Paid Leave Means Women Pay

Who pays for women’s mandated paid leave and other women-centric labor policies? At a superficial level, it depends on who you ask. Proposals for federal mandated paid leave and child care laws run the gamut, and advocates identify government, taxpayers, or private companies as backers. Unfortunately, those answers reveal a glaring oversight: directly or indirectly, women will pay.

Economists of a variety of ideological persuasions agree, including Larry Summers, former Director of the National Economic Council for President Obama. In 1989, Summers wrote “Some Simple Economics of Mandated Benefits” where he asserted that “The expected cost of mandated benefits is greater for women than it is for men.”

What does that mean? In his paper, Summers concludes that women will be paid less or not hired as a result of mandated benefits. In his words, “If wages could freely adjust, these differences in expected benefit costs would be offset by differences in wages.” And if not? “[T]here will be efficiency consequences as employers seek to hire workers with lower benefit costs.”

In the real world, Summers’ predictions seem to be borne out. Jonathan Gruber, an MIT economist historically unopposed to economic intervention, authored research that “consistently suggest[ed]” women’s wages are reduced to reflect the cost of benefit mandates in states that try them. Gruber estimated that the shift in cost is around “the order of 100 percent.”

And more recent research indicates women “pay” for mandated paid leave and job protections in other ways.[1] According to Jenna Stearns, wage and job entitlements led fewer women to hold management positions and promotion-track jobs in Great Britain. Her research provides “evidence that access to job-protected paid maternity leave can actually exacerbate gender inequality among highly educated workers” [emphasis added].

Although proponents rarely mention it, the U.S. policy status quo holds some counterintuitive advantages. A 2015 study comparing the U.S. against other countries suggests that women in the U.S. are more likely to have full time jobs and work as managers or professionals. That difference is attributed to a lack of maternal wage and job entitlement policies.

Importantly, if the U.S. did move toward paid leave or job entitlements for women, the loss of wages and/or opportunities during childbearing-aged years would not be one-time penalties. Being passed over for a job, involuntarily mommy-tracked, or having wages slashed to pay for prospective benefits can have impacts that last a professional lifetime.

These points aren’t mentioned in the current debate, but they should be. As Summers concludes, “There is no sense in which benefits become ‘free’ just because the government mandates employers offer them to workers.” Intellectual honesty requires we don’t ignore this inconvenient, but important fact: paid leave means women pay.

 

[1] Additional evidence here