There is no conflict of interest.
Citation
Schenck, S. M. (2021). Assessing the employment effects of California's Paid Family Leave Program. Eastern Economic Journal, 47, 406-429. https://doi.org/10.1057/s41302-021-00193-9
Highlights
- The study's objective was to examine the impact of California's Paid Family Leave Program on employment.
- The study used a nonexperimental design to compare the outcomes of California firms and similar firms in other states without a paid family leave program. The author used data from the Equal Employment Opportunity Commission (EEOC) and statistical models to compare differences in firm-level employment between the groups.
- The study found a significant relationship between participation in a paid family leave program and increased employment.
- This study receives a low evidence rating. This means we are not confident that the estimated effects are attributable to California’s Paid Family Leave Program; other factors are likely to have contributed.
Intervention Examined
California's 2004 Paid Family Leave Act (PFLA)
Features of the Intervention
The federal Family and Medical Leave Act (FMLA) was passed in 1993 and allows eligible employees to take up to 12 weeks of unpaid leave with job protection. Since FMLA was passed, individual states have created policies to provide additional paid or unpaid leave. California's Paid Family Leave Program was passed in 2002 and implemented in 2004. This program offers up to 6 weeks of paid leave for eligible employees to care for a newborn or adopted child, or to look after a sick child, parent, spouse, or registered domestic partner. California's program applies to all employers regardless of size, making paid family leave available to nearly all private sector employees in California. While on leave, employees receive 60 to 70 percent of their wages, with a maximum weekly benefit that is adjusted for inflation. Reimbursement comes from a small payroll tax paid by employees.
Features of the Study
The study used a nonexperimental design to assess the impact of California's Paid Family Leave Program on firm-level employment. The author used data from the Equal Employment Opportunity Commission (EEOC) for the years 2000 to 2009, focusing on firms with over 100 employees and federal contractors with at least 50 employees. A total of 430,241 unique firms were identified, with 47,644 located in California. Different comparison groups were created based on similar business environments, industry, and size, using metrics such as the Small Business Survival Index and Forbes’ Best States for Business rankings. The author used statistical models to compare employment trends of California firms to similar firms in states that did not have such a program during the same period.
Findings
Employment
- The study found a significant relationship between having paid family leave and increased employment, with a 2.5% increase in average employment for California firms.
- California’s paid family leave was also significantly associated with larger average increases in employment in firms with 100 or more employees. The effect was smaller but still positive and significant among firms with fewer than 100 employees.
Considerations for Interpreting the Findings
The author compared employment outcomes for firms in California with those in other states. Because the analysis considered a policy operating in only one state, it is impossible to disentangle the effect of California’s Paid Family Leave Program from the effect of the state itself; this is known as a confounding factor. Also, the author assessed the effects of the paid family leave program by comparing employment trends in California with those in other states during a time period when California's employment remained stable while other states experienced declines. This could explain the observed differences in outcomes. Therefore, the study is not eligible for a moderate causal evidence rating, the highest rating available for nonexperimental designs.
Causal Evidence Rating
The quality of causal evidence presented in this report is low because the program was implemented in only one state presenting a confounding factor. This means we are not confident that the estimated effects are attributable to California’s Paid Family Leave Program; other factors are likely to have contributed.