The effects of maternity leave policies

1. The effects of maternity leave policies Elizabeth Washbrook Department of Economics University of Bristol

2. What can the provision of maternity rights achieve? • Maternity rights affect • The time a mother spends out of the labour force after a birth • The probability that a mother returns to her pre-birth employer rather than starting a new job • Academic research can provide evidence on • The importance of these two factors for the welfare of families, mothers and children • The impact of the terms of legislation on these two factors

3. Why would we be interested in the time a mother spends out of the labour force? • Research suggest that maternal employment in the first year of a child’s life may be associated with poorer outcomes for children • Health outcomes such as infant mortality, use of post-natal care and immunisations (potentially through the mechanism of less breastfeeding)(Tanaka, 2004; Berger, Hill and Waldfogel, 2002) • Cognitive and behavioural outcomesUS evidence finds significant negative effects (Ruhm, 2004; Waldfogel, Han and Brooks-Gunn, 2002)UK evidence is less clear cut (Gregg, Washbrook, Propper and Burgess, 2004)

4. Results from Gregg et. al. – the effects of early maternal employment on children’s cognitive outcome scores Cognitive outcome measures are normalised to mean 100, standard deviation 10. Regressions contain full sets of controls.

5. Why would we be interested in the time a mother spends out of the labour force? (2) • Skills and human capital depreciate with time spent out of the labour force, resulting in lower wages upon return • The ‘family gap’ literature highlights the large pay gap between women with children and those without children • Decompositions of the gap suggest that it is partly explained by the interrupted nature of mothers’ work histories and their resulting lower levels of work experience (Waldfogel, 1998; Joshi, Paci and Waldfogel, 1998) • A key factor determining the wage penalty to childbirth, however, is not just the loss of human capital per se, but the loss of firm-specific human capital when a mother leaves her pre-birth employer following the birth

6. Why would we be interested in whether or not a mother returns to work for her pre-birth employer? • When a mother leaves her pre-birth employer, she foregoes the premium associated with her job-specific experience and training and with maintaining a good match between employer and employee • Women with children have typically earned around 20 percent less than their childless counterparts • Evidence suggests that this penalty is offset entirely if mothers maintain continuity of employment after a birth (i.e. returning within a year) and particularly if they return to their old employer (Waldfogel, 1998; Joshi, Paci and Waldfogel, 1998)

7. How do maternity rights affect the time to return and retention rates? Taken from Burgess et. al. (2003). Data from ALSPAC, births 1991/92

8. How do maternity rights affect the time to return and retention rates? (2) • The effect of maternity rights depends crucially on whether a mother is financially constrained in the immediate post-birth period • This applies to a large number of women – in a recent survey 75% of women who were entitled to additional unpaid maternity leave did not take up their full entitlement, the majority citing financial reasons as the cause • For these women, the provision of paid leave allows mothers to remain at home until the end of the pay period and then return to work • Longer paid leave periods will increase the amount of time these women spend at home with their babies and presumably protect children from adverse outcomes • Retention is not so much of an issue for these women as they return to work before the unpaid leave period has expired and so automatically retain the right to return to their pre-birth jobs

9. How do maternity rights affect the time to return and retention rates? (3) • Where mothers are not financially constrained the key policy instrument is the provision of unpaid leave • Such mothers can afford to remain at home after the expiry of maternity pay but may or may not return in time to keep their pre-birth jobs • Waldfogel, Higuchi and Abe (1999) estimate that leave coverage increased the probability that a mother returned to her previous employer by 16% in the UK, 23% in the US and 73% in Japan. • Extensions to the period of unpaid leave allow some women to stay out longer and still retain the benefits of their pre-birth job – for these we would observe longer leave lengths but no change in retention • For other women, the chance to return to their pre-birth employer after a reasonable period of leave may induce them to return sooner in order to keep the premium associated with retention – for these we would observe shorter leave lengths and an improvement in retention

10. Conclusions • The provision of paid leave can help to protect children’s health and development by enabling financially constrained mothers to remain at home for longer following childbirth • The provision of unpaid leave enables mothers to retain their pre-birth jobs after a reasonable period of time out. Improvements in retention and continuity of employment following a birth can raise maternal earnings and hence family income for a number of years into the future