Non-Technical Summary:
Until 2011, there was no universal paid parental leave in Australia. Only 56.8 per cent of employed women aged 20 to 45 in Australia had access to paid parental leave provided by their employer. This was also not distributed evenly across all women, but concentrated amongst those with fixed-term or permanent work, on above-median wages, in full-time employment, with higher education, and in professional occupations. Overall, more advantaged women were more likely to have access to paid parental leave than less advantaged women.
The introduction of the Australian Paid Parental Leave (PPL) scheme in 2011 provides a rare opportunity to estimate the labour supply and employment impacts of publicly-funded paid leave on mothers in the first year post-partum. This is of particular interest now with prospective presidential candidates in the US, the only developed country not to have a universal paid parental leave scheme, debating its introduction.
The almost universal coverage of the scheme combined with detailed survey data collected specifically for this purpose up to one year after birth before and after the introduction of PPL allow us to carry out detailed analyses. We examine the impact of PPL on the timing of returning to employment by the mother, the proportion that returned to employment within one year, and the proportion that returned to their pre-birth employer and/or job.
In line with much of the existing literature, we find a positive impact on leave taking in the first half year and on the probability of eventually returning to work in the first year. That is, we find that post-PPL mothers initially return to work more slowly, but that the return to work speeds up later so that they catch up by the middle of the first year, and by the end of one year more post-PPL mothers than pre-PPL mothers have returned to work.
The paper provides new evidence of a positive impact on continuing in the same job and under the same conditions. Further new evidence shows that the mothers’ characteristics matter for the impact of the scheme. We find that labour market impacts of the PPL scheme are stronger for lower-educated than for higher-educated women. In addition, we find that impacts are stronger for low-income women, for those not eligible for employer-provided paid leave, for self-employed women and for women on casual contracts. This provides support for the hypothesis that paid leave schemes are more likely to affect disadvantaged groups of women than more advantaged women.
An updated version of this paper has been published as Broadway, B, Kalb, G, McVicar, D and Martin, B. (2020) The Impact of Paid Parental Leave on Labor Supply and Employment Outcomes in Australia. Feminist Economics, 26(3), 30-65. DOI: 10.1080/13545701.2020.1718175