Did California’s Paid Family Leave Act Improve Long-Term Career Outcomes for Women?

The study investigates the long-term impacts of California’s Paid Family Leave Act (CPFL) on women’s employment, earnings, and childbearing, using extensive administrative tax data. Analyzing a large sample via a regression discontinuity design, the research finds no evidence that CPFL improved employment, increased earnings, or encouraged childbearing among women, suggesting limited impact on the gender pay gap. For first-time mothers, CPFL reduced employment by 6% and earnings by 13% up to a decade after childbirth, representing a lifetime earnings loss of approximately $83,000. Results indicate that CPFL may inadvertently exacerbate gender disparities rather than alleviate them.

Extended Summary

Central Research QuestionThis research examines the long-term effects of California’s Paid Family Leave Act (CPFL) on women’s employment, earnings, and childbearing. The central question asks: Did CPFL improve women's career outcomes and influence childbearing behavior, particularly for first-time mothers, in a way that reduces the gender pay gap and mitigates the “child penalty” observed in wage earnings after childbirth? By focusing on the CPFL's implementation in 2004, the study seeks to understand whether paid family leave can support gender equity in the labor market by encouraging women’s continued attachment to the workforce and potentially fostering career advancement.

Previous LiteratureA significant body of literature suggests that the gender pay gap often widens with motherhood, with women commonly experiencing reduced workforce participation and earnings compared to men, who do not face similar penalties. Prior studies have examined the short-term impacts of paid family leave policies, finding modest positive effects on women’s immediate employment outcomes. For instance, research using survey data and smaller samples indicated that paid leave policies might increase workforce attachment shortly after childbirth, but their long-term impacts remain inconclusive due to limitations in sample sizes and data constraints. Studies on paid leave in European countries show that while short leaves can benefit career continuity, extended leaves may impede career progression. U.S.-specific research on paid leave policies has been limited, but studies of FMLA’s unpaid leave provisions have shown increased leave-taking but negligible long-term career benefits. This study builds on these foundations, contributing new insights by examining long-term, cumulative impacts of paid leave using comprehensive administrative data.

DataThe study employs extensive administrative tax data from the Internal Revenue Service (IRS) and Social Security Administration (SSA) to track the employment, earnings, and childbearing patterns of women in California over a 12-year period following childbirth. By leveraging this large dataset, the researchers overcome previous limitations associated with smaller surveys, allowing for more precise estimations of CPFL’s effects. The data covers all individual income tax returns and most third-party income reporting from 2001 to 2018, offering detailed, longitudinal information on employment and earnings while capturing tax filings and W-2 records regardless of whether an individual filed a tax return. The study's main outcome measures are employment (defined as earnings of at least $1,000 in a tax year), cumulative real wage earnings (adjusted to 2021 dollars), and childbearing events recorded through SSA records.

MethodsTo evaluate CPFL’s impact, the study uses a regression discontinuity in time (RDiT) design. This method exploits a sharp policy change on May 20, 2004, which allowed new mothers to take six additional weeks of paid leave following childbirth. Women who gave birth after this cutoff date were immediately eligible to take paid leave under CPFL, while those who gave birth earlier could not. By comparing the outcomes of women who gave birth before and after the cutoff, the study aims to isolate the effects of CPFL on career and family outcomes. The researchers also analyze the cumulative effects over 12 years to capture the policy’s potential long-term impacts. The RDiT design is complemented by a two-stage least squares (2SLS) approach to estimate the local average treatment effects (LATEs), which measure CPFL’s impact specifically for women who chose to take up paid leave.

Findings/Size EffectsThe findings challenge the assumption that paid family leave policies inherently support women’s career advancement and earnings. Overall, the study finds that CPFL had minimal positive effects on employment or earnings for women. In particular, first-time mothers who used CPFL were 6% less likely to be employed in the decade following childbirth, and their cumulative earnings were 13% lower, translating to a lifetime earnings loss of approximately $83,000. This negative impact was especially pronounced among lower-income women, who were less likely to return to work after taking leave. The researchers observed that these negative effects were not offset in the long term, indicating that the initial reductions in workforce participation and earnings persisted across the 12-year study period. For higher-order births (women who already had children before CPFL’s implementation), the policy did not appear to influence employment or earnings, suggesting that the effects were particularly concentrated among new mothers. Furthermore, the study finds that CPFL had no significant impact on childbearing behavior, with no increase in the number of children born to mothers who took up paid leave compared to those who did not. These findings indicate that CPFL did not encourage larger families nor did it help reduce the economic “child penalty” faced by women after childbirth.

ConclusionThis research provides substantial evidence that California’s Paid Family Leave Act did not achieve its intended objectives of improving long-term career outcomes for women or encouraging higher fertility rates. Instead, the policy appears to have had adverse effects on the employment and earnings of first-time mothers in the years following childbirth, particularly among lower-income groups. The results suggest that CPFL may have inadvertently reinforced gender disparities in the workforce, as the greater take-up of paid leave among women relative to men may have entrenched traditional gender roles in caregiving. These findings align with international evidence suggesting that paid leave policies without gender-targeted components, like “daddy quotas,” may perpetuate labor-market inequalities by encouraging women’s exit from the workforce for caregiving responsibilities. The study’s insights hold significant implications for policymakers aiming to design equitable family leave policies. To mitigate the negative impacts on women’s long-term earnings, future policies may need to incorporate more gender-neutral frameworks or incentives for fathers to participate in caregiving, thereby balancing leave-taking across genders. Additionally, the study highlights the need for policies that support women’s return to work post-leave, such as affordable childcare options and employer incentives for retention, to prevent the career setbacks documented in this analysis.

Citation

Bailey, Martha, Byker, Tanya, Patel, Elena, and Ramnath, Shanthi. "The Long-Run Effects of California’s Paid Family Leave Act on Women’s Careers and Childbearing: New Evidence from a Regression Discontinuity Design and U.S. Tax Data." National Bureau of Economic Research (NBER), December 10, 2023. DOI: 10.3386/w26416