Paid parental leave – parents want it, babies need it, but policy makers tell us that businesses can’t afford it.

The importance of maternity and paternity leave to families has been proven time and again. When mothers are able to take maternity leave, they are more likely to breastfeed and do so for longer and are less likely to be depressed. Fathers who take paternity leave are also more likely to be engaged parents, not only during the initial weeks but down the road as well.

But is there a reason for businesses to support paid leave?

With every other developed country except the United States guaranteeing workers paid leave, the feasibility of paid leave has been well-tested across the world. But nevertheless, there still remains an underlying fear that it’ll somehow be bad for businesses in this country.

The good news, however, is that paid parental leave isn’t bad for business. In fact, it can actually help the bottom line. Although the U.S. doesn’t guarantee paid parental leave, some states, like California, do. A peek into California’s paid leave system can help us see how such a policy would impact both families and businesses, and researchers for years have done just that to help us answer some questions the business community might have about paid leave.

Will workers who take paid leave return to work?

Ah, the good life. No deadlines to meet. No rushing out the door to make a meeting on time. Nothing but baby-snuggles and watching the Today show on the couch. Maybe once a woman gets a taste of staying at home, she’ll decide that’s where she wants to remain and leave the workforce permanently, after her employer just shelled out thousands of dollars while she was on leave.

It turns out, however, paid leave actually makes employees more likely to come back to work after having a new child. For California employees in lower paying jobs, 83% returned to work after receiving paid leave, compared to 74% of those who didn’t take paid family leave. Employees might be more likely to be loyal to a company that was loyal to them.

Will paid leave be too costly for employers?

Paying employees for work they are not actually doing is typically not a good business decision. But when it comes to paid leave, it can be.

In California, nine out of 10 employers said that providing paid leave either had either a “positive effect” or “no noticeable effect” on their company’s profitability and performance. Providing new parents with time to care for their child simply wasn’t the financial disaster businesses worried it would be.

The reason why has to do with turnover. If an employee quits, hiring a replacement can be extremely costly for an employer – roughly one-fifth of a worker’s annual salary. The cost of paid leave is small in comparison to recruiting, hiring, and training a new employee. Because employees who use paid leave are less likely to quit, the company saves in the long run.

But what about small businesses?

Small businesses care about their employees, and also want to see them benefit from paid parental leave. In California, small businesses were actually less likely than larger companies to report any negative effects from paid family leave. A majority of small businesses surveyed by the Small Business Majority found that most support paid leave, funded either by employee contributions or employee and employer contributions, and most already offer some sort of family leave.

For some smaller enterprises, however, providing paid leave would be a true stretch. But a government-administered paid leave program could actually help alleviate some of this burden and help small businesses compete with larger ones that are able to offer generous benefit packages out-of-pocket.

Will people take advantage of it?

We all know how easy it would be to stuff a pillow under your blouse and then tell your employer you need three months off to care for a “baby” while secretly sailing the seven seas.

Prior to California’s implementation of paid family leave, employers had significant concerns about people taking advantage of the program. But 91% of employers surveyed said they did not know of any instances where their employees abused the state leave program.

Would paid family leave put a strain on the economy?

Paid family leave can actually help stimulate economic growth. According to the U.S. Department of Labor, if U.S. women participated in the labor force at the same rate they do in Canada or Germany (countries with generous paid leave policies), there would be 5.5 million more women in the labor force. These women alone could grow the GDP by 3.5 percent, which would result in $500 billion of additional economic activity. 

If a lawmaker proposed a policy that cost $500 billion, kept women out of the work force, and meant families spent less time together, it wouldn’t get a single vote. But our status quo is hurting the economy just as much. A lack of paid family leave is putting undue strains on families, and draining our GDP.

As a country that believes deeply in the importance of family and the spirit of entrepreneurship, policies that help parents bond with and care for their children while helping a business’s bottom line should be at the top of our priority list. Financial security is critical when you are a parent of a young child, and paid leave helps provide that while also ensuring stability for employers.

With states like California acting as a test case, we can see that paid leave reduces employee turnover, and can help a business’s bottom line. Paid family leave may be parent and baby tested, but it’s business approved.