THE EFFECTS OF GOVERNMENT-MANDATED FAMILY LEAVE ON EMPLOYER FAMILY LEAVE POLICIES

I. INTRODUCTION In 1993, Congress passed and President Clinton signed the Family and Medical Leave Act (FMLA). Twice vetoed by President George H. W. Bush, the FMLA allows eligible employees 12 weeks of job-protected unpaid leave from work (per year) to address family issues (Crampton and Mishra 1995). Eligible employees are those with tenure of at least a year and 1,250 hours of work. Furthermore, firms are covered by the FMLA if they employ at least 50 workers. Prior to the FMLA, 12 states and the District of Columbia passed similar legislation mandating family leave benefits. The literature does not provide much evidence that family leave legislation has affected employment, work, leave-taking, or wages. (1) For example, Klerman and Leibowitz (1997) and Baum (2003a) study the effects of family leave legislation on employment but find no statistically significant effects. Similarly, Klerman and Leibowitz (1997) find that the legislation has no effects on work, Han and Waldfogel (2003) find no significant effects on leave-taking for either mothers or fathers, (2) and Waldfogel (1999a) and Baum (2003a) find no significant effects on wages. When the literature does find statistically significant effects, they are either small or prone to change with model specification. For example, Baum (2003b) finds that family leave legislation allows mothers to delay their return to their prechildbirth jobs but only by a couple of weeks; Waldfogel (1999a) finds that family leave legislation increases leave-taking by employees of medium-sized firms (with 100-500 employees) but not for those of large firms (500 or more employees); and Klerman and Leibowitz (1997) find that the legislation increases leave-taking in their difference-indifference (DD) specifications but not in their difference-in-difference-in-difference (DDD) specifications. It is not clear why family leave legislation has not had larger, statistically significant effects on these outcomes. One possible explanation is employees are unable to use the leave mandated by the legislation because it is unpaid. That is, employees may be bound by financial constraints instead of leave-taking limits imposed by employers. Indeed, Cantor et al. (2001) and Waldfogel (2001), using employee responses to the 2000 Survey of Employees, find that the average length of family leave taken (among leave-takers) was only 10 days. Furthermore, Cantor et al. (2001) and Waldfogel (2001) find that over half of leave-takers report being concerned about financial constraints while on leave. A second explanation is that workers do not need to use the leave mandated by family leave legislation because they already have the option of taking time off work through other means, such as accumulated vacation, sick leave, or temporary disability policies. A third explanation is that the mandates only apply to "large" employers (with at least a minimum number of employees). If so, then smaller employers are not affected by the legislation. Cantor et al. (2001) and Waldfogel (2001), using employer responses to the 2000 Survey of Establishments, find that only 10.8% of employers were covered by the FMLA, though these "large" employers employed 58.3% of employees. A fourth explanation is that many employers (particularly the "large" ones covered by the legislation) provide their employees with sufficient family leave regardless of family leave legislation. Indeed, the Pregnancy Discrimination Act of 1979 requires employers with temporary disability leave policies to extend such policies to cover pregnancies (Waldfogel 2001). (3) If so, then the legislation may not change many firms' extant leave policies. If the first and second explanations are correct, then family leave legislation may have increased the amount of family leave allowed by employers without corresponding effects on employment, work, leave-taking, and wages. If the third or fourth explanations are correct, then family leave legislation may not have had statistically significant effects on these outcomes because it has not significantly affected the amount of leave allowed by employers. …