Surprising Consequences from California’s Paid Family Leave Program

Paid Family Leave (“PFL”) is a wage replacement program within the short-term disability program, funded through employee payroll deductions and administered by the Employment Development Department (EDD). PFL covers employees at organizations of any size. Currently, PFL provides employees with partial wage replacement for up to 6 weeks in any 12-month period while absent from work to care for a seriously ill or injured family member or bonding with a minor child within one year of the child’s birth or placement in connection with foster care or adoption. ​ On June 27, 2019, Governor Newsom signed Senate Bill 83, which will extend the duration of PFL benefits from the current 6-week limit to 8 weeks starting July 1, 2020.

Recently, the National Bureau of Economic Research released a study using IRS tax data to evaluate the effects of California’s Paid Family Leave Act on the trajectory of women’s careers. According to the study, the Act did the opposite of what it was expected to do and worsened long-term career outcomes for new mothers. New mothers who took PFL ended up working less and earning less over their careers–averaging $24,000 in cumulative wage loss. (See © 2019 by Martha J. Bailey, Tanya S. Byker, Elena Patel, and Shanthi Ramnath, “The Long-Term Effects of California’s 2004 Paid Family Leave Act on Women’s Careers: Evidence from U.S. Tax Data,” National Bureau of Economic Research.)

The purpose of the study was to see how successful PFL was on closing the gender pay gap. The study concludes, “Our results run contrary to claims that California’s 2004 Paid Leave Act improved women’s short- or long-term career outcomes.” (Id. at 3.) “Moreover, we find little evidence that California’s 2004 Paid Family Leave Act increased women’s wage earnings.” (Id. at 4.) The study found that, “[c]ontrary to predictions that paid leave policies increase attachment to pre-birth employers (and, thus, help women retain valuable firm-specific human capital), women who had access to paid leave were no more likely to remain with their pre-birth employer than women without paid leave access, both in the short and long run.” (Id.)

Critics of the study claim it is not an accurate representation because the study focused on women who gave birth shortly after the Act took effect. They claim that the results might be different if analyzed today. However, without using data from when the Act initially took effect, the study would not have been able to analyze the long-term effects of the Act.

Others indicate that results of the study would be the same regardless of when it was conducted because the real reason for the pay gap “is what happens behind the scenes when a new mother holds her baby for the first time. No one wants to talk about it, yet that’s where we find the answer to why the pay gap persists and why all the paid leave in the world won’t matter. Women simply change when they give birth.” (Suzanne Venker, “The real reason California’s Paid Family Leave Act didn’t work,” The Washington Examiner (November 12, 2019)

California has championed the issue of paid family leave for the past decade as the first state in the nation to implement a paid family leave program. While this study just focused on the PFL Act in relation to childbirth, it is important to note that California has numerous other leave programs providing support to mothers and families.

Laura Curtis, Policy Advocate