THE EFFECT OF PARENTAL LEAVE ON FEMALE LABOUR FORCE
PARTICIPATION IN SWEDEN
Author: Marielle Gueissaz
Student Number: 10846441
Supervisor: Dr. Z.E. Öztürk
University of Amsterdam
January 2018, Amsterdam
Table of content
Abstract 4
1. Introduction: 5
1.1. Why was the text written: problem definition 5
1.2. What is the subject – research question 6
1.3. Outline of the paper 7
2. Overview of female labour force participation 8
2.1. Factors influencing labour force participation 8
2.2. Situation in Sweden 10
2.3. Comparison with other countries 10
3. Overview of the different paid parental leave legislations in Europe 12
3.1. What is the length and how generous is it? 12
3.2. When was it introduced? 12
3.3. How is it financed 13
4. Impact of paid parental leave on female labour supply 13
4.1. Conditions to be eligible & Job protection 14
4.2. Transferability & Flexibility 14
4.3. Duration 16
4.4. Payment 17
5. What should be taken as example for other countries? 18
6. Conclusion 20
Statement of Originality
This document is written by Student Marielle Gueissaz who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in
Abstract
Combining family and working life represents a real challenge for women. High female labour force participation is important among others for gender equality, economic reasons, and for women to be independent. Parental leave is a legislation that helps mothers to have children and pursue their career. This paper researches the effect of parental leave legislation on female labour force participation. This is with help of an example, namely Sweden which was the first country to introduce a paid parental leave in 1974. The results found that eligibility conditions on job tenure, job protection, non-transferability and flexibility of the time, a relatively short duration and a high payment are beneficial for the female labour force participation.
1. Introduction:
1.1. Why was the text written: problem definition
Sweden is one of the leading countries in gender equality and female-friendly legislations. The Swedish female labour force participation is currently at 80.2 per cent which places the country second in the OECD countries after Iceland (Jaumotte, 2004). One of the main reasons for this high rate is that Sweden was the first country in the world to introduce a paid gender neutral parental leave in 1974. The parental insurance entitled parents to 26 weeks which could be shared between both parents and receive 90 per cent of their salaries during that period (Duvander, Ferrarini, & Thalberg, 2005). The aim was to achieve better gender equality by allowing men and women to combine working and family life. This legislation was introduced in order to rebalance the inequality of the rate of labour participation in favor of women against men. The law allows the leave to be divided equally between the two parents, which helps smooth the reintroduction of women in the labour force (Rönsen & Sundström, 1996). Nevertheless, this goal was not reached. The gender-neutral design of the policy, allowing to freely divide the time available between both parents led to an uneven distribution of the leave. Over the years, the length and payment of the leave were modified. The duration of the leave was extended to more than a year, but most of the leave was still taken by women. Even 20 years after the introduction of the legislation, 90 per cent of the leave was taken by the mothers (Duvander, 2014). This is why in 1995, the government introduced a reserved month from the leave, exclusive to each parent, non-transferable and lost if not taken. This rule was extended to 2 months in 2002, which led to an increase of the share of fathers using any leave. This privileged leave can be taken up to the child’s 8th birthday and is according to
many researchers, one of the main reasons for the high female labour force participation and the advancement of Sweden in terms of gender equality. (Duvander, 2014; Duvander et al., 2005; Jaumotte, 2004).
