Phased Leave: Success at Home and at Work

There is a valley of death in the pay and work world for women. It begins with childbirth and it ends … actually, it doesn’t end. The pay gap between men and women jumps from 10-cents on the dollar for those between the ages of 25 and 34, to 19-cents for those between 35 and 44, and it stays in that range until retirement.¹

In a recent Third Way report, we dissected the gender pay gap every way we could. We found no single root cause. Instead, there were multiple explanations that each account for a portion of the gap, from occupational discrepancies to outright discrimination. A substantial portion, though, comes from the subtle effects and biases that occur from bearing a child and the different ways the job market values fathers and mothers. Spoiler alert: there’s a motherhood penalty of about 4% for each child, according to a detailed study from Michelle Budig of the University of Massachusetts at Amherst.²

In this paper, we offer a new, gender-neutral policy idea to help make parenting and the workforce partners instead of adversaries—called phased leave. With this, new parents in the federal workforce would be eligible to work half-time for 12 months following the birth or adoption of a child. The 12 month clock would start after they use any other leave that they are entitled to and choose to use. Since this is an experimental idea, we would limit the proposal to federal employees as a testing ground. It is our hope that once implemented, it could be a model for state and local governments, as well as the private sector. Ultimately, we want to see a career arc for women where they are not penalized for having a child.

It is important to note that phased leave is not a substitute for other proposals that address pay disparity between men and women and the challenges of being a parent in the workforce, such as access to child care and mandated paid family leave. Instead, phased leave would complement these other proposals to create an environment where parents can thrive at both home and at work.

The Situation: An Evolving Labor Market for Women

Today, family structures have evolved beyond the outdated template of a working father and stay-at-home mother. Whereas 43% of women with children under 18 were stay-at-home mothers with working husbands in 1967, by 2012 that number had been halved—to just 20%.³ Now, both parents may continue working throughout their children’s lives, or the family might be a single-parent household, or a same-sex household, or a woman-headed household where the father is responsible for childcare. Altogether, 71% of mothers now work outside the home.⁴ Within two-parent households, both parents work full-time in 46%, the father works full-time while the mother works part-time in 17%, and the mother works full-time while the father works part-time or not at all in 6%.⁵ Further, more than a quarter of households with children under 18 are headed by a single mother.⁶

These demographic shifts are readily apparent when looking at the composition of today’s workforce. In recent decades, the rate of women in the labor force has increased while the rate of men in the labor force has decreased; women now compromise nearly half of the labor force.⁷

Source: Bureau of Labor Statistics

If you break down the numbers by educational attainment, you can see that women have completely closed the gap among the most highly-skilled members of the labor force, making up about 50% of the civilian labor force with postsecondary education.

Source: Bureau of Labor Statistics

Looking at just younger generations, women are obtaining even more skills than their male peers—in the 2009-2010 academic year, women earned six out of ten Associate’s, Bachelor’s, and Master’s degrees conferred.⁸ As demand for highly skilled workers increases, and women are more often the employees with those skills, we need to ensure that policies facilitate workforce participation among women, not discourage it.

The Problem: Career Breaks and Career Brakes for Mothers

Too many new parents are forced to make a binary choice when they start a family—do I prioritize my career or prioritize raising my child? And while this question impacts all parents, female workers in particular are the ones most affected. The number of stay-at-home dads has almost doubled in recent years (to two million), but if new parents decide that one of them should stay at home to care for their children, it is most typically the mother.⁹ And for those women that choose to leave the workforce to care for their children, many face negative ramifications throughout their careers.

Even if the time off is paid, extended periods of leave can have adverse career impacts. An OECD report found that leaves of longer than four to six months, both paid and unpaid, reduced labor force participation and earnings for women.¹⁰ In another research effort, Harvard Professors Claudia Goldin and Lawrence Katz found that extended spells out of the labor force resulted in substantial decreases in earnings for Harvard’s female alumni—for example, female graduates of the MBA program saw a 53% earnings penalty from taking an extended leave.* ¹¹

* The study defines an extended leave as a period equal to or greater than 10% of the worker’s total time in the workforce. Hence, for someone who has been working for 15 years, an extended leave would be 18 months or longer.

