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Is Parental Leave Costly for Firms and Coworkers?

Author

Listed:
  • Anne A. Brenøe
  • Serena P. Canaan
  • Nikolaj A. Harmon
  • Heather N. Royer
Abstract
Most existing evidence on the effectiveness of family leave policies comes from studies focusing on their impacts on affected families - mothers, fathers, and their children - without a clear understanding of the costs and effects on firms and coworkers. We estimate the effect of a female employee giving birth and taking parental leave on small firms and coworkers in Denmark. Using a dynamic difference-in-differences design, we compare small firms in which a female employee is about to give birth to an observationally equivalent sample of small firms with female employees who are not close to giving birth. Identification rests on a parallel trends assumption, which we substantiate through a set of natural validity checks. We find little evidence that parental leave take-up has negative effects on firms and coworkers overall. Specifically, after accounting for wage reimbursements received by firms offering paid leave, there are no measurable effects on firm output, labor costs, profitability or survival. Coworkers of the woman going on leave see temporary increases in their hours, earnings, and likelihood of being employed but experience no significant changes in well-being at work as proxied by sick days. These limited effects of parental leave reflect that most firms are very effective in compensating for the worker on leave by hiring temporary workers and by increasing other employees' hours. In contrast, we do find evidence that parental leave has negative effects on a small subsample of firms that are less able to use their existing employees to compensate for an absent worker.

Suggested Citation

  • Anne A. Brenøe & Serena P. Canaan & Nikolaj A. Harmon & Heather N. Royer, 2020. "Is Parental Leave Costly for Firms and Coworkers?," NBER Working Papers 26622, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26622
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    Cited by:

    1. Morchio, Iacopo & Moser, Christian, 2018. "The Gender Pay Gap: Micro Sources and Macro Consequences," MPRA Paper 99276, University Library of Munich, Germany, revised 24 Mar 2020.
    2. Hoey, Sam & Peeters, Thomas & van Ours, Jan C., 2023. "The impact of absent co-workers on productivity in teams," Labour Economics, Elsevier, vol. 83(C).
    3. Rita Ginja & Arizo Karimi & Pengpeng Xiao, 2023. "Employer Responses to Family Leave Programs," American Economic Journal: Applied Economics, American Economic Association, vol. 15(1), pages 107-135, January.
    4. Salvanes, Kjell G & Johnsen, Julian Vedeler & Ku, Hyejin, 2020. "Competition and Career Advancement: The Hidden Costs of Paid Leave," CEPR Discussion Papers 15157, C.E.P.R. Discussion Papers.
    5. Schmutte, Ian M. & Skira, Meghan M., 2020. "The Response of Firms to Maternity Leave and Sickness Absence," GLO Discussion Paper Series 691, Global Labor Organization (GLO).
    6. Maclean, J. Catherine & Pichler, Stefan & Ziebarth, Nicolas R., 2020. "Mandated Sick Pay: Coverage, Utilization, and Welfare Effects," IZA Discussion Papers 13132, Institute of Labor Economics (IZA).
    7. Huebener, Mathias & Jessen, Jonas & Kühnle, Daniel & Oberfichtner, Michael, 2021. "A Firm-Side Perspective on Parental Leave," IZA Discussion Papers 14478, Institute of Labor Economics (IZA).
    8. Bana, Sarah & Bedard, Kelly & Rossin-Slater, Maya & Stearns, Jenna, 2023. "Unequal use of social insurance benefits: The role of employers," Journal of Econometrics, Elsevier, vol. 233(2), pages 633-660.
    9. Thomas Høgholm Jørgensen & Jakob Egholt Søgaard, 2021. "Welfare Reforms and the Division of Parental Leave," CEBI working paper series 21-09, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    10. Zarepour, Zahra & Wagner, Natascha, 2023. "How manufacturing firms respond to energy subsidy reforms? An impact assessment of the Iranian Energy Subsidy Reform," Energy Economics, Elsevier, vol. 124(C).
    11. Timpe, Brenden, 2024. "The labor market impacts of America’s first paid maternity leave policy," Journal of Public Economics, Elsevier, vol. 231(C).
    12. Kristin F. Butcher & Deniz Çivril & Sari Pekkala Kerr, 2024. "The Impact of State Paid Leave Laws on Firms and Establishments: Evidence from the First Three States," Working Paper Series WP 2024-12, Federal Reserve Bank of Chicago.
    13. Ann P. Bartel & Maya Rossin-Slater & Christopher J. Ruhm & Meredith Slopen & Jane Waldfogel, 2021. "The Impact of Paid Family Leave on Employers: Evidence from New York," NBER Working Papers 28672, National Bureau of Economic Research, Inc.
    14. Fariha Kamal & Asha Sundaram & Cristina J. Tello-Trillo, 2020. "Family-Leave Mandates and Female Labor at U.S. Firms: Evidence from a Trade Shock," Working Papers 20-25, Center for Economic Studies, U.S. Census Bureau.
    15. Girsberger, Esther Mirjam & Hassani-Nezhad, Lena & Karunanethy, Kalaivani & Lalive, Rafael, 2023. "Mothers at work: How mandating a short maternity leave affects work and fertility," Labour Economics, Elsevier, vol. 84(C).
    16. Montpetit, Sébastien & Beaureard, Pierre-Loup & Carrer, Luisa, 2024. "A welfare analysis of universal childcare: Lessons from a Canadian reform," CLEF Working Paper Series 73, Canadian Labour Economics Forum (CLEF), University of Waterloo.

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    JEL classification:

    • H0 - Public Economics - - General
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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