Labour force participation is defined as the percentage rate of working population aged 15-64 currently employed or seeking employment (Périvier-Timbeau, 2013). In the last decades, the amount of women being part of the workforce increased and was accepted more and more in western countries (Arnot, 1975). Nevertheless, a gap remains. One of the reasons for this difference is the difficulty of managing a career and a family life. This is why remodeling the terms of access to parental leave is necessary to progress from a gender equality point of view (Périvier-Timbeau, 2013). Maternity leave existed before parental leave, giving the
opportunity exclusively to mothers to take a compensated absence from work in order to take care of the child and herself physically and mentally (Kalb, 2017). It is often offered separately from parental leave, in order to support the health of the child and the mother. Parental leave was introduced to give the same opportunities to men and women on the labor market. It is an employment-protected allowance which is a family right in some countries. It is attributed to both parents who reduce or stop their professional activity in order to take care of a new-born baby (Périvier-Timbeau, 2013). In most cases, the leave is fully taken by the mother. This phenomenon can amongst other factors be explained by the very implemented gender-specific roles given by society: for women, caring for the children and organizing the family, and for men, the role of providers of resources (Mills et al., 2014). This is a problem for gender equality as women are as qualified as men to do the same jobs. As a solution, fathers using a higher share of parental leave can diminish the burden of care on women and lead to a faster reconcilement of their working and family life (Jaumotte, 2004). Furthermore, it signals to employers that men are as likely as women to take a leave and can therefore increase the career chances of women (Périvier-Timbeau, 2013).
1.2. What is the subject – research question
As mentioned above, Sweden is one of the leading countries when it comes to gender equality and family-friendly policies. The generous maternity and parental leave Swedish parents benefit from, allows mothers of young children to reduce the normal working hours. In theory, such arrangements would enable mothers to obtain quality jobs while having the possibility of reducing their working time. This helps them achieve a family-work balance in order to pursue their careers. This paper will examine in further detail what the different factors from the parental leave are, that influence the female labour supply.
The introduction of such a legislation helps mitigate gender discrimination for women in child-bearing years and increase female labour force participation (Duvander et al., 2005). A high female labour force participation is desired because of the following reasons. As mentioned earlier, it leads to a more gender equal society. Furthermore, in a society where separation and divorce of couples is increasing (Arnot, 1975), it is crucial that women are financially independent in order to support themselves if needed. A higher rate of women in the labour force is an economical advantage as it contributes to the increase of the national GDP. Finally, women who do not work but have been educated and trained at the expense of the
government represent a tremendous loss, as the state invests in their education but they are not contributing anything back (Elborgh-Woytek et al., 2013).
This leads to the research question of this paper being: To what extent does parental leave legislation influence female labour force participation. This question will be answered based on the example of Sweden, where the implementation of a paid parental leave has led to an increase in female labour force participation. Different aspects of the policy and its influences on the female participation rate will be analyzed and judged on their effectiveness. This will be done by means of papers published on this topic as well as statistics published by the OECD or the Swedish bureau of statistics.
1.3. Outline of the paper
The rest of the paper will be structured as follows. In section 2, female labour force participation as well as the factors influencing it will be defined, followed by a description of the situation in Sweden as well as in other OECD countries. Section 3 will give a general overview on how parental leave legislation works and what the situation in the OECD countries is. After this, the factors of parental leave influencing female labour force participation will be described in section 4. Based on these findings, section 5 will provide an analysis on how parental leave legislation should be structured and finally the paper will end with a conclusion in section 6.
