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Charles Wheelan, Ph.D. The Naked Economist

Charles Wheelan, Ph.D., The Naked Economist

Maternity 'Leave' Doesn't Mean Forever

by Charles Wheelan, Ph.D.

Good (963 Ratings)
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Posted on Friday, September 28, 2007, 12:00AM

The other evening, I heard my wife mumbling to her computer, "I've about had it with this maternity leave stuff."

By way of background, we have three children. My wife has worked more or less full time for the past 20 years. Like me (and just about everyone else in our generation), she wishes it were easier to balance work and family.

A Policy Tweak

If you guessed that her maternity leave mutterings were an assault on the tightfisted human resources policies of corporate America, however, you'd be wrong. She's tired of women taking advantage of generous maternity benefits and then quitting almost immediately after they go back to work.

"It's unfair to the companies, and it's bad for other working women," she says. I think she's right on both points. A simple tweak to maternity leave policy could make companies and working women (and their families) better off. Maternity benefits should be more generous -- but also more finely targeted toward those women who ultimately return to work.

But before I defend that solution, let me persuade you that there really is a problem. The issue of "fairness" is always in the eye of the beholder. And any issue related to children, working women, and/or gender tends to smother logic with emotion.

So let's examine the paid leave phenomenon in a slightly different context. Let's assume that Bob falls off his roof while cleaning leaves out of the gutters and lands on a spiked wrought-iron fence, leaving him unable to work for a significant chunk of time.

What About Bob?

Bob is a model employee; his firm absolutely wants him back on the job when he's able to work. Assume that Bob is entitled to short-term disability, which replaces 60 percent of his wages while he's recovering from being impaled on the fence.

But Bob's benevolent employer offers him more than the bare minimum required by law. His firm pays him his full salary and extends his leave beyond what his doctor says is necessary for his recovery. Obviously Bob's job is held open, requiring colleagues to cover for him and precluding a search for his replacement. Bob's employer continues to pay the premiums for the health insurance policy that has covered most of his accident-related expenses.

Bob's coworkers take up a collection and buy him a get-well gift. He comes into the office once during his recovery to show off his scar (and a segment of the wrought-iron fence that the emergency room physicians let him keep). People in the office like Bob, and they think his scar is cool. But on his third day back at work, Bob tells his boss he's quitting. The life-threatening wound and several months at home thinking about it have convinced him that he doesn't want to work anymore.

Then people in the office like Bob less. They feel taken advantage of. And although I created Bob, and am sympathetic to his fence wound, I don't like what he's done here either.

Back to Maternity

"It's not called a 'maternity bonus,'" my wife reminds me. "It's called a ‘maternity leave.'" She has a good point: The word "leave" strongly suggests that you're coming back.

I'll concede that what's "fair" to employers and coworkers in this situation is debatable. But the basic economics of why generous but indiscriminate maternity benefits can make working women worse off are more straightforward. The basic analysis goes like this:

1. Maternity benefits are expensive. And the more generous the firm in this regard, the more expensive the policy.

2. Even an expensive maternity policy makes perfect sense if it helps to retain valuable employees. But the more often a firm gets "burned" by an employee who accepts generous benefits (beyond what's required by law) and then quits, the less sense the policy makes.

3. The more generous the policy, the more it hurts to get burned.

4. If enough women accept generous maternity benefits but don't ultimately return to work, some rational firms will decide that expansive maternity benefits just don't make financial sense.

There are two crucial insights here. First, when women receive maternity benefits (again, above and beyond what's required by law) and then promptly quit, the decision doesn't merely affect their own firm. In the long run, it'll also affect the workplace environment for other women, which is why I found my wife grumbling about this issue to her computer late at night.

Second, the more generous a firm is with maternity leave benefits, the more expensive it is when an employee takes the package and then doesn't return to work for any significant period of time. It's a sad irony that the firms with the best intentions pay the highest potential price.

Some Good News

There's a simple fix that's fair to firms and to working women -- both those who go back to work after having a baby and those who don't. Maternity benefits (and paternity benefits, should we ever get that enlightened) should be paid gradually over time after an employee comes back to work.

Suppose a firm wants to offer a maternity leave of 6 months at 100 percent salary, rather than the bare minimum of 6 weeks at 60 percent pay. Great. But why not fold those benefits into an employee's paycheck over the year in which he or she comes back to work -- or two years, or whatever? That's what my wife would like to see.

Some companies currently pay benefits during maternity leave but then require employees to pay them back if they don't return to work. The practical effect is the same, though it feels more warm and fuzzy to give extra benefits to women who return to work than it does to demand things back from those who don't.

