If U.S. businesses offered extensive parental leave policies, the nation could see up to 5 million additional workers join the labor force. 

That's the conclusion of a new research paper released by the Federal Reserve Bank of San Francisco on Tuesday. Co-authored by Mary Daly, the agency's new president, the paper found an 8 percentage point gap between women's labor participation rates in the U.S. and Canada, a discrepancy the researchers said is linked to the two countries' parental leave policies. The gap in the men's rate was 2.5 percentage points. 

"Parental leave policies in Canada provide strong incentives to remain attached to the labor force following the arrival of a new child," the report states, noting that employees there have job protection and continue to accrue wages and benefits while on leave. "Thus, a parent on leave maintains a continuous employment relationship, and this protection can last for up to 78 weeks in combination with existing maternal leave."

To be sure, dictating employers' parental leave policies is outside the Fed's purview. And while the agency did not recommend an action plan, the report shows its interest in finding new ways to support the labor force beyond just growing the economy.

"A large pool of skilled potential workers could be encouraged to join the labor market with the right set of policies," the paper's authors wrote, adding that three-quarters of the discrepancy between the participation rates in the Canadian and American labor market can be attributed to the attachment of women to the workforce. "By reversing the trend in participation of prime-age women to catch up with Canada's labor market participation rate, the United States could add as many as 5 million prime-age workers to its labor force."

Published on: Nov 14, 2018