2. Overview of female labour force participation 2.1. Factors influencing labour force participation
As mentioned earlier, the female labour force participation is defined as the number of women aged 15-64 being actively engaging in the labour market, either by working or searching for work. According to a study published by the OECD in 2004, the female labour force participation does not only depend on parental leave policies, but also on many other family-related policies (Jaumotte, 2004). Firstly, some forms of family taxation discourage women to join the labour force. Family taxation is the tax treatment of the second earner in a working couple. In most of the OECD countries, married women taxed as second earner are taxed more heavily compared to men and single women (Jaumotte, 2004). Secondly, childcare subsidies and child benefits are forms of financial support paid by the government. Through subsidizing the cost of the childcare, the former policy makes it affordable for mothers with lower incomes to send their children to a day care and return to work. Childcare subsidies therefore have a positive effect on female labour force participation. Child benefits are a lump-sum paid by the government for the care of children in order to reduce families’ costs. Nevertheless, as families only have more available income at their disposal, it has been proven to work as income effect and may have a negative or no impact on the labour force participation (Jaumotte, 2004). Therefore, childcare subsidies are more desired than child benefits to increase female participation. Thirdly, flexibility of working time arrangements plays an important role in helping mothers to combine working and family responsibilities. Indeed, it is easier to raise children and be part of the working force when working at a lower rate. Countries with rigid working policies and times, have a lower proportion of female labour force participation (Mills et al., 2014). Countries with more flexible working policies such as the Netherlands or Switzerland who have female part-time rates of 75.0 per cent and 58.8 per cent respectively, also have a higher rate of female labour force participation (74.7 per cent and 79.5 per cent) (OECD, 2016a). Fourthly, the tax incentive to share market work between the couple can lead to an increase in the female labour force participation because of inactive women taking part-time jobs. Countries where the market income of the first and the second earner is taxed separately represent an advantage for the earners who have more disposable income than if the higher earner was the only one taxed (Mills et al., 2014). Finally, other policies such as anti-discrimination laws or job search obligation have a positive influence on female participation, whereas restrictions on opening hours of shops have a negative impact.
The combination of these policies can help increase the female labour force participation and is different in every country. According to Jaumotte (2004), northern European countries, as well as Austria and France, which have high female participation rates, have a relatively high second-earner tax treatment as well as a generous child support. This encourages female labour force participation, in particular full-time work and could explain why these countries have lower rates of female part-time workers.
Other factors that are not directly influenceable by the government may affect the female participation: for instance, the education of women as well as the situation of the labour market. Higher educated women tend to join the labour market more easily. Furthermore, high male unemployment rate seems to encourage women to work, probably in order to compensate the loss of the male not earning in a couple. High female unemployment rate on the other hand discourages women to work, as they are not keen on joining a working life primarily dominated and ruled by men (Jaumotte, 2004). This keeps women from entering the market, hence keeping the labour market more male dominant, which further discourages women from entering the market. A vicious cycle!
As mentioned before, a high female labour force participation is desirable because of gender equality reasons, stimulation of the economy by increasing the workforce and thus increasing production and more independence of women.
50 55 60 65 70 75 80 85 90 19 65 19 67 19 69 19 71 19 73 19 75 19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 20 07 20 09 20 11 20 13 20 15 % Employment/population ratio Labour force participation rate Linear (Labour force participation rate)
Figure 1: Labour force participation and employment rate, women aged 15-64, Sweden 1965-2016
2.2. Situation in Sweden
Currently Sweden has a female participation rate of 80.2 per cent, and is therefore one of the leading countries in the OECD after Iceland. As shown in figure 1, the female employment rate rose from 52.8 per cent in 1965 to 74.8 per cent in 2016. In this year, the female labour force participation rate was just above 5 percentage points higher, indicating an unemployment rate of close over 5 per cent. The employment rate as well as the participation rate increased more steeply after 1974. The introduction of the shared paid parental leave could be an explanation for this. The decrease of the employment rate in the 1990’s can be explained by the economic crisis which led to a decrease in labour demand, leading to an increase in unemployment. Overall, the employment rate as well as the participation rate of women has constantly increased in Sweden.
2.3. Comparison with other countries
As mentioned earlier, the female participation rate depends mainly on different family-oriented policies. As shown in figure 2, Nordic countries have a high participation rate which can among other factors be explained by their family-friendly oriented policies and their generous expenditure on family benefits.
