Designing Paid Family Leave Policies to Support Low-Income Workers: Evidence from across OECD Countries

Paid family leave is a critical policy for supporting workers’ ability to balance their dual roles as caregivers and earners. Paid parental leave benefits women’s economic opportunities, including increased labor force participation for women, smaller gender wage gaps, and an increased likelihood that women will return to work with their previous employers. Paid parental leave is also associated with improved maternal and infant health, including higher breastfeeding rates, increased vaccination rates, and lower infant mortality rates. Beyond infancy, paid family medical leave allows workers to meet their family members’ health needs without job or income loss. Yet, policy design decisions may limit access to paid family leave for some workers, particularly low-income workers who may need it the most. Using data from the WORLD Policy Analysis Center on 34 OECD countries, this paper explores three critical aspects of policy that disproportionately impact low-income families: payment, eligibility criteria, and differences in leave generosity across family types. For payment rates, we examine how lower wage replacement rates, flat-rate payments, or caps on benefits may result in payment levels that are too low for minimum wage earners or even average wage earners to remain above the poverty line, making leavetaking unaffordable. For eligibility criteria, we examine how tenure and contribution requirements meant to fund parental leave systems may exclude a variety of workers, including those who have: changed jobs or fields, lost a job when a company had layoffs or an industry was downsizing labor forces, been seasonally or intermittently employed due to reduced opportunities in an economic downturn, or recently finished a period of education. We also look at how policy designs meant to encourage gender equality in leavetaking may inadvertently disadvantage single parents. Throughout, the economic feasibility of designing policies to be inclusive of low-income families is discussed.