How Do Firms Respond to Parental Leave Absences?
(Write up)
with Ursa Krenk, Andreas Steinhauer, and Josef Zweimüller
Show Abstract
How do firms adjust their labor demand when a female employee takes parental leave following childbirth? Do these adjustments depend on the leave duration? To address these questions, we compare "treated" firms—where an employee gives birth—with comparable "control" firms without a birth. Using Austrian social security data and leveraging parental leave policy changes that significantly changed leave durations, we document three main findings. First, firms experience systematic changes in hiring, employment, and total wage bills both before and during parental leave, but these effects vanish over time. Second, parental leave affects firms' demand for female and male labor differently, reflecting strong gender segregation within firms. Third, while extended government-mandated parental leave increases actual leave durations, it does not significantly influence other firm-level outcomes. These results indicate that Austrian firms effectively manage temporary leave absences following childbirth, even within the context of generous parental leave policies.