During an extended leave, a parent is missing out on valuable work experience, work networks are atrophying, and the technologies, processes, and best practices in a specific field may change. All of this contributes to the gender wage gap that women face. A report by Dr. Michelle J. Budig of University of Massachusetts-Amherst found that, on average, women lose about 4% in earnings for every child that they have.¹² Other reports have suggested that the experience gap—of which leaving the workforce to care for infants is a substantial contributor—accounts for about 14% of the gender wage gap.¹³

This experience gap can be seen upon examination of female earnings at different age ranges. As Emily Liner has written, both women in the early stages of their careers (age 25-34) and the middle stage (age 35-44) have made vast improvements in earnings relative to their male peers over the last 35 years. But the older group still lags about 9 cents on the dollar behind the younger group, about the same as in 1979.¹⁴ Much of this discrepancy can be attributed to the effects of marriage and childbirth. Women who have never been married earn 94% of what never-married men make, while married women make just 79 cents on the dollar compared to married men.¹⁵ Further, working mothers make just 75% of what working fathers earn.¹⁶

Women don’t even have to leave the workforce to be penalized for becoming mothers. In fact, many women seek to remain in the workforce, but end up moving to part-time in order to balance the demands of work and home life. Women work part-time at twice the rate of men (25% to 12%) and are more likely to cite non-economic reasons, which would include caring for a family member.¹⁷ When women make this career shift, though, they often switch employers and, in the process, end up taking a job that does not fully utilize their skill level.

Only 20% of first-time mothers that stay with the same employer (that they were with pre-birth) reduce their hours, compared to 44% of those that switch employers.¹⁸ Women who switch employers are much more likely to become underemployed. In fact, 18% of first-time mothers that switch employers post-birth take a job that requires a lower level of skill than where they worked pre-birth, compared to only 1% of those staying with the same employer.¹⁹ While this career downshift may be OK for some parents, many others plan to return to the workforce full-time eventually, and this can set them years behind their peers.

In recent research, Professor Goldin has shown how the degree to which switching to part-time work affects women’s earnings depends on the culture of the profession. Simply put, when flexible work schedules are built into the culture of the workplace, women don’t suffer as much. When comparing women within and across different occupations, Golden found that women with MBAs and JDs lose substantially more than half of their salaries when they start working half as much. This is because work schedules in these industries are often inflexible, and workers are penalized for not maintaining the same hours as their peers. On the other hand, women that are pharmacists and decrease their hours see a more linear decline in earnings (aka, if they work half as many hours, their pay only declines half as much). This is because pharmacies are most used to workers that don’t align to a single schedule. What can we learn from this? Lack of workplace flexibility hurts women’s earnings and contributes to the gender wage gap.²⁰

For many fathers, the problem is different. Instead of feeling pressure to leave careers and care for their children, men often find that social stigmas and workplace policies force them to prioritize work over their children. According to Pew Research Center, 51% of Americans think kids are better off with a stay-at-home mother, as opposed to 8% with a stay-at-home father.²¹ This attitude is also present in the employer-employee relationship—a 2012 survey by the Boston College Center for Working Families found that 99% of working fathers felt that their employers expected them to maintain the same working patterns as before the birth of their child.²² Another report, by the Families and Work Institute, found that nearly half of employed men experience work-life conflicts.²³ Even if these fathers want to take on a bigger role in caregiving, they don’t feel like it’s an option. This further intensifies the pressure on mothers to pause their careers and inhibits the sharing of the workload that comes with raising a child.

The Solution: Phased Leave for Federal Workers

To reduce the wage gap, increase job opportunities and earnings for parents (especially women), and give more parents the flexibility to take on bigger roles in caring for their children, we would give new parents in the federal workforce a 12-month “phased leave” work option. Under this policy, new parents would be eligible for half-time work (20 hours per week) for 12 months following their return to work from the birth or adoption of a child. The 12 month clock would start after they use any other leave that they are entitled to and choose to use, such as their Family and Medical Leave Act (FMLA) leave and any paid leave available to them.

Under President Obama, the federal government has made efforts to enhance flexibility for its workers, but there is still room to help employees balance their work and home lives. (See box below.) Phased leave would take the next step, and grant all full-time, civilian federal employees the right to move to a half-time schedule for up to one year following the birth or adoption of a child. With nearly 2 million full-time federal employees spread across all 50 states, this would significantly impact an immense number of families.

Current Federal Paid Leave for Parents

Full-time federal employees have access to FMLA benefits (which provides 12 weeks of unpaid leave), and while they don’t get specific paid family leave, they can use vacation and sick leave for childbirth, adoption, or caring for a spouse or family member who gave birth. There are specific guidelines on how much and under what circumstances sick leave can be taken, but, in general, it provides federal workers with a pool of paid leave that can be used directly before and after the birth or adoption of their child so long as the leave directly relates to the event and is not used for general childcare. Employees can use accrued (and advanced) vacation leave for any purpose, but the dates must be approved by their supervisor.

