The Effects of Maternity Leave Benefits on Labor Market Outcomes

Abstract

This paper investigates the effects of maternity leave benefits on the labor market outcomes of mothers with newborn babies in the United States. This paper estimates the effect of maternity leave benefits after controlling for substantial intrinsic differences between maternity leave covered and uncovered workers. The fixed effects estimation method is used to analyze the wage effect. Also, more explanatory variables are added to control for heterogeneity in the analysis of the turnover and employment effects. The results support the hypothesis that maternity leave coverage is beneficial on women's labor market outcomes. Maternity leave significantly lessens turnover one year after' childbirth, and is closely related with more employment outcomes after childbirth. Maternity leave also provides beneficial effect on wage profiles especially through encouraging covered women to work more hours. Maternity leave covered workers have maintained far steeper wage profiles before giving birth than uncovered workers. However, wage premium from maternity leave coverage is not large enough to cancel the negative effects of childbearing. Also, uncovered workers who start new jobs see their wages "rebound" after giving birth. This makes the slope of hourly wage profiles of uncovered workers similar with those of covered workers after giving birth.