California just passed a law guaranteeing paid sick leave to nearly all workers in the state. New York City has introduced a universal pre-kindergarten program. President Obama has been promoting similar proposals and Hillary Clinton has hinted she will tout some of these ideas if she runs for president. But what's the case for passing these laws? Working parents may like them, but what about business owners? How would more generous supports for families affect the economy? We decided to put those questions to Betsey Stevenson, an economist from the University of Michigan who is now a member of the president's Council of Economic Advisers. Following is a transcript of our conversation, edited for length and for clarity.
Cohn: We always hear that the workforce has changed a lot in the last 30 to 40 years, because of so many women entering the workplace. What do the numbers actually show? At some point, it hit a plateau, right?
Stevenson: Today women make up 47 percent of the labor force, which is compared to 38 percent in 1970. The growth in women participating in the labor force really grew in the 1970s and the 1980s, particularly among women who have children. But it started to flatten out in the mid to late 1990s and it’s declined somewhat since then.
Cohn: There’s been a decline?
Stevenson: It’s actually declined. One of the questions we have to ask is, what’s causing that decline? What are the things we could do to support further increases in female labor force participation? And the reason to think that we could have still-higher female labor force participation is that, as you look around at a bunch of the other developed countries, you’ll see they are getting higher rates of female labor force participation.
Cohn: They didn’t always, right?
Stevenson: They didn’t always. In fact the U.S. used to have one of the highest rates of female labor force participation. Our position has eroded over time.
Cohn: Is there a widely accepted explanation for why?
Stevenson: Researchers have shown that policies for working families like paid parental leave, paid maternity leave, workplace flexibility, and so on make it easier for women to participate in the labor force. One of the reasons some of the countries have gotten ahead of the U.S. is because they’ve adopted those types of policies.
And if you turn to the U.S., California has paid leave—and we see stronger female labor force participation in California, particularly among women with smaller children. There’s a reason for that. When women don’t have paid maternity leave, and they are forced to quit their job in order to take off the time they want with a newborn, then there’s not an easy path back into the workforce. If you give them paid leave, then there is an easy path.
Cohn: But paid leave can be too long, right? Isn’t that what they did in Germany? They pushed it out so far that people weren’t coming back, and a lot of people thought that was a mistake?
Stevenson: Sure, it can be too long. But in the U.S., our experience has been with companies discovering that they actually get better retention when they offer more leave. Remember, in the U.S., when we think about paid leave, we often think in terms of a couple of weeks—six weeks, for example. I think anyone who’s had a child will understand how tough it is to go back to work just a couple weeks after that new child is born.
That’s one of the reasons why a company like Google discovered that they could really improve their retention rate and get more women to come back to work if they went from three months paid maternity leave, or paid family leave, to five months. Because at five months there were just a lot more people who felt like, wow, it’s time for me to go back to work and I’m really ready to go back to work and I have a child care plan and I have the tools in place to be able to go back easily. So when we have those paths—when we are making sure people are able to get access to the childcare that they need, access to the time off that they need—all of those things make the onramp back to work easier.
Cohn: Paid family leave, more assistance with childcare—these ideas have been around for a while. But I think many people support these ideas because they figure, well, it’s the right thing to do and it helps out parents. You’ve made the point that there’s a strong economic case for these policies. Can you explain what you mean by that?
Stevenson: We started off talking about how much female labor force participation has grown, but what we didn’t really talk about was laying the groundwork for how much more important women have become to the economy.
In the 1970s, women didn’t just start joining the workforce in larger numbers. They also started enrolling in graduate school more, going to college more, and investing more in skills. In the 44 years since 1970, women have outpaced men in college degrees, have caught up with and outpaced men in graduate degrees, have caught up with men in terms of workplace tenure so they’re staying in jobs longer and getting more on-the-job experience than in the past. When women face this bind of trying to balance young kids with a job, it’s at a time when they have an enormous amount of skills. If they can’t figure out how to make everything work, it’s not just a loss to them. It’s actually a loss to the economy.
Of course, we’re also starting to see this bind become more problematic for men. They’re increasingly making choices in their lives about how to balance work and family—and, when they’re not getting the support they need, they’re also turning down opportunities. This summer, we saw a CEO [Mark Schireson] come out and publically say “I’m stepping down because I can’t balance this job with my family.”
When we have businesses or public policies that aren’t helping people figure out how to make everything work, what we see is people have to solve the problems on their own. And too often they solve the problem on their own by having to achieve less than they otherwise would be able to achieve—by participating in the labor force less, or by taking a job that doesn’t quite fit, or by making sacrifices on making sacrifices on the family front.
Cohn: But wait a minute. That CEO who just stepped down—let’s use him as an example. He’s no longer contributing all of his skills to being CEO of that company, which presumably was very valuable to the company and to the economy. On the other hand, he’s spending more time with his kids. Presumably his kids find that valuable. There’s social value there. I mean, not everybody wants to come back to the workforce and it’s not clear to me we’re better off if more people do.
Stevenson: I was actually thinking about that, as you asked your questions, and it’s why I tried to choose my words carefully. What we want is for people to make the right choices for them and not a choice that’s constrained by a lack of appropriate supports.