On top of this, President Obama issued a memo to the heads of departments and agencies in the executive branch granting employees the right to ask about flexible work arrangements and instructing agency leaders to ensure that flexible arrangements “are available to the maximum extent possible.”²⁴ In response, OPM issued a handbook that outlines what options are available to parents, including taking up to 240 hours of sick and annual leave in advance of accruing it, using leave donated from other employees, and using leave and FMLA benefits intermittently. Agencies are also encouraged, but not required, to offer part-time or job sharing schedules. Those participating in these programs receive pro-rated, full-time benefits (if they work 20 hours a week, they will receive 50% of their normal insurance premium contribution).²⁵ It is unclear, though, the extent to which agencies have made flexible arrangements available or employees have adopted them.

Phased leave would apply to all parents, whether they are giving birth or adopting, and regardless of whether they are the childbearing parent or the partner. Prior to having the child, it would be up to the parent to request a move towards a half-time schedule, based on a process that would be established by the Office of Personnel and Management (OPM). The employee and their supervisor would then work together to set a schedule, deciding whether the employee will work shorter or fewer days, or both, and when the employee would return to full-time status.

During the period in which the employee is half-time, they would only receive half of their typical wages, but they would receive their full benefits. Perhaps most importantly, time on phased leave would count as full-time for promotion and raise purposes as well as retirement benefits, ensuring that these parents do not fall behind in their careers and long-term goals.

Additionally, when drafting guidelines for the program and considering how to disseminate information about it to federal workers, OPM should place emphasis on the fact that both men and women can enter into these work arrangements. Encouraging parents of both genders to take advantage of the program would mitigate potential stigmas that might otherwise discourage fathers from utilizing the program.

There is no one-size-fits-all solution to how workers should approach balancing their home and work lives. Instead, phased leave would ensure that there are flexible options available to workers. When it is fully in effect, the program could be used in a variety of ways depending on the circumstances of the individual worker:

• An employee may exhaust any paid time they have and then work for several months on phased leave, in order to ease back into the workplace as well as easing their newborn into childcare.
• A couple that both work for the federal government may both go on phased leave with opposite schedules to ensure that one of them is always home to take care of their newborn, thus eliminating the need for daytime childcare.
• An employee that is looking to spend as much time as possible with their new child, but knows that they want to return full-time to their career and doesn’t want to fall behind, may choose to fully maximize their phased leave option.

Costs

Agencies would need to get the same amount of work done when an employee moves to a half-time schedule, so the operating costs of the federal government would increase under phased leave. If an employee chooses to utilize the option, their agency might respond in several ways, with differing implications to operating costs:

• Reallocate work assignments among existing workers or adjust schedules to ensure coverage.
• Hire a temporary worker or contractor to fill in for the other half of the schedule.
• Hire additional full-time replacement staff to cover for multiple people on phased leave simultaneously (further described below).

While it might seem like additional workers are necessary, some research has shown that transitioning a portion of a mostly full-time workforce to part-time allows for more efficient scheduling, thus increasing productivity.²⁶ Some agencies that currently operate with mostly full-time staff might find this approach feasible, and thus phased leave would not carry additional costs for them.

It is important, though, that agencies have the option to replace lost hours from phased leave workers to ensure that work gets done and to avoid negative morale effects on other workers. If temp or contract workers are hired part-time, the cost implications of phased leave could be small. This is because a worker on phased leave would not get paid for the hours that the part-time employee is working instead of them.

While some of the lost hours due to phased leave would be replaced with reallocating work schedules and hiring part-time workers, we will calculate the upper bound cost estimate of the impact to personnel costs by assuming that 100% of the reduction in hours is replaced through hiring additional full-time workers with full benefits. We will assume that the aggregate number of hours worked does not change and that the new workers are paid at the same wage as the phased leave workers.

For example, if an agency has two workers, Jessica and Stan, that decide to take phased leave, the agency may hire a third full-time worker, Jane, to make up the lost hours. Jessica and Stan would both only be paid for the 20 hours per week of they work, while Jane is paid for the 40 hours she works (20 of which would cover Jessica’s reduction in hours and 20 of which would cover Stan’s reduction in hours). Therefore, the total hours worked remains 80. The increased costs would come from paying for the full-time benefits of three workers, instead of two.

As of September 2014, there were about 1.8 million full-time, non-seasonal federal civilian employees.²⁷ Using a birthrate weighted for the gender and age demographics of federal employees (see appendix), we estimate that 49,420 employees become parents every year. If each of these parents were to take full advantage of the program, 24,710 additional full-time employees would need to be hired to make up the other half of the work. With the most recent data showing that federal full-time workers cost the government about $20 per hour in total benefits, we can calculate that each of these workers cost about $42,000 per year in non-wage compensation. Thus the total benefits earned by the additional workers would be roughly $1 billion per year. This would represent a 0.4% increase in salary and benefits cost for the federal civilian workforce.²⁸

Additionally, agencies would face higher human resources (HR) costs, as they would have to manage the phased leave scheduling as well as a higher head count of employees. The most recent available data estimates that the mean HR cost per federal employee is about $1,500.²⁹ Therefore, the increase in HR costs across all agencies would be approximately $75 million per year if the upper bound of 24,710 additional full-time employees is reached.

