The Effects of Maternity Leave Legislation on Mothers' Labor Supply after Childbirth

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 employerprovided 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. …