How Do Firms Respond to Parental Leave Absences?
Parental leave policies lead to temporary absences from the workplace—but how do firms adjust in response? The new working paper by Anne Brenøe, Urša Krenk, Andreas Steinhauer and Josef Zweimüller studies the labor demand effects of parental leave.
The analysis uses Austrian administrative data, comparing firms with and without birth-related absences and exploiting quasi-experimental variation from major parental leave reforms. The findings show that firms adjust quickly: most anticipate the leave and respond by hiring replacement workers - predominantly women - before the absence begins. Gendered patterns emerge, with temporary declines in female wage bills and modest increases in male wage bills. However, these adjustments are short-lived and largely fade after two years.
Crucially, the analysis reveals that firms’ responses do not systematically vary with the duration of leave. Even extended parental leave entitlements have little long-term impact on employment structures or firm survival. These results suggest that firms are able to absorb temporary workforce shocks without lasting disruption.
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