The Effect of New Jersey’s Paid Parental Leave Policy on Employment

Paid parental leave policy remains a continuing source of controversy in the United States. Advocates for parental leave policy maintain that it has a positive effect on child rearing outcomes and family happiness. Critics, however, maintain that paid parental leave will cause firms to hire fewer women. This paper evaluates the critics’ claim that paid family leave entitlements will reduce employment using the New Jersey family leave law that took effect in 2009. We conduct a difference-in-difference analysis that compares county-level employment in western New Jersey using eastern Pennsylvania as a control. We disaggregate county-level employment to test whether women, workers of childbearing age, educated workers experienced larger employment effects in western New Jersey (relative to eastern Pennsylvania) following the New Jersey family leave law. We also conduct similar comparisons within New Jersey. Our estimates suggest that the New Jersey family leave law reduces overall employment by about 3.3 percent. However, the employment reductions among women, people of childbearing age, and more highly skilled workers are relatively larger. Finally, we find little evidence that family leave mandates have employment effects for unskilled workers.