Study Finds that Effects of California's Paid Family Leave Act Did Not Help Women's Careers and Gender Pay Gap

Martha Bailey, Tanya Byker, Elena Patel, Shanthi Ramnath, The Long-Run Effects of California's Paid Family Leave Act on Women's Careers and Childbearing: New Evidence from a Regression Discontinuity Design and U.S. Tax Data" 

We use administrative tax data to analyze the cumulative, long-run effects of California's 2004 Paid Family Leave Act (CPFL) on women's employment, earnings, and childbearing.***

A growing body of evidence suggests that the gender gap in pay emerges abruptly at motherhood, as new mothers work less for pay in order to increase their caregiving at home. These differences are also evident in U.S. tax data, which show that the “child penalty” for women in annual wage earnings grows sharply after their first child is born.

Academics and policymakers have mobilized around this issue, citing the absence of paid family leave in the United States as a major obstacle to gender equity in the labor market. Paid family leave policies, they argue, could enable workers to take longer leaves to care for newborns instead of dropping out of the labor force. Remaining attached to employers could help workers retain job- and firm-specific human capital and decrease skill depreciation, minimizing wage losses due to caregiving. Because more women leave the labor force than men for caregiving reasons, formalizing paid leave policies could narrow the gender gap in pay.***

Our findings challenge the conventional wisdom that paid leave benefits improve women’s short- or long-term career outcomes. In fact, CPFL significantly decreased employment and earnings of first-time mothers in the short run. First-time mothers taking up paid leave under CPFL were 6 percent less likely to be employed and earned 13 percent less during the first three years after giving birth. Moreover, we find evidence that these earnings effects persisted, with wage earnings remaining 13 percent lower nine to 12 years later.