California Provides an Argument Against Mandated Paid Family Leave

At least in a U.S.-based context, California is known as a state that is at the forefront of trying policies that are heralded by the Left. One such policy is that of mandated paid family leave. Under the California Paid Family Leave (PFLA), employees are provided partial pay to take off of work for up to six weeks to either tend to the serious illness of a close family member or to bond with a new child. Essentially, the premise behind paid family leave is work-life-balance vis-à-vis providing employees to take on a variety of family caregiving obligations without work getting in the way or needing to quit one's job to meet said obligations. If you want more information on paid family leave, please see my analysis on paid maternal leave from five years ago (see here), my analysis on Family and Medical Leave Act (FMLA), this policy report from the Cato Institute, or you can read this primer from the Congressional Research Service.

Having recently come back from a trip to France and see how they better manage work-life-balance than in the United States in the sense that they work to live (instead of the increasingly common practice in the United States to live to work), it got me thinking about whether it's an important value. Nevertheless, the tricky thing about public policy, especially when it has good intentions, is that it all too often comes with unintended consequences. Looking at the latest study on the PFLA, it seems that paid family leave is no exception. Last week, researchers from the University of Michigan, University of Utah, Middlebury College, and the U.S. Department of Treasury released a study showing that there is little evidence towards the benefits of paid family leave (Bailey et al., 2019). To quote the report:

We find little evidence that PFLA increased women's employment, wage earnings, or attachment to employers. For new mothers, taking PFLA reduced employment by 7 percent and lowered annual wages by 8 percent six to ten years after giving birth. Overall, PFLA tended to reduce the number of children born, and by decreasing mothers' time at work, increase time spent with children.

This finding is significant because one of the arguments used for legally mandated paid family leave is that at least for new mothers, it helps with labor force attachment. Based on these findings, reducing annual wages by 8 percent sure doesn't help with the gender wage gap that liberals are vehemently against (see my analysis on the gender wage gap here, here, and here). And I imagine that reduced employment doesn't do any favors when it comes to trying to get greater female representation in the workforce, nor does it help with make new mothers more likely to stay attached to employers, as proponents predict. While increased time with children is important, there is also the tradeoff of a lower fertility rate, which is problematic for a country that already struggles with a fertility rate below replacement rate.

Yes, this study draws upon robust tax data, has a large sample size, and does so over a relatively long period of time, all of which helps make it methodologically superior to previous paid family leave studies. While case studies have a role in discovering the efficacy of new ideas with little previous empirical data, there are limits to trying to draw general conclusions from this study. For one, PFLA lasts for six weeks. One could argue that six weeks is not long enough (or that it could be too long). Another issue is that PFLA provides 60-70 percent of a worker's wages. Perhaps providing a different amount would create different incentives. Perhaps an automatic enrollment would change the interactions. There could also be other elements within either the culture or economy of California that could make paid family leave less effective than it could be otherwise.

By itself, using this study to rally against mandated paid family leave is inadequate. Nevertheless, it does add to the empirical research showing the unintended consequences of mandated paid family leave. With that being said, here are a few points to consider when thinking of the tradeoffs of mandated paid family leave:

• Paid family leave lowers women's wages. The latest study is not the only one to confirm this point. One study analyzing 21 countries showed that paid parental leave is more effective when the time period is moderate, as opposed to being long (Misra et al., 2011). On the other hand, the same study showed that the same policies contribute to lower wage levels for women relative to men (ibid.). There are also older studies showing the same effect, including those from economists well-known on the Left (e.g., Ruhm, 1996; Gruber, 1994; Summers, 1988).
• Paid family leave affects women labor participation rate. A study from the National Bureau of Economic Research came to the conclusion that paid parental leave was responsible for about 28 percent of the drop of women labor participation between 1990 and 2010 (Blau and Kahn, 2013).
• Paid family leave makes it more difficult for women to receive promotions. A study of paid leave expansions in the United Kingdom not only resulted in fewer female managers, but also exacerbated gender inequality (Stearns, 2017).
• Support for paid family leave is in the details. Much like with so many policies, they sound nice in concept or in theory. That is why support for many Left-leaning proposals has higher support in the abstract. When you ask survey respondents about the details of the Left's latest and greatest policy ideas, support declines (see my analysis on that survey data here). Mandated paid family leave is no different. People assume that paid family leave is a wonderful thing, assuming they don't have to pay for it. When confronted with costs they would have to shoulder (e.g., lower salary, fewer benefits, less promotional potential for women), the support for federal paid family leave diminishes to the point where a majority are opposed (2018 Cato Institute survey).

I will leave you with this thought: whether we are discussing minimum wage, menstrual leave, or other rigid employee protections, they unquestionably come with a tradeoff. That is the economic nature of labor laws, and more specifically, employee benefits. If mothers want to prioritize more time bonding with their newborn children, that's fine. That is a decision they have to make for themselves. But let's not ignore the fact that that choice all too often comes with the tradeoff of less career development potential, a shift in career choices, and lower wages for women. While paid parental leave is becoming more popular, it comes with a price, a price that employers are too happy to ultimately pass either to the customer or their employees. The question is whether the price of a policy such as mandated paid family leave is worth the cost.