Is maternity leave too costly for employers?
Just how much does it cost to let your employee have a baby? To date the question has generated more emotion than statistics. But as Congress, the courts, and companies look for ways to balance families with the marketplace, they are beginning to tackle possibly the thorniest social problem of the 1980s.
And none too soon: Baby-boomers who have delayed childbearing are having children in ever greater numbers. In the next few years, demographers predict three-fourths of working women to have children.
Early last month, the Supreme Court of the United States upheld a California law and ruled that states may require employers to give women disability leave for pregnancy and childbirth and to guarantee them reinstatement to the same or similar jobs. A week earlier, a bill had been introduced in the US Senate to require companies with 15 or more employees to grant unpaid parental leave for 18 weeks; a similar bill will go before the House on Feb. 4.
Many companies oppose any kind of mandated parental leave, with the US Chamber of Commerce leading the fray. Others, however, say that the costs of retraining, lost productivity, and lower employee morale are far higher than the costs of retaining temporary workers or continuing medical benefits for employees who are on leave.
At Meridian Bancorp Inc. in Reading, Pa., and Southern New England Telecommunications in New Haven, Conn., more than half the employees are women. So one might think they feel the same way about parental leave in general, and current legislative battles in particular.
Not so. Jeanne Kardos, director of employee benefits at the phone company, says Southern New England has been providing parental leave, unpaid but with benefits, for a decade.
``In the long run, we save money,'' she says. The company has a large number of female engineers and salespeople, she says, and ``we've invested a lot of training and experience in these people.'' In 1985 ``only a handful'' of the 235 employees who took maternity leave chose not to come back.
Ms. Kardos, who testified last year before Congress, favors parental leave legislation. The issue ``is perceived as dealing with a very small group of people [women in childbearing years], so companies resist it. Mandated benefits is the only way it's going to happen,'' she says.
At Meridian, senior vice-president Chester Mosteller does not oppose parental leave per se; his bank's program is comparable to Southern New England's. But he says that corporate policies are better off ``without additional government regulations and paper work.'' He estimates that the proposed legislation would increase the bank's medical expenses by $500,000 to $750,000.
Who's right? Does it cost more to wait for an employee, or start afresh? The evidence is conflicting. One personnel study indicates that the cost of hiring a new employee - after advertising, recruiting, and training - is 93 percent of the first year's salary.
Meryl Frank, director of the infant-care-leave project at Yale Bush Center, has estimated that it would cost the nation $1.5 billion a year to provide employees with a combination of paid and unpaid leave for six months. The cost for unpaid leave, she says, is financially negligible, just ``mainly inconvenience and loss of productivity.''
On the other hand, hiring a temporary worker until an employee returns is not cheap. After US Rep. Patricia Schroeder (D) of Colorado introduced a bill last summer (the same bill being introduced this month), the Chamber of Commerce estimated the out-of-pocket expense for hiring a word-processing employee for 18 weeks.
The added cost, over what it would have cost if the permanent employee had not taken leave, would come to about $5,200 in Washington, $3,900 in Chicago, $3,350 in Houston, and $3,175 in New York, the chamber says.
Each side dismisses the other's statistics as too simplistic or biased. A more neutral measure, says Sheila Kamerman, author of the book ``Maternity Policies and Working Women,'' is the paid-leave policies already in place in five states.
New York, New Jersey, Hawaii, California, and Rhode Island have required companies to offer paid disability leave to pregnant women for about a decade. Under the plans, any company with one or more employees must put money in a collective pot. Employees receive anywhere from a maximum of $145 a week, in New York, to $224 a week, in California.
The annual cost to companies ranges from $53.50 per employee in New Jersey to $262 per employee in California. Noting that these relatively modest costs cover paid leave, Ms. Kamerman says, ``To bring up concerns about cost for unpaid is just looking for reasons not to do it,'' that is, offer any kind of parental benefit. The legislative proposals and the Supreme Court decision all involve unpaid leave.
The cost of mandated parental leave to the employee is more subtle, perhaps illegal, says Sheldon Sollosy, president of Manpower Inc. of Providence, R.I., a temporary-employee service. If the Schroeder bill passes, he says, ``I think you're going to see changes in hiring habits. Employers don't have to say why they're not hiring you.''
Both proponents and opponents of parental leave use international comparisons to prove their points. For example, an aide to Rep. Thomas DeLay (R) of Texas, who is against the parental-leave bills, says that most countries with paid maternity leave have higher unemployment rates among women of childbearing age (20 to 34) than their counterparts in the US. She attributes that in large part to discrimination against women because of those costly policies.
Ms. Frank at Yale believes the unemployment rate ``has more to do with the role of women in Europe than parental leave.'' Lower educational levels of European women and the lower participation of women in the work force full time are more important factors. (She also notes that West Germany, which gives a half year off with full pay, has a lower unemployment rate for women of childbearing years than the US.)
Moreover, 117 countries, including virtually every Western industrial nation except the US, have a paid disability- leave policy, ``and they're hardly bankrupt,'' Frank says.
In some ways, the question is rapidly becoming irrelevant. More than 75 percent of large companies, though considerably fewer (about 40 percent) of medium-size and small companies, already have disability leave, which can be used as parental leave. The bill would sweep the smaller and medium-size companies into the net, which could affect a great number of women, because about half of all working women work for small firms with fewer than 50 people. The Supreme Court decision will likely spur federal legislation, says Donna Lenhoff, associate director of the Women's Legal Defense Fund. Eight states have been working on parental-leave bills and awaiting the outcome of the California case; they are likely to pass legislation, Ms. Lenhoff says. Ten states have maternity-leave laws. ``And when you create patchwork legislation,'' she says, ``you necessitate federal legislation.''