The effects of maternity leave legislation on mothers' labor supply after childbirth.

• Author: Baum, Charles L., II

1. Introduction

   Many more women work today compared with 25 years ago, and many of these women want to simultaneously raise children and work (Klerman and Leibowitz 1994; Leibowitz and Klerman 1995). Some of these women leave their jobs for a short period of time to give birth, only to return to the workforce soon after childbirth (Klerman 1994). To deal with the needs of these women, maternity leave legislation (MLL) has been passed in the United States, starting on the state level in 12 states in the late 1980s and early 1990s and culminating in 1993 with President Clinton's signing of the first federal maternity leave law, the Family and Medical Leave Act (FMLA). Like many of the 12 states' maternity leave laws passed before the FMLA, the FMLA allows eligible women to take up to 12 weeks of unpaid leave and guarantees that they can return to their old jobs. (1) Before passage of MLL, if women left the workforce to give birth, their employers were not required to give them their jobs back.

   MLL may affect mothers' leave-taking and return-to-work decisions if the amount of employer-provided maternity leave is less than that mandated by the government and if a mother is eligible. Klerman and Leibowitz (1997) predict that MLL will have a positive effect on the incidence of leave taking and on the number of mothers who return to work at their prechildbirth jobs. They also predict that MLL will allow some mothers to take more maternity leave, delaying their return to work at their prechildbirth jobs. To arrive at these predictions, Klerman and Leibowitz first consider affected mothers who would have quit work in the absence of MLL. They predict that, with MLL, some of these mothers will now take maternity leave and return to their prechildbirth jobs. This occurs because MLL increases the amount of maternity leave offered by the employer, consequently increasing the value of returning to work at the prechildbirth job relative to quitting. Klerman and Leibowitz next consider affected mothers who would take a suboptimal amount of maternity leave and return to their prechildbirth jobs absent MLL. They predict that MLL will allow these mothers to get closer to (or actually attain) their optimal amount of maternity leave (and delay their return) by increasing the amount of employer-provided maternity leave.

   The effects of MLL on leave-taking and return-to-work decisions are particularly important to employers. If MLL increases the incidence of leave taking or delays mothers' return to work, then MLL may increase the cost of production. The cost of production would increase because MLL requires employers to continue providing benefits such as health insurance coverage for employees on leave. Additionally, MLL would increase the cost of production by increasing employee absenteeism. If mothers take leave, then employers must hire and train temporary replacement workers to substitute for these mothers or else continue production without replacements. Certainly there are hiring and training costs associated with temporary workers. In addition, temporary workers should have less firm-specific human capital, making them less productive than these mothers would have been. Continuing to produce without temporary replacements for these mothers may increase demands for other workers to produce. Requiring remaining workers to cover absent employees' duties may harm worker morale.

   Conversely, MLL may benefit employers by preserving employer--employee relationships if permanent separations are costly. Employers would not lose their investments in workers and they would not have to hire and train permanent replacements. However, Ruhm (1998) argues that employers and employees are free to privately negotiate maternity leave benefits in the absence of MLL. If maternity leave can be voluntarily negotiated, then optimal employer--employee relationships will be preserved without the legislation. (2) If this is the case, then the only workers whose behavior is affected by MLL are those without employer-provided maternity leave for whose employer's job turnover is not terribly costly. These may be low-skilled workers with low levels of firm-specific human capital, and employers may not find it optimal for these employees to be allowed to return to their prechildbirth jobs.

