The Impact of Paid Parental Leave on Labor Supply and Employment Outcomes in Australia

The introduction of the Australian Paid Parental Leave scheme in 2011 provides a rare opportunity to estimate the impacts of publicly funded paid leave on mothers in the first year postpartum. The almost universal coverage of the scheme, coupled with detailed survey data collected specifically for the scheme’s evaluation, means that eligibility for paid leave under the scheme can be plausibly taken as exogenous, following a standard propensity score-matching exercise. Consistent with much of the existing literature, the study finds a positive impact on mothers’ taking leave in the first half year and on mothers’ probability of returning to work in the first year. The paper provides new evidence of a positive impact on continuing in the same job under the same conditions, where previous conclusions have been mixed. Further, it shows that disadvantaged mothers – low income, less educated, without access to employer-funded leave – respond most.HIGHLIGHTS Studying the effects of introducing paid parental leave (PPL) in an advanced industrial country is important for the US, which is considering PPL.PPL was introduced in Australia in 201 l. Previously only 57 percent of 20–45-year-old women had access to paid parental leave provided by employers.Post-PPL, mothers initially return to work from leave more slowly than before, but after about six months of leave they return to work at a faster rate than pre-PPL.Post-PPL, the probability of returning to work within a year is higher than pre-PPL.PPL helps mothers balance paid work and family life and improves workplace attachment. Both effects are, on average, stronger among more disadvantaged groups.