0 10 20 30 40 50 60 70 80 90 Tu rk ey Me xi co Co st a Ri ca So ut h Af ric a Ita ly Ch ile Ko rea G ree ce Po la nd Bel gi um H un ga ry O ECD c ou nt ries Co lo m bi a Ir el an d Lu xem bo ur g Sl ov ak R ep ub lic Un ited S ta te s Czec h Rep ub lic Fr an ce Ja pa n Sl ov en ia Isr ael Ru ss ia n Fed er at io n Sp ai n Po rt ug al Au st ra lia Au st ria Un ited K in gd om Est on ia G er m an y Li th ua ni a La tv ia Fi nl an d Ca na da N ew Ze al an d N et her la nd s N or wa y D en m ar k Swi tzer la nd Swed en Ic el an d %
Figure 2 : Labour force participation of OECD countries, women aged 15-64, 2016
Source: OECD (2018b)
This is presented in figure 3, where the OECD countries are ordered by the rate of public expenditure on family benefits. The public spending are formed by child-related cash benefits, children subsidies and financial support through the tax system (Jaumotte, 2004). According to Elborgh-Woytek et al. (2013), high expenditure on family benefits have a positive correlation with female labour force participation. Indeed, it can be seen from figure 2 and 3, that from the 10 OECD countries spending the highest share of their GDP on family benefits, Denmark, Sweden, Iceland, Finland and Norway are also in the first 10 OECD countries with the highest female labour force participation rate. Nevertheless, it is not the only reason for a high female participation rate. The Netherlands and Switzerland have a low social expenditure on family benefits, but score high on the female labour force participation ranking. One reason for this can be the flexible working policies in these two countries and therefore the high amount of female part-time workers (OECD, 2016a).
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 M ex ic o Tu rk ey U ni ted… Kor ea La tv ia Por tuga l Ca na da Ja pa n Sp ai n N eth er la nd s Chi le Ita ly Sw itz er la nd Sl ov en ia Est on ia Is ra el Sl oc ak … O EC D - Tota l G er m andy Czec h… Austr ia Austr al ia N ew … Bel gi um Fr anc e H un ga ry N or w ay Fi nl and Ir el and Lux em bo ur g Ic el and Sw eden D en m ar k U ni ted … % of GDP
3. Overview of the different paid parental leave legislations in Europe 3.1. What is the length and how generous is it?
Different countries have different legislations when it comes to family policies. Nowadays, almost all OECD countries offer some sort of parental leave. Within the OECD, 27 of the 35 member countries offer a paid parental leave. The essential distinctions that can be made are the differences in compensation and the length. The payment for the parent taking the leave can be divided into three categories: firstly, countries offering a percentage rate of the wage that varies from 25 to 100 per cent. Secondly countries offering a flat rate and thirdly countries offering a parental leave without remuneration. The length of the leave can vary from 13 weeks in Iceland to 146 weeks in Estonia. Differences in eligibility conditions as well as remuneration changements during the leave make it difficult to categorize the countries. For example, Belgian mothers may take 15 weeks of maternity leave at a rate of 82 per cent of their earnings for the first 30 days. Afterwards, the payment reduces to 75 per cent for the rest of the maternity leave and mothers are entitled to a flat rate for a parental leave of 3 months. Belgian fathers are entitled to two weeks of paternity leave at a rate of 100 per cent of their salary for the first 3 days. Afterwards, it reduces to 82 per cent for the rest of the paternity leave. They are also entitled to a parental leave of 3 months remunerated with a flat rate (Ray, 2008). Other distinctions occur within the length and terms of parental leave such as in Sweden where some time is reserved for the father and the mother, or as in Germany and Austria, where the parents get a bonus of a certain amount of weeks if the leave is divided more equally, or as in France where parents get a penalty if one of the parents takes a too high share of the leave (Ray, 2008).
3.2. When was it introduced?
In figure 4, 30 countries members of the OECD are listed according to the year of introduction of a parental leave, as well as the length of the leave in 2016. Poland and Hungary introduced parental leaves prior to Sweden. Nevertheless, Sweden was the first country to introduce a paid leave in 1974. Mexico, Switzerland and the United States are examples of member countries who do not have a parental leave.
