Much of the discussion about President Obama’s proposal for paid family leave focuses on the cost to employers and taxpayers. But what are the economic costs of not providing paid leave?
The United States is the only developed country that doesn’t guarantee paid leave for workers who are new parents. (The federal Family and Medical Leave Act gives workers the right to 12 weeks of unpaid leave.) But the price of not having a paid parental leave policy is becoming more clear—and quantifiable—thanks in part to California and New Jersey's state paid-leave programs and a slew of studies conducted over the past ten years.
Not only does research show that mothers are more likely to leave jobs to care for family. There’s evidence that it has a ripple effect, with more people going on public assistance and employers having higher turnover.
In a December Kaiser Family Foundation/New York Times/CBS News poll of unemployed Americans, 61 percent of women cited "family responsibilities" as a reason for not working. Just 37 percent of men said that.
“There are enormous costs to whole families—women in particular—to children, to the economy more generally, and to employers for not having paid family leave,” said Heather Boushey, executive director and chief economist of the Washington Center for Equitable Growth, who has studied and advocated for paid leave policy.
Here are some of the major costs of not having paid leave.
More workers go on public assistance. More than half—55 percent—of female-headed families were on public assistance, according to the 2014 annual report by the U.S. Department of Health and Human Services. While there’s no data that shows just how many mothers left jobs because of no paid-leave options, a 2012 Rutgers Center for Women and Work study found that 24 percent of new mothers in states with no paid leave receive some form of public assistance. On average, they each receive $749 worth of benefits a year.
The same report found that women who take paid leave are about 40 percent less likely to receive public assistance or food stamps.
Employers lose female talent. The percentage of mothers not in the workforce grew to 29 percent in 2012, up from the most recent low of 23 percent in 1999, for a mix of reasons, according to a Pew Research Center study. A majority of the unemployed women reported they were home to care for family members, while 6 percent said they were home because they couldn't find work.
“Our lack of paid family leave lowers our labor supply,” Boushey asserts, noting that women -- who make up 47 percent of the U.S. workforce -- are more likely than men to leave jobs to care for family members. The United States had the highest labor force participation among women in 1990, according to a study by economists Francine D. Blau and Lawrence M. Kahn. By 2010, the U.S. fell to 17th among nations. While the reasons for the drop are a source of debate, a July report by the White House Council of Economic Advisers pegged the decline to the fact that in the past decade other countries developed paid leave and other policies to help working families while the U.S. did not.
Employers take a hit on employee turnover costs. When employees are forced to leave jobs to care for family members, companies spend time and money to hire new workers. Boushey and Sarah Jane Glynn found that the median cost to employers to replace an employee is an estimated 21 percent of that employee’s salary. A survey of California employers by Appelbaum and Ruth Milkman, a City University of New York sociologist, determined costs range from $4,000 to $8,000 per employee. In industries where turnover is extremely high, such as retail establishments which often touch nearly 100 percent turnover every year, those costs multiply quickly.
Michael Egenton, vice president of government relations for the New Jersey Chamber of Commerce, said he is not aware of any New Jersey businesses that report paid leave has helped turnover rates, or hurt them, since the state launched an employee-funded family leave program in 2009. While the chamber remains opposed to government mandates regarding employee leaves, he says now would be a good time for a “third-party-neutral, no-stake-in-the-game” think tank or academic institution to conduct a wider analysis on the impact of paid family leave.