Numbers Don’t Lie: How Paid Parental Leave Helps the Economy

“Pawternity leave” is on the rise around the world. At the very least, several companies in the UK and India now provide “paid parental leave” for pets! That’s paid time off to employees when a new pet becomes part of the family.

“Pets are like babies nowadays,” according to the owner of a UK tech company. “So why shouldn’t staff have some time off when they arrive?”

Which begs the question: If puppy parents are reaping the benefits of paid parental leave, can’t the United States provide comparable benefits to ensure human babies receive the same support?

Perhaps it’s a bit more complicated than an optional company program to let people stay home to house-train the dog. And it’s not that Americans don’t care about new parents or babies. (A Pew Research survey from last month reveals Americans overwhelmingly support paid leave access following the birth or adoption of a new child.) Many Americans just disagree about who should foot the bill – private employers or taxpayers.

Well, how about both? Many in the private sector already enjoy weeks or months of paid leave as part of their company’s benefit package and they have no need for government assistance.  And those company policies can stay right where they are.

But many companies don’t offer assistance to new parents, especially when its too expensive to sustain an employee who is not actively contributing to the company’s bottom line for weeks at a time.

A new paper studying the paid leave system shows that parent workers who are least likely to be offered paid parental leave as a company benefit are the ones who need it most — they are at the lower-end of the economic ladder, and the ones whose families are least able to sustain themselves during a pause in earnings. The end result is that lower-income parents who choose (or need) to stay home with a new child often are forced to quit their jobs or are given no guarantee their job will be there when they come back. And they are least likely to have resources to support themselves during the break from work.

First-time parents, particularly low-income mothers, often find no other option than to quit their jobs to care for newborn children, even though work is their most effective path to self-sufficiency.”

That becomes a larger problem for the economy as a whole, according to the study’s co-authors Angela Rachidi and Ben Gitis. Their solution?

A better approach is to offer a modest, well-targeted government paid parental leave program to supplement what is already provided in the private market. …

An income-tested paid parental leave program would effectively target these workers so they can raise healthy children and remain attached to the labor force.”

Their program would include:

… a reasonable benefit ($300-$500 per week, depending on family size and income) to low- and lower-middle-income households. We suggest phasing it in and out in a way that targets those who are the least likely to already have it, as well as the least likely to handle an income loss from time away from work.”

What does that translate into on a national scale? An estimated $4.3 billion per year by taking into account the number of families who would qualify — 2 million qualified workers who add a child to their family each year.

Rachidi and Gitis recognize that many are hesitant to support new government programs, since they often result in higher taxes or potentially an increase in national debt.

But it turns out, there is a financial upside to providing paid parental leave.

Research shows that paid parental leave has positive effects on employment and job continuity, both of which support economic growth.”

More so, the overall cost of not providing paid parental leave could be substantially higher — and not just in short-term annualized dollar output. Returning to work too soon has been shown to negatively affect children, especially those from disadvantaged backgrounds.

Rachidi and Gitis look at other proposed models on the table and find they are much more expensive. They also note the potential risk that employers may stop providing paid leave benefits to workers if there’s a federal program, but their study attempts to mitigate that risk by limiting the number of workers who would be eligible for the program to those who don’t already receive benefits.

Ultimately, self-reliance is important at every stage of life. Sustaining employment – especially as the number of dependents increase inside American households – is as critical to the stability of the family as it is to the government providing benefits to unemployed parents.  It is in the interest of the country at the family level and the national economic level to assist vulnerable parents who need to retain income during the early weeks of a new child’s life, and to keep their jobs in the long-term.