In either case, the point of the policy is that any benefit above and beyond basic short-term disability goes to those workers who return to work, and not to those who don't. It puts the "leave" back in maternity leave policy.

Return Dividends

It's crucial to note that many women have no idea whether they'll return to work after having a baby. So it makes perfect sense to take leave and then decide. Fair enough. But it's also fair that those who don't come back should get less from the firm than those who do.

"I'd like to be able to offer a much bigger carrot to those women who come back," my wife explains. "And I can only do that if I don't have to give the same package to those who don't."

After all, the point is not to give Bob a send-off bonus because he had a roof accident; it's to offer a benefit that makes it easier for him to recover and come back to work.

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380 Comments

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  • Yahoo! Finance User - Tuesday, February 10, 2009, 2:28AM ET  Report Abuse

    • Overall: 1/5

    Most women do not get benefits for maternity leave. We have 12 weeks of unpaid leave and most employers give it grudgingly at that. For a developed country, our maternity laws are pathetic. Pregnancy discrimination laws have weak teeth (how do you prove that a prospective employer didn't hire you at 6 or 7 mos pregnant because there were no more "qualified" applicants??) Women are absolutely smart to hang onto their jobs until they decide whether or not to return, and they shouldn't be penalized for that. The only thing I agree with on this article is that there IS a problem with our country's work/life balance at present. And one more thing -- "Bob" isn't having a baby that completely changes his life circumstances and responsibilities. You're comparing apples to crowbars. Comparing a temporary injury to a permanently changed family lifestyle -- and insinuating that new moms are also in the category of feeling "entitled" because they might not want to return to work (especially when there is so much pressure for moms to be perfect mothers AND perfect workers) -- is insulting and ridiculous. It would have been much more appropriate to put "Bob" on hypothetical paternity leave than give him a head injury. It may not have been your intent to be so insensitive -- but I agree with your assessment that the problem of maternity & paternity rights in the workplace is huge and complex, ad so it seems to me you have opened a can of worms. But really -- Bob wants to stay home with his scar? Is that really the same as adjusting to life with a new baby and rearranging your priorities to accomodate? You have kids. You tell me.

  • Yahoo! Finance User - Sunday, October 12, 2008, 10:07PM ET  Report Abuse

    • Overall: 1/5

    Actually, I agree that there should be more incentives for women who choose to return to work after their maternity leaves. I also think that women returning from maternity leave would much prefer flexible/part-time schedules and quality childcare over any monetary "carrots". However, your comparison of a woman giving birth and caring for her baby to the "Bob" situation is truly asinine. How you can possibly compare a mother's decision to stay home to care for her child with this fictional "Bob" who has decided that "he doesn't want to work anymore." Your ignorance earns you a 1-star rating.

  • Yahoo! Finance User - Friday, June 13, 2008, 9:28AM ET  Report Abuse

    • Overall: 5/5

    Oh please. I read the comments here and it screams Double Standard. Their rationale is "It's fair because it's a capitalist society, an employee can quit whenever she wants". I'd love to see their reaction if they removed the maternity leave law and companies started firing women after they got pregnant. There would be an outcry because "it isn't fair". So, employees can take advantage of the generosity of their employees and "it's only fair". But it would be unfair if an employer decided to do what's best for them (because they've been burned too many times, paying maternity leave only to have the employee quit afterward). Right...

  • Yahoo! Finance User - Monday, March 24, 2008, 7:12PM ET  Report Abuse

    • Overall: 1/5

    I am currently approaching my maternity leave and will be soon having to make this difficult decision. Personally, I would rather not have maternity leave pay than be made to feel guilty about it if I choose to not come back. Most women who are given the generous packages you speak of here, are women who make significant incomes. Personally, I will get 8 weeks paid at 100%. While it is a very generous package, it is peanuts compared to the future earning potential that I may be walking away from. I don't think women are taking advantage or stealing their maternity leave pay but that they have heavier concerns on their minds, such as the welfare of a newborn child or the idea of giving up a career they've worked their whole lives to create. My decision will be made according to what is best for me and my family, a few weeks of pay (whether it be kept or paid back) and a few bitter co-workers are not going to be factors that influence that decision.

  • Yahoo! Finance User - Friday, February 15, 2008, 11:06AM ET  Report Abuse

    • Overall: 1/5

    Give me a break. What company even offers his "bare minimum" of 6 weeks at 60% pay? I certainly haven't heard of any of these. Although I can see one or two of his points, the whole idea of maternity leave AFTER the leave is finished is ridiculous. How would that help anyone?

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