The heterogeneous impact of short-time work: from saved jobs to windfall effects

Paid family leave allows workers to take time off from work to care for a family member with a serious health condition, with reduced financial risk and increased job continuity. In 2004, California was the first state in the nation to implement a paid family leave program allowing workers to take up to eight weeks off work with partial pay to care for their own or a family member's serious health condition. While the effects of California's law on the labor supply of parents of newborns have been extensively studied, the role of paid family leave in the labor supply of workers who may need to provide care for a spouse has not been studied widely. We examine the effects of California's law on the employment of workers who are aged 45-64 and have a disabled spouse, using the 2001-2008 American Community Survey. Our preferred estimates suggest the paid leave program increased the employment of 45-64 year old women with a disabled spouse in California by around 0.9 percentage points (or 1.4% on a pre-law base rate of 65.9%) in the post-law period compared to their counterparts in other states, with a 2.9 percentage point rise in private sector employment. The employment of men with a disabled spouse in California also increased, but by a smaller amount: 0.7 percentage points (or 0.8% on a pre-law base 86.8%) (with a non-significant 0.4 percentage point decrease in private sector employment).