Figure 4: Length of employment-protected parental and home care leave available to mothersa) by year of introduction, 2016
3.3. How is it financed
In most of the countries the financing of the parental leave is made by social security, but can also be combined with the employer liability. In Sweden, the parental leave is financed by contributions paid by the employer, which represents 2.2 per cent of the individual gross earnings (Duvander et al., 2005)
4. Impact of paid parental leave on female labour supply
As seen in section 2, paid parental leave has an overall positive effect on female labour force participation. In this section, the effects of the different factors of the policy will be discussed. In particular the conditions in order to be eligible as well as the effect of the job protection will be looked into in section 4.1. Afterwards the transferability and flexibility of the available days will be considered in section 4.2. The length and the payment of the leave will be assessed in section 4.3 and 4.4. respectively. Sweden will be taken as example because it has had an established gender neutral paid parental leave for more than 40 years and has thereby achieved a high female labour force participation, which made it possible for researchers to examine the effect of the different aspects on the participation rate.
0 20 40 60 80 100 120 140 Po la nd H un ga ry Sw ed en Fr an ce Italy N or w ay Fi nl an d Sp ai n D en m ar k Po rtu ga l G er m an y Ko re a N ew Ze al an d Ic el an d Au st ra lia Au st ria C an ad a N et he rla nd s Ja pa n Es to ni a G re ec e Sl ov ak R ep ub lic Be lg iu m Ire la nd Lu xe m bo ur g U ni te d Ki ng do m C ze ch R ep ub lic M ex ic o Sw itz er la nd U ni te d St at es 1968 1969 1974 1977 1977 1977 1980 1980 1984 1984 1986 1987 1987 1988 1990 1990 1990 1991 1992 1993 1993 1993 1998 1998 1999 1999 2001 - - -Weeks Source: OECD, 2016 (b)
a) Information refers to parental leave and subsequent periods of home care leave (sometimes under a different name, for example, “childcare leave” or “child raising leave”, or the Complément de Libre Choix d’Activité in France). Data reflect entitlements at the national or federal level only, and do not reflect regional variations or additional/alternative entitlements provided by states/provinces or local governments in some countries (e.g. California in the United States).
4.1. Conditions to be eligible & Job protection
In Sweden, the condition to be eligible for the paid parental leave is that parents need to have been employed for more than 240 days prior to the child’s expected birth. Then parents get paid 80 per cent of their salary for the first 390 days and receive a flat rate of 180 Swedish krona per day, corresponding to 19 euro, for the last 90 days. If the future parent does not meet the requirement, he/she receives a flat rate payment of 250 Swedish krona, corresponding to 27 euro per day for the totality of the leave (Evertsson & Duvander, 2011). This condition encourages parents to have a stable position in the labour force, in order to get a higher compensation. A further incentive to have a stable position in the labour force is the law protecting the employee who is taking a leave for his new-born child. Parents are ensured their position when they return after the leave (Low & Sánchez-Marcos, 2015). This job protection encourages women to reenter the labour force, but also has negative aspects for employers. They lose an employee for a certain amount of time, who is accumulating less experience and returns disadvantaged compared to his/her colleagues in terms of skills and knowledge. This may lead to a lowering of wage increase, which discourages women to return to work after a long time absent from work (Evertsson, 2016). The length of the leave playing an important role in the female participation will be discussed more thoroughly in section 4.3.
