Association for Public Policy Analysis & Management

Economic insecurity and instability are common in the time surrounding the birth of a child and can be detrimental to parent, family, and child wellbeing. Paid family leave (PFL) policies are expected to increase household economic wellbeing following a birth through the direct transfer of benefits and through supporting mothers’ employment. Yet, research on the connections between PFL and household-level economic outcomes is limited. Additionally, implications of PFL for household economic circumstances in the period closely following a birth are ambiguous. Research suggests PFL increases parents’ leave length, which could reduce household economic wellbeing if wages are not replaced fully. However, by facilitating mothers’ pre- to post-birth job continuity and increasing employment and work when children are slightly older PFL may contribute to household economic wellbeing in the longer term.

To build knowledge in this area, the present study estimates the effects of California’s broadly-available PFL program (CA-PFL) on risk of poverty and total household income among mothers of infants (<1) and 1-year-olds. I use annual, cross-sectional data covering 2000-2013 from the American Community Survey. Poverty status and total household income are measured in the year prior to the survey. A triple differences approach isolates impacts of CA-PFL on these outcomes by comparing outcomes among California mothers eligible for CA-PFL after implementation in 2004 to unaffected mothers of older children and in other states. Estimating effects separately by child’s age (infants v. 1-year-olds) approximates differences in policy impact from the months immediately following the birth to the somewhat longer term.

Results suggest that CA-PFL—which provides six weeks of leave at 55 percent wage replacement—has little net effect on household economic wellbeing among mothers with infants. This finding is in line with expectations that gains in the period closely following birth through the direct transfer may be counteracted by increases in parents’ leave taking and consequent earnings declines. In the longer term—among mothers of 1-year-olds—CA-PFL decreases risk of poverty by an estimated 10.8% and increases household income by an estimated 4.1%. Longer-term gains are concentrated among low-educated and single mothers. These results are consistent with expectations that CA-PFL will boost longer-term household economic wellbeing through the program’s demonstrated positive effects on mothers’ labor force attachment, and will be particularly important to economically disadvantaged parents who are unlikely to have access to other forms of paid leave.

Study findings are especially relevant as legislators and program administrators in California craft adjustments to CA-PFL, and policymakers across the U.S. consider similar programs. Results suggest that a broadly-available PFL policy like CA-PFL can allow parents and infants to benefit from the positive health effects of longer parental leaves without negative economic consequences, and can improve household economic wellbeing in the longer term, with larger gains for economically disadvantaged groups. Higher or progressive wage replacement may be needed to go beyond maintaining the economic status quo to actually improving economic wellbeing closely following birth. Additionally, job-protection and efforts to increase awareness and participation could potentially lead to even greater benefits.