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Exploring the Impact and Importance of Paid Family Leave



As parents of young children, caregivers of aging parents, and economic development nerds, paid family leave is frequently at the top of the mind of this group of authors. In addition to our own experiences, we often see clients nationwide struggle with overburdened and expensive child care systems, low labor force participation rates, and challenges recruiting and retaining a competitive workforce. While past blog posts have covered the economic impacts of child care and the motherhood penalty, recent legislation changes at the state level have led to this post’s explorations on paid family leave. 



What is paid family leave? 


According to the US Department of Labor, “paid family and medical leave refers to policies that enable workers to receive compensation when they take extended time off work for qualifying reasons, such as bonding with a new child, recovering from one’s own serious illness, or caring for a seriously ill loved one.” Put plainly - it is paid time off after the birth or adoption of a child or to take care of a sick family member. Currently, no federal legislation exists governing this topic in the private sector, so it is left up to states and employers to determine their own policies. Thirteen states and territories mandate paid family leave; eight others have voluntary paid family leave that employers can opt into via the private insurance market. While the Family and Medical Leave Act (FMLA) guarantees job protection for eligible workers, it does not guarantee any form of compensation and is not offered to workers who have been at a company for less than a year, or for those at companies with under 50 employees.  


What is the impact of paid family leave? 


Paid family leave is good for businesses, the economy, and caregivers. Most notably, 


  • companies with paid family leave policies (whether mandated or voluntary) have better retention rates for their employees;


  • paid family leave increases labor force participation rates; and a paid family and medical leave policy has been shown to reduce the poverty rate by 2 percentage points;


  • local economies benefit from supporting paid time off for new parents. Recent research by the Prenatal to 3 Policy Center found that, in the Commonwealth of Pennsylvania alone, benefits of bonding leave outweigh costs by 18 to 1; and 


  • families are healthier and happier if paid parental leave is on the table. Paid parental leave policies have been shown to significantly improve maternal physical and mental health.



How can we improve outcomes? 


Over half of states introduced paid family leave legislation in 2023. While not all successful, this increased attention to a pressing economic issue demonstrates a potential for momentum. 

In the absence of paid family leave, employers can offer various accommodations and supports to working parents and caregivers: flexible hours and remote work options, well-appointed and dedicated spaces for expressing mothers to pump, breast milk transportation while traveling for work, mentorship within the company, child or elder care stipends and/or Flexible Spending Accounts (FSAs), and mental health support.


 

For those of us in the economic development world, we can continue finding and spotlighting data that shows how beneficial paid family leave and other caregiving accommodations are for everyone. If you have data or case studies to share that tell this story, reach out to [email protected]

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