4.2. Transferability & Flexibility
The available time of parental leave can be divided into three different categories: firstly, parental leave is an individual right where both parents are entitled to the same amount of time which is non-transferable. Secondly, parental leave is an individual right that is transferable to the other parent. Thirdly, parental leave is a family right where the available time is dividable between both parents (Castro-García & Pazos-Moran, 2016). In Sweden, parents of a young child benefit from a family right consisting of 480 days to share between the two. Nevertheless, parents also have an individual right of 60 non-transferable days, lost if not taken. Therefore, each parent is entitled to 60 days, and the 360 remaining days are to be divided between the couple (Evertsson, 2016). The non-transferability of the leave is important to encourage fathers to take the leave and to incite women to reenter the labour force (Périvier-Timbeau, 2013; Belle, 2016). An example for this is Germany, where the proportion of fathers taking the leave rose from 3.3 per cent in 2006 to 29.3 per cent in 2012, after introducing two bonus months, available if both parents take at least two months of
leave. In Sweden, the introduction of non-transferable time which started with 30 days in 1995 and increased to 60 days in 2003 has led to an increase in the number of fathers taking the leave, as well as the amount of days they were taking. As presented in figure 5, the average amount of days taken by fathers has more than doubled between 1995 and 2014. Nevertheless, in 2014 fathers were still only taking 25.8 per cent of the full leave and mothers 74.2 per cent (OECD, 2016b). This increase is far from the gender equality but shows an improvement. The non-transferability is crucial for the women’s labour force participation rate, as when fathers take the leave, it allows mothers to go back to work more quickly and not to be absent from work for a too long time. In addition to the non-transferability, the flexibility of the leave plays an important role for the labour force participation. In Sweden, parents are authorized to split the 480 days in ¾, ½, ¼, and 1/8 days leave (Rönsen & Sundström, 1996). For instance, parents can work at 50 per cent during 20 days instead of 100 per cent for 10 days. This allows mothers to combine their working life more easily with their family life and therefore increases the labour force participation.
Figure 5 : Male average days of paternity and parental leave benefits used, 1995-2014
Source : OECD (2016c) 0 5 10 15 20 25 30 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Ave ra ge d ays
4.3. Duration
As mentioned before, the length of the leave taken by the mother plays an important role in the labour force participation. It is crucial that mothers take a break after the birth of a child, in order to recover physically, to create a bound with the child, readjust to the new family situation and to go back to work re-energized (Jaumotte, 2004). Nevertheless, researches have shown that the length is only beneficial to a certain extent. When the leave is too long, besides just not wanting to rejoin the labour force, women can be discouraged by low career prospects due to a loss of skills and delay in terms of knowledge. Furthermore, lengthy leave has shown to have a negative influence on wage increase. This refrains the higher earner (usually men) of the couple on taking a leave, forcing the lower earner to take the majority of the leave and having a negative impact on their career.
In a study made by Evertsson & Duvander (2011) with help of the Swedish Level of Living Survey between 1991 and 2000, it was shown that a too lengthy leave can have negative effects on women’s career prospects. The study measures the likeliness of an upward occupational move for women taking a leave up to 15 months compared to women taking more than 15 months. The results show that women who take up to 15 months of leave have significantly higher career prospects than women who take more. This can be explained by two reasons. Firstly, the deterioration of human capital. Human capital is defined as the knowledge, professional skills and experience learned through education, practical training or during working time. According to Evertsson (2016), human capital starts to deteriorate after approximately three months, meaning that after a long leave, an employee is less up to date in terms of skills and knowledge compared to his or her colleagues and would therefore explain the disadvantage men and women have when returning to work. Secondly, Evertsson & Duvander (2011) found that longer leaves can be perceived as a lack of commitment to work from the employee taking the leave, resulting in less career promotions. Therefore, women taking longer leaves could be discouraged to reenter the labour force after their leave, knowing they have lower career prospects. Negative signaling towards the employer is also a problem for men, who in the previously explained traditional gender roles, are expected to provide for the household and not to take a leave, whereas it is normal for women to take one. Resulting that when men deliberately take a leave it is perceived by the employer as a lower commitment to work Evertsson (2016).
In the same study, Evertsson (2016) linked the findings of the previous research about the duration of the leave to wages. He found that the length of the leave is negatively correlated to wage increases. Nevertheless, the length of the leave has a different impact on wages for men and women. Women incur the highest loss of wage increase when the leave is lengthy, whereas men’s wage increase suffers straight away. Human capital which is not built up during the leave is the reason for a general loss for men and women’s wage increase. The negative signaling to the employer is stronger for men than women, which is the reason why men’s wage increase suffers faster than women’s wages. However, in a dual-earner couple, men tend to be the higher earner of the two (Duvander, 2014). This could be an explanation why men still take a shorter leave in order to avoid a more important economic loss. Leading to an uneven distribution of the leave where the mother takes most of the available time which also has an impact on her wage, discouraging a reinsertion into the labour force and decreasing the female labour force participation.
