The Effect of Expanding Access to Maternity Leave on Women's Employment and Wages -Evidence from the U.K

Background

Maternity Leave Legislation allows women to take time off from employment immediately before and after childbirth with income replacement. Since 1975, the United Kingdom (UK) has seen several changes to its maternity leave policy –duration of job-protected leave, statutory maternity pay (paid by the employer), maternity allowance have each increased over time. What is unique about the 1994 legislative changes was that it removed eligibility restrictions, allowing job-protected leave to all pregnant women regardless of hours of work, effectively removing barriers to accessing a significant work-family reconciliation policy for a large number of women. Prior research on long term trends in employment and wage gaps of married women with children compared to married women without children in the UK, corresponding to changes in government policies pertaining to maternity leave, taxation, childcare and welfare, finds evidence of increase in employment and wages over time. Our study builds on and extends prior research by including both married and unmarried mothers, women of childbearing age (“potential takers”) and by isolating the effects of the 1994 policy changes.

Methods

We use micro-data from the General Household Survey, for three years prior to the policy change, 1991-1993, and two years post-change, 1995-1996, and implement a difference in difference research design to identify the effects of policy change.  We have two labor outcomes: employment status: full-time employee (35 weekly hours worked or more); part-time employee (below 35 weekly hours worked); and unemployed; and constant weekly earnings. We compare the outcomes of working mothers (“takers”) or childbearing age women (“potential takers”) to the outcomes of women of working age who are not of fertile age (45-65).

Results

 

We find that there is a six-percentage point difference in the probabilities of being employed full-time between the new mothers and the control group post-policy.  The analysis of potential takers of the policy also shows an increase in the probability of being employed by 4% between the treatment and the control groups post policy. Lower probabilities of being unemployed are observed for both treatment groups, when compared to their respective control groups, post policy. Decreased range from 6-7% for takers and 2-3% for all women of child bearing age.

Women who were directly affected have a decrease in earnings below 1%, those potentially affected by the 1994 policy change have 4% decrease, but results are not statistically significant.

Conclusion and Implications

We observe that removing barriers for women to access maternity leave has a slight negative effect on wages within two years of childbirth, but an increase in the probability of being employed, for both women of childbearing age and new mothers. This result has both direct and indirect implications for policy. Contrary to the belief that making maternity leave easily available to women will be detrimental to their labor market performance, results indicate that such policies tend to improve their economic wellbeing, through their positive effect on women’s employment. Further, women’s improved attachment to the labor market is expected to have positive implications for their wages long term.