Labour Market Effects of Parental Leave Policies in OECD Countries

This paper considers how entitlements to paid leave after the birth of children affect femalelabour market outcomes across countries. Such entitlements are granted for various lengths of time andpaid at different rates, reflecting the influence of different objectives including: enhancing children’s wellbeing,promoting labour supply, furthering gender equality in labour market outcomes, as well as budgetconstraints. Although parental care is beneficial for children, there are concerns about the consequences ofprolonged periods of leave for labour market outcomes and gender equality. This paper therefore looks atthe long-run consequences of extended paid leave on female, male, and gender differences in prime-age(25-54) employment rates, average working hours, and earnings in 30 OECD countries from 1970 to 2010.It finds that extensions of paid leave lengths have a positive, albeit small, influence on femaleemployment rates and on the gender ratio of employment, as long as the total period of paid leave is nolonger than approximately two years. Additional weeks of leave, however, exert a negative effect onfemale employment and the gender employment gap. This paper also finds that weeks of paid leavepositively affect the average number of hours worked by women relative to men, though on condition –once again – that the total duration of leave does not exceed certain limits. By contrast, the provision ofpaid leave widens the earnings gender gap among full-time employees.      