Finally, Rönsen & Sundström (1996) have shown that when a legislation with longer leaves available for women is introduced, women tend to take advantage of it and extend their leave. For the reasons mentioned above this has a negative impact on women’s labour force participation and the amount of time available for women a leave should therefore not be too long.
4.4. Payment
Compensation during the leave is an important factor in labour force participation, because it can have a major influence on how the leave is divided up between the parents. In Sweden, the first 390 days of the 480 granted days are paid at a rate of 80 per cent of the salary of the person taking the leave. The last 90 days are paid at a flat rate of 180 Swedish krona per day (Evertsson, 2016). According to Belle (2016), countries with the highest payment during the leave have the highest share of uptake of parental leave.
In couples where one of the two parents earns substantially more than the other, it makes financial sense to let the one earning less taking most of the leave in order to avoid an economic loss. In most of the cases, the father earns more than the mother, so this leads to women taking the higher proportion of the leave. (Albrecht, Edin, Sundström, & Vroman, 1999). Unfortunately, this goes against the desired gender equality and more into traditional patterns where men are the breadwinner and women stay home to take care of the children
(Arnot, 1975). Nevertheless, a solution to this problem could be to increase the non-transferability time of the leave, encouraging fathers to take a higher proportion of the leave, provided the compensation is high enough.
5. What should be taken as example for other countries?
According to section 4, eligibility conditions, job protection, transferability, flexibility, duration and payment of the parental leave policy influence the female labour force participation. In this section, all these factors will be combined in order to find the best circumstances for high female participation. The first step in order to facilitate the increase of female labour force participation with help of a parental leave legislation, is that it has to be as attractive as possible for men (Belle, 2016). If fathers take more time of their available leave, it encourages mothers to rejoin the labour force more quickly after the birth and their entitled leave. This is particularly challenging, as it has been shown that men taking a leave signal low work commitment to their employer (Stafford & Sundström, 1999). Therefore, in order to make the leave attractive for fathers, it firstly has to have a high income replacement. Otherwise, men might be dissuaded by the financial loss they could face (Evertsson, 2016). Indeed, men incur a negative wage effect quicker than women do. As mentioned before, contrary to women, men are not expected to take a leave, which if they do signals negative commitment to their employer. Therefore, even a short leave has a significant impact on their wage, whereas wages of women decrease more gradually during the leave (Evertsson, 2016). This effect discourages men to take some leave, but could be compensated with a higher income replacement. Secondly, there should be some time reserved for fathers referred to before as non-transferable with a potential loss of the available time if not taken (Belle, 2016). This way, men taking a leave would become normalized and the negative signaling of work commitment would be reduced. The so-called “daddy-months” in Sweden are a good way to gradually introduce the nontransferable time. Another way of encouraging men to take more time, is to offer a bonus time of leave, if the father takes a share of available leave that is high enough. In Germany, two “bonus” months are offered if both parents have taken at least 2 months each of the available 12 months. Geisler & Kreyenfeld (2012) conducted a study researching the effect of the introduction of this new parental leave legislation in 2007, comparing men’s participation at parental leave before and after the reform. Results show that the uptake of parental leave by men significantly increased since the leave benefit reform. Thirdly, as
mentioned before for women, time available should be flexible so that the leave can be made more smoothly by working part-time, hereby lowering the chance of impacting their career due to a full-time break.
