Reducing Maternal Labor Market Detachment: A Role for Paid Family Leave

Nearly 30% of working women leave the labor force when they have a child. Access to paid family leave may allow some women to take temporary leave rather than quitting, which may have significant implications for their labor force participation in the long run. We test this hypothesis relying on two policy-based natural experiments: implementation of state-legislated paid family leave programs in California and New Jersey. We estimate an event-study difference-in-differences model comparing pre-to-post-policy trends in labor force participation between women with young children and women with no minor children in each state. We find that in the absence of paid leave, maternal labor market detachment is nearly 30% following a birth; it attenuates over time but remains significantly different from zero as much as eleven years later. We find that access to paid family leave at the time of a birth significantly increases labor market participation by more than 5% in the year of a birth; it attenuates over time but remains significantly different from zero as much as five years later. The impacts are the largest for women with higher educational attainment, indicating that paid leave policies induce the most productive workers to remain in the labor market.