In reality, the take-up rate would likely be much less than 100%, so the increased cost would be substantially less than the upper-bound. Looking at the use of paid leave in California might provide a more realistic point estimate. In 2004, California started providing up to six weeks of paid leave for new parents with a 55% wage replacement rate. (Although not a perfect proxy, the wage replacement rate is close to the earnings of a half-time worker.) If the take-up rate of phased leave is similar to that of the California program, then workers will use about 27% of their entitled leave.³⁰ This would mean that replacing all of those workers with full-time workers that receive benefits would cost roughly $280 million per year. Furthermore, some of the lost hours would not be replaced with full-time workers, meaning that the actual costs would be lower.

Benefits to Productivity and Efficiency

In addition to the benefits of the program for workers, phased leave would positively impact the productivity and efficiency of the federal government. These gains would be realized through three sources: lower turnover, more efficient scheduling, and enhanced recruitment of talented employees.

Of the most direct benefits is lower turnover of employees. Replacing employees is not cheap. In a meta-analysis of research on the topic, the Center for American Progress found that the average cost of turnover was 21% of an employee’s salary.³¹ Facilitating parents’ ability to balance parenthood with careers would help reduce voluntary quits, which account for about 35% of departures from the federal government (about 40,000 employees each year). At an average salary of $79,000 a year, these 40,000 voluntary quits cost the federal government over $660 million a year. A reduction in this turnover could offset a substantial portion of the increased operating costs.

A second benefit would be the ability for some agencies to schedule more efficiently with more part-time workers. The federal workforce is over 94% full-time,³² meaning that managers are limited in fitting work schedules to demand (since most employees are slated to work 40 hours each week). A recent study of the Dutch service sector found three productivity enhancing benefits of part-time labor: bridging the gap between the working hours of an office and the working hours of full-time employees; cushioning peak hours with part-time employees, and; bridging gaps caused by lunch breaks and other transitions for full-time employees.³³ While this is probably not applicable to all areas of the federal government, there are many agencies that employ customer-serving employees where these same benefits can be realized. Being able to better allocate workers to match with demand for labor will reduce the need for hiring replacement workers for employees on phased leave in these agencies and increase the productivity of existing workers.

Finally, making phased leave an enshrined benefit for all full-time permanent federal employees would help the federal government recruit talented workers. As young workers are entering the workforce and deciding between career paths while at the same time considering starting families, phased leave would serve as an attractive benefit that allows the federal government to better compete with private sector options (see box below). It would also serve as a magnet for talented mid-career professionals that find their current job too rigid for balancing work and family life. While hard to quantify, the benefits of being able to better attract talented workers should not be ignored.

Data provided by the website Glassdoor corroborates the fact that workers value flexibility. On the website, users are able to review their experiences working for past and present employers, including providing ratings on their overall experience and individual factors, such as specific benefits that were available to them. For companies where reviewers indicated which benefits are available, those with reduced or flexible hours have an above-average employee satisfaction rating (3.23 on a 5 point scale) compared to organizations that do not (2.99).³⁴

Conclusion

The federal government wouldn’t be the first to take a phased leave approach—some private sector companies have been offering the option of returning part-time to workers for over a decade.³⁵ Nor would the phased leave program be the most generous program out there. But the federal government recognizing the value of balancing work and family life by guaranteeing flexibility to its almost two million workers would send a huge signal to the rest of the country while making life easier for tens of thousands of working parents

Appendix

The estimated birthrate of the federal workforce was calculated using CDC birthrates for differing age and gender groups and weighting them according to the demographic profile of the federal workforce. The federal workforce profile available had age ranges above that of the CDC birth rate tables for mothers; for these ages (those over 45), we assumed that they had a consistent birth rate with the over 45 group on the CDC table. Because of the low birthrates in general for older individuals, this shouldn’t cause a problem with the point estimate.

CDC birthrates³⁶:

The federal workforce is 56.5% male.³⁷ If we assume that this holds across all age brackets, we get a weighted average birthrate by age bracket of:

Federal workforce by age:

Applying the combined birth rates of fathers and mothers to the age demographics of the federal workforce results in a rate of 27.1 births per 1000 workers (including fathers whose spouses give birth).