There are countless benefits to paid parental leave including the mental and physical health of both the parents and children, however, this report will focus primarily on the economic benefits to businesses.
The United States is a global leader both economically and politically, yet is the only developed country without federally mandated paid family leave; the only other two countries without being Papua New Guinea and Suriname (Gault, Hartmann, Hegewisch, Milli & Reichlin, 2014). The current U.S. federal law, the Family and Medical Leave Act of 1993, allows for twelve weeks of unpaid leave, including care for immediate family members, birth and adoption of a newborn, and serious health conditions (United States Department of Labor, 2015). The growing number of women and parents joining the workforce strengthens the need to provide parents with adequate policies to take care of their health and children (Council of Economic Advisors, 2014). A leading cause for concern about paid leave is the cost to employers, however, in most cases paid leave can be financially beneficial for american businesses as it increases retention, productivity, and recruitment rates, thus considerably reducing turnover costs as well as spurring local economic growth by creating a sustained tax base and lowering public assistance need.
Many companies do not provide paid family leave because they believe it to be a costly financial burden, however, businesses that do grant paid leave have higher retention and recruitment rates (Gault, et al, 2014). A study from the National Longitudinal Survey of Youth reported that women with access to paid leave are 40 percent more likely to return to work than those without, thus saving employers turnover and replacement costs (Gault, et al, 2014). This is especially significant for companies that require specific skills as retention would decrease time and money spent in training new employees (Council of Economic Advisors, 2014). Paid leave research in Connecticut found that many employers who replaced workers on leave spent an average of 6 weeks replacing employees (Trzcinski and Stevenson, 1991) costing companies on average between $4,000 and $9,000 (Hinkin & Tracey, 2006).
In addition to being a principal contributing factor for retention of current employees, paid leave is a compelling and efficacious tool to attract potential employees (Melamed, 2014). In a survey of two hundred human resource managers, two-thirds cited family-supported policies as the single most important factor in attracting and retaining employees (Council of Economic Advisors, 2014). Moreover, a federal mandate for paid leave would allow small and large business to compete more equally for talent because the perk of paid leave, more often given at large companies, would be accessible at both (Boushey, 2016).
Additionally, companies see improvement in productivity and morale. After returning from paid leave, employees’ hours per week increased by 2 to 3 hours (Gault, et al, 2014). Blake Mycoskie, founder of Toms shoes, offers 8 weeks of paid leave at his company; he finds that parents who do not take or take very little paid leave decline in productivity due to tiredness from taking care of their child and guilt for remaining at work, which can lead to bad decisions costing the firm time, money, and energy. (CNN, 2015).
Financial costs are exactly what opponents of paid family leave are concerned about (Appelbaum & Milkman, 2011). Contrary to such apprehensions, in California, a state with paid leave for over a decade, 89 percent of employers reported either no or a positive effect on productivity and 99% reported an improvement in employee moral. Even more notable, 87 percent reported there was no significant cost increase and 8.8 percent actually reported cost savings due to less turnover and replacement costs (Appelbaum & Milkman, 2011). All of which indicate many of the financial fears business have about paid leave are inaccurate.
California and Rhode Island, two of the three states that have paid leave, fund paid family leave through employee payroll taxes distributed through State Disability Insurance (Gault, et al, 2014). Costs to employees are negligible; the average cost to California employees is $30 annually and $32 annually for Rhode Island employees (Montana Budget and Policy Center, 2015). In California paid leave is available to nearly all private sector (businesses not run by the government) employees, regardless of business size, who pay into the State Disability Insurance, and have worked for a company for a year; thus greatly expanding the amount of parents eligible, particularly low income parents because their places of work are less likely to provide paid leave (Appelbaum & Milkman, 2011). Prior to California's passage of paid family leave, many concerns were raised over the disproportionately negative impact paid family leave would have on small businesses, however after six years of implementation small businesses (less than 100 employees) were less likely to report any unfavorable effects as compared to large businesses (over 100 employees) (Appelbaum & Milkman, 2011).
The fact that parents maintain a steady income while on paid leave and have an increased rate in return to the workforce reduces the need for government paid public assistance for parents and infants (Gault, et al, 2014). Far too many families without paid leave rely on public assistance to remedy their loss of income. A study in by the National Longitudinal Survey of Youth states families without paid leave are 61 percent more likely to receive public assistance and on average collect $413 more in public assistance than those who do not (Gault, et al, 2014). Additionally, a sustained family income and increased number of participants in the workforce play a large part in maintaining customer buying power and elevating local tax revenues (Boushey, 2016). Paid leave not only is beneficial to the well-being of the family and development of the child, but increases the amount and quality of work of employees benefiting both employers and the united state’s economy.