out, other developed countries adopted a variety of policies to help working parents, like paid family leave, subsidized child care and support for part-time work. The United States, meanwhile, did very little, which is why it no longer leads European countries in female labor force participation.

“It’s sort of a no-brainer to think about it: If you don’t have child care, you’re going to have fewer women in the labor force,” said Betsey Stevenson, a member of the Council of Economic Advisers who is on leave as an economics and public policy professor at the University of Michigan.

The United States is the only developed country not to offer paid maternity leave as part of federal policy. Just 59 percent of workers say their employers offer them paid leave, according to the council.

That may be affecting American competitiveness. Family-friendly policies in other countries explain nearly a third of the decrease in women’s labor force participation relative to those countries between 1990 and 2010, according to a 2013 study by Francine D. Blau and Lawrence M. Kahn of Cornell University.

After California became the first state to offer paid parental leave, new mothers were more likely to return to work, according to a study by Maya Rossin-Slater and Jane Waldfogel of Columbia University and Christopher J. Ruhm of the University of Virginia. One to three years later, mothers of small children were working more and at higher incomes. Paid leave provides job continuity, economists say, so women are less likely to leave the labor force. Paid leave is particularly important for low-income mothers, who more than doubled their maternity leaves in California.

“When people have paid leave, it just gives them a path back to work, whereas when they drop out of the labor force and stop working in order to take a leave with a young child, they come back slower,” Ms. Stevenson said.

Google is another real-world case study. Postpartum women were leaving the company at a rate twice that of other employees. So Google expanded its maternity leave to five months fully paid from three months partly paid. Attrition decreased by 50 percent.

At a place like Google, the cost of paid maternity leave was less than the cost of recruiting another highly skilled employee. At low-skilled jobs, though, the calculus shifts, because workers are more easily replaceable. That has led to increased inequality, because high-skilled workers tend to have paid leave while low-skilled ones do not.

Even fewer employers offer paternity leave. Although it would be unlikely to increase the number of men who work — men rarely quit when they have children — paternity leave might help increase women’s labor force participation by involving men more at home and making it easier for women to work.

The policy debate is not just about parents of young children; paid leave policies also cover employees who need to care for aging parents. Elder care is already eating away at women’s work force participation, which is why the biggest declines are among women in their 40s and 50s. That need will surge in coming years.