Out of a diverse group of 18 New Jersey businesses that were asked about the state’s paid family leave policy, which has been in place since 2009, the vast majority said it hasn’t hurt their bottom lines, according to interviews conducted by researcher and journalist Sharon Lerner.
New Jersey’s policy, like the ones in the other two states that have paid family leave, operates like social insurance, where workers pay in a percentage of their wages so they can later use the money when a new child arrives or they need to care for a family member. They can then take up to six weeks off. In the rest of the country, workers are only guaranteed 12 weeks of unpaid leave.
Fourteen of the companies, in industries as widespread as shipping, nursing, pharmaceuticals, and accounting, said the paid leave hadn’t had any impact on their finances, while two felt it saved them money because they don’t have to cover the cost of paid leave.
Two companies said it did cost them extra money because it encouraged more employees to take leaves and to take longer ones. That meant they had to hire more temporary workers to cover the employers who were out. Even so, they both felt that it was worth it.
Meanwhile, 12 of the businesses said the law had a positive impact on their work overall, while six saw it as neutral and none saw it as a negative. The most common reason for seeing it in a positive light was the decrease in financial hardship for their workers who needed to take leave. None of the companies said it affected turnover or productivity and none of them said any of their workers had abused the leave.
Similar experiences were reported by California’s businesses in a much more comprehensive study from 2011. Eileen Appelbaum and Ruth Milkman of the Center for Economic and Policy Research did detailed surveys of employers and employees at 253 firms about the state’s program, which has given workers up to six weeks of paid leave since 2004. They found that “the vast majority of employers reported that it has had minimal impact on their business operations.” Ninety-one percent said it had either a positive effect or no noticeable one on profitability or employee performance, while 89 percent said the same of productivity. Ninety-one also said that they weren’t aware of any employee abuse of the program.
By reducing turnover, paid family leave can be a real boon to employers. Appelbaum and Milkman found that those who got paid leave were more likely to return to the same job afterward. Such an effect was estimated to save employers $89 million in each year. Turnover is very costly: it takes the equivalent of about 20 percent of an employee’s salary to replace her.
Paid family leave can also help boost the economy. It’s likely to keep people from leaving the labor force and can even help add more people to it. It also reduces the amount of time women spend out of the labor force by decreasing the chance that they’ll have to quit their jobs for the birth of a new child. A quarter of women who have to take leave either quit or are let go.
And paid leave can reduce financial hardship for employees. Of those who get partial pay or no pay when they have to take leave, a third borrow money, dip into their savings, or put off bills, while 15 percent go on public assistance. Women who get paid leave, on the other hand, are much more likely to see their wages increase when they go back to work.
Besides California and New Jersey, Rhode Island is the only other state that has a paid family leave program. Sen. Kirsten Gillibrand (D-NY) and Rep. Rosa DeLauro (D-CT) introduced a federal program in December, but it hasn’t advanced out of committee.