   I examine three outcomes that are of interest to employers: how MLL affects (i) the incidence of leave taking, (ii) the probability that mothers eventually return to their prechildbirth jobs, and (iii) the timing of these mothers' return to work. (3) To address these outcomes, I first estimate a sequential discrete-outcome model that consists of a probit for the incidence of leave taking and, conditional on initially taking leave, a subsequent multinomial probit (MNP) for the probability of returning to work at the prechildbirth job and starting work at a new job. The equations are estimated simultaneously to control for cross-equation correlation in order to account for possible biases arising from unobserved heterogeneity. Then a second approach is taken where again the leave-taking equation is estimated but the subsequent equation becomes a dynamic MNP showing the timing of a mother's return to work. Conditional on taking leave, the dynamic MNP shows the monthly probability of returning to the prechildbirt h job and starting a new job for the first eight months after giving birth. The National Longitudinal Survey of Youth (NLSY) data set is used, which allows identifying each mother's state of residence and, consequently, whether state or federal leave mandates are in force. Because state-level maternity leave laws passed before the FMLA vary, the effects of MLL can be studied as a natural experiment: A "treatment" group of mothers for whom MLL applies is compared with a control group of mothers who were covered by neither the FMLA nor mandated leave from their state. The NLSY also allows determination of whether the data suggest that mothers are eligible for MLL. The results provide some evidence that MLL increases the probability that mothers eventually return to their prechildbirth jobs, but the results do not provide significant evidence that MLL impacts the incidence of leave taking. Further, the dynamic MNP model shows that MLL allows mothers to delay their return to work at their prechildbirth jobs. The results are somewhat stronger when account is taken of whether mothers are eligible for MLL. The remainder of the article is as follows: Section 2 reviews the literature and explains how this paper extends that literature; section 3 specifies the model; section 4 describes the data; section 5 presents the results; and section 6 discusses the results and concludes.

2. Literature Review

   Two studies use multivariate regression analysis to explicitly determine the effects of government-mandated maternity leave in the United States (Klerman and Leibowitz 1997; Waldfogel 1999). Other studies (Ruhm and Teague 1997; Ondrich et al. 1998; Ruhm 1998) have examined the effects of European maternity leave mandates, but because European mandates guarantee leave that is both paid and longer in duration, the effects of MLL passed in the United States may be different.

   Klerman and Leibowitz (1997) use data from the 1980 and 1990 censuses to see how state MLLs have affected mothers' employment status. In particular, they examine mothers' employment status at two points in time (1980 and 1990), where employment categories include employed, working, and on leave. Employing a difference-in-difference-in-difference technique, their preferred model shows that state MLL has not had significant effects.

   Waldfogel (1999) examines the Bureau of Labor Statistics' Employee Benefits Survey and the 1994 Westat survey and finds that leave coverage offered by firms increased after the FMLA. In particular, she finds that two thirds of all employers reported having to change their leave policies due to the FMLA. Examining the March Current Population Survey (CPS), she finds that leave taking also increased after the FMLA. Then she employs a difference-in-difference-in-difference methodology with the CPS data to determine the effect of the FMLA on employment and wages. She finds that the FMLA has had a small, positive effect on employment and essentially no effect on wages.

   In a related study, Averett and Whittington (2001) investigate other potential effects of MLL such as whether maternity leave affects fertility. Their results suggest that women with maternity leave are significantly more likely to give birth. Averett and Whittington also examine whether women who plan on giving birth are more likely to select jobs that offer maternity leave. Results suggest that fertility plans do not influence job sorting based on maternity leave benefits.

   The literature has three primary shortcomings. First, the literature uses cross-sectional data rather than panel data and is therefore only able to determine the effects of MLL at a particular point in time. None of the existing studies examines the effect of MLL on the timing of the mother's return to work or on whether working mothers return to work for their prechildbirth employers. Second, the existing literature often fails to take advantage of both state variation in maternity leave laws and variation created by the FMLA. Third, none of the literature determines whether mothers are eligible for government-mandated maternity leave. (4) Many mothers who are living in states where MLL is in force are not actually eligible for the mandates either because they do not have the requisite work history or because they work for firms of insufficient size.

   The literature is extended primarily by estimating a dynamic model that allows determining how MLL affects the timing of the mother's return to work as well as whether the mother actually returns to her prechildbirth employer. Additionally, both state variation in MLL and variation created by the...