So let’s take a woman who wants to go back to work but won’t do so because she can’t find childcare that’s good enough, or affordable enough, or faces a tough burden going back to work for some other reason—we don’t want her making that decision for those reasons. But not every woman wants to go back to work after a child is born. And I know dads who have stayed home for quite a bit of time after their first child was born. We just don’t want people staying home and out of the workforce because they don’t have support. The whole idea is to help create a situation where there are structures in place, allowing people to maximize what they are able to contribute to their families and to their careers—their personal and their professional ambitions, with the balance they prefer.
I think the CEO is a great example, because he’s an example of someone saying, you know, people don’t ask men if they are struggling with these issues, but a lot of men are struggling with these issues. I think that’s important to realize, because too many companies think that they can ignore the family needs of their male employees and they’ll still attract the same kind of talent. And what we’re seeing is both kinds of people, men and women, voting with their feet to try to find companies that will allow them to balance better. So I think that was a high profile case illustrating that men vote with their feet on these issues as well.
I think there are a lot of companies that need to ask themselves, gee, it’s our tradition that our people work 80-hour weeks. But we’re losing some people who aren’t able to do that. Does that mean we’re losing an important perspective? Does that mean we’re losing an important skill set? And there are questions that, as a society, we should be asking ourselves, about what kind of supports do we want in place.
If you talk about something like childcare, early childhood education is very important. As a society, we have a stake in making sure young kids they have all the tools that will help them grow into successful adults. And one of the things that the research makes really clear is that providing those supports to people with young children, by enabling greater investment and development of those young children, we get bigger returns when those kids are older. If you look at the estimated returns of something like the Perry preschool project, they’re very…
Cohn: They’re quite large
Stevenson: They’re very, very large. Those are just the returns that come to the kids when they grow up. They come to the kids because they’re more likely to work, they earn more, they’re less likely to get involved in criminal activity. The other thing with Perry preschool is there’s now a safe, affordable place for parents to send their kids when they go to work, which enables greater household income, and that greater household income also benefits the kids and benefits the families. So these things are very importantly linked to each other.
Cohn: One theory I hear a lot is that, fine, we should have more family-friendly workplaces. But the market will take care of that on its own. Companies like Google are already doing it. Others will follow, particularly as workers demand these things. Why not just let this all play out?
Stevenson: You know, I talked to a business school professor who actually studies these issues. And he said that is true, the market will probably solve itself—in 30 to 40 years. And I just think that’s a really long time for Americans to wait to get a break. I think if we can, by being active on this issue, do it faster, and help companies make these realizations quicker, and provide a societal infrastructure that people want, then I think that that’s a success. Waiting is costly. There’s whole generation that’s going lose out while we wait.
Cohn: Let’s look at this from the other side. My reading is that Google and other companies may come around to this conclusion, but McDonald’s won’t. I worry about the class disparity. Workers without the bargaining power won’t be able to get…
Stevenson: Notice I didn’t say I think that the market would fix itself. I said that a business school professor thought those things. And even he said it would take a while.
There’s still limits on who’s going to do what. And that’s why I think there’s a question of how, as a society, what do we want to do. Businesses aren’t going to provide high-quality childcare for everyone. That’s something that’s just not going to happen. Yet, as we’ve already discussed, the returns, the economic returns from high quality preschool and high quality early education, are huge. And so as a society, we should actually want to make that investment. And the president’s been very much out there on how important early childhood is, and his preschool initiatives, and the reason for that is that it reaps huge dividends. So if you’re just an investor, a taxpayer who sees yourself as making an investment, that’s one of the places where you should really want to see your tax dollars go because the payoff is huge.
Cohn: What is the argument for putting money into something like childcare specifically, as opposed to just giving young parents more money. Hey, you’re having a child, you have a tax credit, just make it bigger.
Stevenson: Well I think there are a lot of policy ways to support families with young children. When it comes to something like preschool for all, there’s enough research out there that kids benefit from the kind of structured curriculum. You might not go into a preschool classroom and think that that finger-painting going on is a structured curriculum. But it actually is. And you know there are child development experts that really try to figure out what it is that a three-to-four year old needs to learn.
Anyone who’s gone and toured preschools, you can discuss with them—what curriculum they follow, what’s the educational theory behind it, and what are the things they do in it. What we see is, these things are important for kids, and teaching them the sets of skills they need to lay the groundwork to become successful adults. Not just successful workers but successful adults. If what we care about is how kids grow up, we may actually have a stake in whether or not they get that childhood education—not just whether their family has more income in order to allow their parents to think about how they might make choices, but we might actually have a stake in the outcome of education.
There are countries that have thought about, there are certainly other policies that different countries have pursued and I think that we have certainly spent a lot of time trying to think about the merits of various policies to support working families and the presidents definitely willing to have a discussion, debate, behind people who want to discuss these issues with republicans, with members of congress, with governors, with state and local governors, local government, I think the whole idea behind the working families summit was to have a conversation about what’s the best way approach these issues as a nation.