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Is Parental Leave Costly for Firms and Coworkers?

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  • Anne A. Brenøe
  • Serena P. Canaan
  • Nikolaj A. Harmon
  • Heather N. Royer

Abstract

Most existing evidence on the effectiveness of family leave policies comes from studies focusing on their impacts on affected families - mothers, fathers, and their children - without a clear understanding of the costs and effects on firms and coworkers. We estimate the effect of a female employee giving birth and taking parental leave on small firms and coworkers in Denmark. Using a dynamic difference-in-differences design, we compare small firms in which a female employee is about to give birth to an observationally equivalent sample of small firms with female employees who are not close to giving birth. Identification rests on a parallel trends assumption, which we substantiate through a set of natural validity checks. We find little evidence that parental leave take-up has negative effects on firms and coworkers overall. Specifically, after accounting for wage reimbursements received by firms offering paid leave, there are no measurable effects on firm output, labor costs, profitability or survival. Coworkers of the woman going on leave see temporary increases in their hours, earnings, and likelihood of being employed but experience no significant changes in well-being at work as proxied by sick days. These limited effects of parental leave reflect that most firms are very effective in compensating for the worker on leave by hiring temporary workers and by increasing other employees' hours. In contrast, we do find evidence that parental leave has negative effects on a small subsample of firms that are less able to use their existing employees to compensate for an absent worker.

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  • Anne A. Brenøe & Serena P. Canaan & Nikolaj A. Harmon & Heather N. Royer, 2020. "Is Parental Leave Costly for Firms and Coworkers?," NBER Working Papers 26622, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26622
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    Cited by:

    1. Johnsen, Julian Vedeler & Ku, Hyejin & Salvanes, Kjell G, 2020. "Competition and Career Advancement: The Hidden Costs of Paid Leave," CEPR Discussion Papers 15157, C.E.P.R. Discussion Papers.
    2. Johanna Catherine Maclean & Stefan Pichler & Nicolas R. Ziebarth, 2020. "Mandated Sick Pay: Coverage, Utilization, and Welfare Effects," NBER Working Papers 26832, National Bureau of Economic Research, Inc.
    3. Huebener, Mathias & Jessen, Jonas & Kühnle, Daniel & Oberfichtner, Michael, 2021. "A Firm-Side Perspective on Parental Leave," IZA Discussion Papers 14478, Institute of Labor Economics (IZA).
    4. Ginja, Rita & Karimi, Arizo & Xiao, Pengpeng, 2020. "Employer Responses to Family Leave Programs," IZA Discussion Papers 13833, Institute of Labor Economics (IZA).
    5. Thomas Høgholm Jørgensen & Jakob Egholt Søgaard, 2021. "Welfare Reforms and the Division of Parental Leave," CEBI working paper series 21-09, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    6. Morchio, Iacopo & Moser, Christian, 2018. "The Gender Pay Gap: Micro Sources and Macro Consequences," MPRA Paper 99276, University Library of Munich, Germany, revised 24 Mar 2020.
    7. Ann P. Bartel & Maya Rossin-Slater & Christopher J. Ruhm & Meredith Slopen & Jane Waldfogel, 2021. "The Impact of Paid Family Leave on Employers: Evidence from New York," NBER Working Papers 28672, National Bureau of Economic Research, Inc.
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    JEL classification:

    • H0 - Public Economics - - General
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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