The effect of paid parental leave in the United States on young women's employment and earnings, and the family wage gap

Abstract

Using March Current Population Survey data from 1994-2015, this paper examines the effect of paid parental leave in the United States on young women's employment and earnings, and the family wage gap. The family wage gap is the difference in earnings between parents and non-parents. Paid parental leave laws in California and New Jersey are exploited for a quasi-natural experiment using difference-in-difference-in-difference empirical models. Results show robust evidence that paid parental leave has negative impacts on young women's employment and earnings. Estimated impacts vary by education level, with employment effects concentrated among young women without a bachelor's degree, and earnings effects concentrated among young women with only some college experience. Additionally, results also show weakly suggestive evidence that paid parental leave decreases the family wage gap for both mothers and fathers.