The second step is to structure the leave in a way that facilitates the reinsertion of women in the labour force after the leave. This excludes the time of maternity leave right before and after the birth, which is exclusively for new mothers to recover physically and mentally. In order to achieve high female labour force participation, eligibility conditions such as a certain time of job tenure might help. Indeed, if someone needs to have had a paid employment for a certain amount of time before the birth of the child, it stimulates the one to have a stable position in the labour market. Furthermore, job protection is an important factor of the parental leave, which guarantees the job position of someone who has left on a leave. As well as for men, parental leave should have a high compensation. According to Low & Sánchez-Marcos (2015), combining job protection with income replacement helps preserving the attachment to the labour market and therefore increases the chance of rejoining the labour force after the leave. In order to smooth this reinsertion and help mothers find a good work-life balance, flexibility of the leave allows mothers to work at a lower rate than before the birth, which is very helpful. Therefore, the leave should be available in parts of days, as it is the case in Sweden. The last factor discussed in this section is the length of the leave. It is a complex factor because it influences many different outcomes. A long leave is primarily expensive for the government or the employer, depending on how the leave is financed. As a result, long leaves are less compensated and therefore less attractive for men. For example in Slovakia, the available parental leave is 164 weeks, but the compensation is only 32 percent of current wages of the takers (Kalb, 2017). Moreover, as mentioned before, a long absence from work deteriorates human capital of the absent employee, lowering wage increase when returning, which might discourage women to reenter the labour force. Employers may also be even more reluctant to assure job protection if the leave is too long. Nevertheless, a long leave can be an advantage if traditional child care is expensive and not subsidized by the government. Indeed as discussed in section 2, family policies such as childcare benefits have a positive effect on female labour force participation, by making childcare more affordable (Jaumotte, 2004). A shorter leave on the other hand is desirable, as compensation could be higher and therefore more attractive. For example in Denmark, the duration of the parental leave is 52 weeks to be shared by the parents at a full time rate for almost the whole leave
(Belle, 2016). Also, a shorter leave could stimulate women to go back to work more quickly, provided that the childcare is affordable for them.
6. Conclusion
This paper examined the role of parental leave in female labour force participation within the OECD countries, particularly in Sweden. It has been shown that female labour force participation depends on different factors which can be easily influenced by the government. The economic situation of the country influences the participation rate, as high female unemployment rate discourages women to join the workforce. However, a high male unemployment rate tends to push women to work, in order to prevent economic losses in a couple (Jaumotte, 2004). Different combinations of family policies can have a positive impact on female participation. For instance, in the Nordic countries where a high child support is offered, including childcare subsidies and parental leave, combined with beneficial second-earner tax treatments, family policies lead to a high female labour force participation. However, it was found that other countries such as the Netherlands and Switzerland can reach high female participation rate without high child support, but with flexible working policies, which ease women into the labour force as part-time workers. Then parental leave was analyzed into more detail.
The main factors and their influence on female participation were investigated. It was found that eligibility conditions are important to incite future mothers to be part of the workforce before getting pregnant. Moreover, job protection is of crucial importance to assure women that they can reenter the labour force easily after their leave. It was then explained that non-transferability of the available time is important in order to stimulate men to take time from the leave and encourage women to return to work relatively quickly. After this, it was shown that allowing parents to separate the time granted for the leave in full or part days permitted them to combine their working and family life more easily. Later it was explained that a short time right after the birth exclusive to the mother, called maternity leave, is necessary and should not be neglected. This period of time is not to be confused with the time to acclimatize with the baby and take care of it during the parental leave. The length of the leave differs from country to country. A too lengthy leave has been shown to have a negative impact on the female labour force participation rate due to a reduction in human capital which negatively impacts the wage increase. Therefore, the right amount of time available for men and women
should be calculated, in order to avoid a negative impact on women’s labour participation rate. The last factor discussed in this paper was the compensation of the leave, primordial for the attractiveness of the latter. In couples where earnings differ too much, it makes more sense to let the one earning less take the higher share of the leave, leading women who on average earn less, taking a longer leave and negatively impacting the female labour force participation. Therefore, a higher compensation would encourage men to take a leave as well. Nevertheless, it was suggested that a combination of higher compensation with non-transferable time, would encourage men to take longer time of the leave and facilitate the re-introduction of women in the labour force.
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