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Paid Parental Leave Is Fueling Sweden's Start-Up Boom

Spencer Platt / Getty Images

Each week, Sweden’s national Twitter account allows a different Swede to take over tweeting and tell his or her story. Last week it was Louise Samet, a new mom and an employee of Swedish e-commerce giant Klarna. But unlike Amazon, where women only receive eight weeks of paid leave and men receive none, Klarna supplements  68 weeks of paid leave, which is split evenly between mothers and fathers. According to Samet, Sweden’s parent-friendly policies mean not only a better corporate culture, but also fertile ground for people interested in breaking into the start-up scene. I caught up with Samet to get a little more of a tech start-up insider's view on paid leave, innovative business, and workplace culture.

Samet began her week of tweeting discussing paid leave. "I have a son who's 5 months old and am currently enjoying the generous parental leave," Samet tweeted on Monday, adding a few minutes later: "[Paid leave] enables me to have a career and spend time with my son, and it really promotes gender equality." A little later in the week, Samet considered the role of Sweden's robust welfare system, of which paid leave is a part, in shoring up its start-up companies: "I find the startup scene in Sweden very interesting, people dare to try out their ideas, prob partly thanks to the social welfare system."

Samet has a point: Along with Klarna, Sweden is the birthplace of Spotify, Just Eat, and Skype. On a per capita basis, Sweden is the second most prolific tech hub in the entire world, after Silicon Valley. What’s driving the boom in innovative new tech companies?

To hear Samet and several other tech-savvy Swedes tell it, it’s because Sweden’s welfare system ensures entrepreneurs against risk. “A stronger welfare system can enable both women and men to work at start-ups while also having a sustainable work-life balance long-term,” Samet explained in an email, adding that pregnancy doesn’t generally preclude promotions in Sweden, even at fast-paced companies like Klarna. Asked about Amazon’s high-pressure workplace environment—which, according to The New York Times’ recent exposé, discourages employees from taking time off for family—Samet says: “The cultures are worlds apart… Having an employer question any time off is simply not an option.”

Samet’s perspective illustrates a key problem in the conservative opposition to mandating paid leave. For one, some conservatives have voiced concerns that paid leave laws might discourage companies with already generous policies (tech companies chief among them) from continuing to offer their employees such cushy benefits. But look close at how Klarna handles Samet’s state-guaranteed leave, and it’s obvious there’s a smarter choice. While the Swedish government guarantees Samet 80 percent of her regular pay, Klarna picks up the remaining 20 percent as a company benefit. Paid leave in Sweden, therefore, potentially ends up costing companies less than if they were paying out the entire amount, as American companies do. Taxes are higher, of course, but they appear to pay off for families and businesses hoping to try something new. The generous paid leave trend catching on in the American tech sector is perhaps a recognition of this fact: that benefits like paid leave encourage people, as Samet put it, to "dare to try out their ideas."

Those of a rightward economic persuasion insist that welfare stifles innovation. Yet this is hard to square with the reality of Sweden’s start-up boom, and even more difficult to explain in the context of Samet’s observation about gender specifically. After all, high-stakes industries are inherently risky, and women thinking about having families have good reasons to think twice about risky jobs. But with guaranteed paid parental leave in place, women have less reason to hesitate when it comes to taking jobs with new companies in a developing industry. For start-ups, that means their employment pool is widened beyond a single sex, and for women, it means the opportunity to work where they choose rather than where specific benefits are more readily available.

Innovation is always a popular theme come election season, and paid leave looks to be a factor in the 2016 cycle. Shrewd candidates should put the two together. “Given the number of successful companies started in Sweden,” Samet says, “it can’t be all that bad.”