Paid Leave is Good for Business is a Department of Labor blog post, authored by Heidi Shierholz, Chief Economist at the Labor Department.  In her post, Heidi states that  paid leave is good for business, particularly in recruiting and retaining talented workers.  In a survey of 200 human resource managers, two-thirds cited family-supportive policies as the single most important factor in attracting and retaining employees.

Over the last few decades, the composition of the workforce has changed in important ways. One major change was the increased participation of women in the labor force; between 1970 and the late 1990s, the share of women (age 25-54) who were in the workforce jumped from one-half to more than three-quarters.

Though female labor force participation stalled in the 2000s, women’s earnings have nevertheless become an increasingly significant share of total household earnings: Currently, women are breadwinners or co-breadwinners in two-thirds of families with children. 63 percent of children live in a family where both parents work.

Women Labor Force Participation
by Age Group, 1970-2014

With the changing workforce, the ability for working parents to take paid leave has important implications for families, employers and the broader economy. For example, paid maternity leave can positively impact working mothers’ wages and employment by encouraging them to return to work and continue their careers. Recent research has examined the implementation of California’s paid family leave and found that it increased the weekly hours and pay of employed mothers of 1- to 3-year-old children by almost 10 percent.

Despite the positive evidence, paid leave policies have been slow to develop. The U.S. now lags all other developed countries in providing leave.  Less than half of workers (48 percent) report being able to take paid leave for any family related reason, and just 39 percent report being able to take some type of paid family leave for the birth of a child. The lack of access to paid leave is one reason that women’s participation in the workforce has stalled in the U.S. since 2000 and is now significantly below that of many other developed nations.

If U.S. women between 25 and 54 participated in the labor force at the same rate as they do in Canada or Germany, there would be roughly 5.5 million more women in the labor force in the U.S.

All else equal, that would increase GDP by an estimated 3.5 percent, which would translate into more than $500 billion of additional economic activity. That is over $500 billion of economic activity annually that we are leaving on the table in large part because we don’t have the labor market policies – paid leave, workplace flexibility, quality child and eldercare – that our peer countries have that boost labor force participation, productivity, work engagement and better allocation of talent across the economy.

Paid leave is good for business, particularly in recruiting and retaining talented workers.  In a survey of 200 human resource managers, two-thirds cited family-supportive policies as the single most important factor in attracting and retaining employees. Given that the typical cost of replacing an employee is around 20 percent of that employee’s annual salary, family-friendly policies that reduce turnover can be highly cost-effective.  Another survey of 253 employers affected by California’s paid family leave initiative found that “the vast majority – over ninety percent – reported no noticeable or a positive effect on profitability.”

Heidi Shierholz is the chief economist at the Department of Labor.