Mandated Paid Maternity Leave: A Bad Idea For Women

Abigail Hall Blanco Research fellow, Independent Institute
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With women’s issues on everyone’s mind, presidential candidate Hillary Clinton has debuted a campaign video vowing to fight for mandated paid maternity leave. “It’s outrageous that America is the only country in the developed world that doesn’t guarantee paid leave,” she said.

Clinton is not the first to point this out. For decades politicians and women’s advocacy groups have called on lawmakers to mandate paid leave for new moms, claiming the lack of such a policy is unfair to women and detrimental to the economy. Many say that women in the United States leave the labor force because “family-friendly policies” have not been enacted.

This issue hits home for me. As a woman who plans to have children, I can appreciate the desire to spend time at home with a new little one without worrying about going broke. But I am also an economist, and economics tells us why mandated paid maternity leave is a bad idea for women and everyone else. While proponents genuinely intend to help women, their suggestion would do more harm than good.

What people forget is that paid maternity leave is not free. It is costly to employers. Even if a woman does not get paid during her time off, her employer loses her labor services, holds her position open until she returns, and may have to pay overtime wages to cover her lost work hours. Mandating paid maternity leave would only increase these costs by the amount of a woman’s wages.

Firms cannot ignore these costs. If any employee fails to generate more revenues than expenses, that employee is not a good investment. This is particularly important when considering mandated paid leave because it would raise the cost of employing all women of childbearing age. If an employer that believes a female applicant will cost him thousands of dollars down the line in maternity leave, she may no longer be a good investment.

Obviously, this will make it more difficult for young women to find jobs, and some will be forced out of the labor market. Women who do find jobs will be offered lower pay because their employers will reasonably believe they are likely to cost more in the future.

So younger women will face discrimination — understandably so, as they’re more expensive than men or women past child-bearing age. If a male and female are equally productive, but employing the woman will cost $15 per hour over the term of her employment because of likely maternity leave, while the man will cost only $10 per hour, it makes sense to hire the man! It’s not that the employer is a misogynist or unfriendly to families. It’s just basic economics.

Nordic countries are often held up as icons of maternity policy. In Norway, women receive 36-46 weeks of paid leave after having a child. New mothers in Denmark can take a full year off with full pay.

What is frequently left out in these examples, however, is that women in these countries are less likely to achieve their career goals than women in the United States. In fact, more American women hold managerial and executive positions than women in the countries typically hailed as beacons of the feminist ideal. Women in the United States also earn wages closer to those of their male peers.

Some think the way to prevent the discrimination I’ve described is to outlaw it. But this would only increase the costs: the time, money, and labor resources government would spend to investigate the discrimination caused by its own policy.

Contractual alternatives to coerced paid maternity leave make much more sense. How about encouraging women to negotiate maternity leave as she would salary or other benefits? This would allow women to obtain a longer leave without increasing the cost of employing younger women as a group.

Forced paid leave would fail to help women and their families by reducing their wages and harming their chances at employment. This policy truly throws the baby out with the bathwater.

Abigail R. Hall is a Research Fellow at the Independent Institute (Independent.org) and an incoming Assistant Professor of Economics at the University of Tampa.