Equality starts at home: paternity leave

Stephanie Kelly,Senior Political Economist
Nancy Hardie, Macro ESG analyst
Abigail Watt, Quantitative research economist
And Jeremy Lawson, Chief Economist

The first edition from our ‘A Woman’s Place’ series takes a closer look at the first big takeaway from our research: Policymakers and companies should ensure men have access to paternity leave and do more to incentivise men to take that leave so that the burden of child-related career breaks is more evenly shared. Paternity leave is a powerful policy tool to boost female labour force participation and, importantly, this does not come at a cost to men’s participation.

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Raising the diversity and inclusivity of workforces can improve economic performance by lifting utilization rates and the workforce productivity by making better use of human capital. In a world where populations are aging and productivity growth is sluggish, a stronger diversity and inclusion agenda could provide a much needed boost to the global economy.

The disproportionate burden of caring for children is the most important reason why female participation rates are systematically lower than those for men across the advanced economies. While cultural and personal preferences are not the subject of our research, we do review how policies might be exacerbating the work/care trade-off and identify the opportunities to lessen the severity of the so-called "child penalty."

Nonetheless, take up remains a challenge. Japan’s experience shows that in a labor market characterized by presenteeism and gender discrimination, generous paternity leave entitlements are insufficient to break down the gender participation divide. This has an important read across for all countries; policymakers and companies should consider leave policies in tandem with policies associated with the overall workforce environment, including incentives for greater flexibility in working arrangements and penalties for workplace discrimination and bullying.

Sweden provides a counterexample of how paternity leave uptake can be boosted over time. Implementing father-specific allocations that boost overall parental leave (known as "Daddy months") increased the rates of leave taking by fathers in Sweden. Similar policies exist in Iceland and Norway to actively encourage uptake, where rates of parental leave taken among men are also higher than average.

The importance of paternity leave for female participation is just one piece of a much more complex, future workforce puzzle, but it is an important — and until now largely invisible — one. In future editions of this series, we will add more policies to this list, including tax choices and employment protections.

Our research underscores the role of policy when considering the ‘S’ in ESG investing. Policy is a crucial lever that companies and governments can harness to address systemic inequalities. Investors have an opportunity to consider this information in investment decision making and advocate for better policies, knowing their importance.

Chart 1: Contribution of paternity leave policy to female labor force participation

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Source: OECD, ASI (as of 2020) *where 0 there is no legislated paternity leave.



 

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