5 Financial Reasons Paid Parental Leave Is Essential for Moms and Dads

By Emily Guy Birken on 20 July 2016 0 comments

The United States is one of only two countries in the world that does not offer guaranteed family leave for new parents — the other one being Papua New Guinea.

The U.S. isn't completely without family leave policy, of course. The Family Medical Leave Act (FMLA) of 1993 guarantees that eligible workers can take up to 12 weeks of unpaid leave for a new baby or adoption (or to care for an ailing family member) without it affecting their employment. But only about 60% of American workers meet FMLA eligibility requirements, and even those who do might not be able to afford to take 12 weeks off without a paycheck.

There are a couple of deeply entrenched economic beliefs behind America's lack of paid parental leave: First, that companies cannot afford (and should not have to afford) the cost of paying an employee who is not working, and second, that having children is an individual choice that does not (and should not) affect society financially.

But the truth is that both of those economic beliefs are just that — beliefs. In reality, we are shortchanging ourselves as a country by not offering paid parental leave. Here are the five most important financial reasons why paid parental leave is essential. (See also: 6 Best Jobs for Working Moms and Dads)

Paid Parental Leave Costs Companies Less Than Turnover

It seems like a pretty simple economic truth: An employee is only valuable to a company if he or she is producing work for a paycheck. Paying an employee to stay home with a new baby or newly adopted child costs the employer money without getting any benefit in return.

The problem with this view of employment is how narrow it is. An employee's usefulness to a company is much greater than any particular 12-week span, particularly when you consider the cost of hiring a new employee to fill the gap. In California, where 12 weeks of paid family leave has been the law of the state for over a decade, researchers have found that mothers who took such leave were 6% more likely to be working a year later than those who did not.

The same researchers have also discovered that California women who took leave and returned to their jobs worked 15% to 20% more hours during the second year of their child's life than those who did not take leave.

Looking at the situation from a purely financial perspective, companies are going to be better off paying new parents for leave rather than spending money on hiring new employees, particularly considering the fact that employees who have taken advantage of paid parental leave will feel great loyalty toward their employers.

The facts from California bear this out. The President's Council of Economic Advisers reported in 2014 that more than 90% of employers affected by California's paid leave initiative saw either a positive or no noticeable effect on profitability, turnover, or morale due to implementation of paid family leave.

Paid Parental Leave Saves Money on Health Care

Mothers who have time to stay home with newborns have healthier babies than women who must return to work quickly. According to a study of European paid parental leave policies conducted by the University of North Carolina, more generous paid parental leave is found to reduce infant mortality and improve overall health in children. Considering the consistently rising costs of health care in the United States, the cost of paying for parental leave is going to be much cheaper for our government, society, and private sector than the cost of paying for a sick child's health care.

But it's not just the children who experience health benefits from paid parental leave. Mothers who have longer paid maternity leave report fewer symptoms of postpartum depression, which means they are better able to be fully engaged both at work and with their babies. And the mental health benefits do not stop with baby's first year. According to a study by the Network for Studies on Pensions, Aging, and Retirement in the UK, women who were able to use a more generous maternity leave policy were 14% less likely to suffer late life depression.

Fathers also experience mental health benefits by getting paid time off. Israeli researchers have found fathers who work as primary caregivers for their children will see changes in an area of the brain called the amygdala that help them to become better suited to parenting. In addition, a father's immersion in parenting duties has also been correlated with both enhanced child development and improved marital relationships — all of which can help the entire family's mental and physical health.

Paid Parental Leave vs. Public Assistance

Several states in addition to California have launched statewide paid parental leave initiatives. In New Jersey, a study from the Center for Women and Work at Rutgers University, discovered that mothers who had used the state's paid family leave policy were more likely to be working nine to 12 months after their baby was born than mothers who had not used the leave.

So what were the nonworking mothers doing? In many cases, families who do not have access to paid parental leave are forced to rely on other methods of getting by. In particular, the Rutgers study found that women who took paid parental leave in New Jersey were 39% less likely to be on public assistance and 40% less likely to receive food stamps in their child's first year compared to parents who did not take leave.

It can be difficult to tease out the differences between the taxpayer costs of state-mandated parental leave compared to the taxpayer costs of public assistance, but it seems much more financially beneficial for the family to use paid leave and ensure job continuity.

Paternity Leave Increases Maternal Paychecks

Much of the conversations about family leave centers around the mother-child bond, which is certainly understandable. Mom is the one whose body goes through the wringer during pregnancy and childbirth, and more time for her to physically recover and bond with baby is a good thing.

But when Dad takes time off to care for a newborn or newly adopted child, the entire family benefits financially. In Sweden, which mandates that fathers must take two months off for the birth of a new child (and that time can be taken anytime in Junior's first eight years), researchers found that the mother's annual income increased by nearly 7% for each month that the father took off from work.

The Children Are Our (Financial) Future

As much as parental leave helps parents, it's important to remember how much it benefits the kids. Mothers who used maternity leave will see their children attain higher education, have higher IQs, and earn higher incomes than mothers who didn't, according to research from The Institute for the Study of Labor in Bonn. These effects were biggest in families where the parents had less education and were less likely to have jobs that offered paid parental leave.

That means making a relatively small sacrifice now by instituting parental leave will lead to smarter, better educated, and more financially secure adults in 30 years or so. Those kids are the ones I want taking care of things once I'm back to drooling again — not the kids who were treated as a financial burden.

Widening Our Vision

The view that parental leave is too expensive is the societal version of spending a dollar to save a nickel. Parental leave benefits parents, children, and society far more than it costs. If everyone treated the cost of having children the same way many U.S. employers do — as a cost that is too great to bear — then the world would get dark and depressing PDQ.

Children are a social good, and we reap much more than we sow by paying the cost of parental leave.

Does your employer offer paid parental leave?

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