The economics of the “Mommy Track” explain why parental leave isn’t enough

The mommy track is a symptom of what economists call “a signaling game.”
The mommy track is a symptom of what economists call “a signaling game.”
Image: REUTERS/Thomas Peter
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A popular recommendation for addressing the underrepresentation of women among business leaders is requiring companies to offer paid family leave, which is law in every developed nation except the United States.

But while compelling businesses to allowing new parents to take weeks away from work to bond with a new baby is a step in the right direction, it will never solve the problem.

Companies that want to increase the presence of women among their leadership must consider going further. Don’t just allow new parents—women and men—to take time off: obligate them to take it.

Why offering parental leave isn’t enough

Women’s representation in business takes a precipitous decline toward the top ranks of leadership. And it is not a coincidence that the age at which leaders typically start their management careers is also the age at which highly educated women are most likely to have children.

Of the women currently serving as CEOs across the Fortune 500 and S&P 500 (only 5.1% of CEOs at those companies), all were appointed between the ages of 40 and 60. Pew Research reports that of women ages 40 to 50 with children (roughly 85% of women in that age range), 41% of those with a bachelor’s degree—like virtually all of the aforementioned CEOs—had their first child after the age of 30. For those with graduate degrees—as the majority of those CEOs have—it was a full 50%.

The age at which leaders tend to begin their careers in management, according to one study, is also 30.

Thus, there is little argument that making it easier for women to have a child and return to work is essential for keeping women on the leadership path.

However, simply offering parental leave, even to both men and women, does little to change the core economic source of bias around paid family leave.

The economics behind the “Mommy Track”

The employer-employee interaction surrounding parental leave decisions is what we economists call a signaling game. The choice of whether to take advantage of parental leave conveys information to one’s employer that the employer can in-turn use in its decision-making.

Companies are prone to use employees’ decision to take paid time off (or not) as a proxy for whether they’re likely to prioritize work over other things—a desirable quality in leaders that may indicate, for instance, who may be willing to work late or over weekends. It certainly makes sense to use every bit of information available when making consequential decisions. But in this case, it happens that the information being used is inherently biased. The costs and benefits of taking leave are different for men and for women. For example, women who give birth must recover from the physical strains put on their bodies during pregnancy and delivery, which time off from work allows them to do. While men can enjoy other benefits of leave—such as early bonding time with their child—they cannot reap those physical benefits of parental leave. Therefore a woman will always be more likely to take leave than a man, all else equal. This also means that a woman who takes parental leave may be more likely to prioritize work highly than a man who does not. So the proxy itself imperfect.

The result of this biased information is a dearth of women in leadership.

Women returning from maternity leave tend to find a different landscape from when they left. The propensity of organizations to not select these women for the best projects or promotions—shunting them into dead-end careers—is so infamous it has a name: the mommy track.

How mandating parental leave evens the playing field

Generally speaking, there are two potential choice patterns in signaling games called separating and pooling equilibria.

In a separating equilibrium, the decision made by the first mover (here, the employee) allows the second mover (the employer or supervisor) to learn a characteristic or ‘type’ of the first mover, because different ‘types’ will choose differently. This is what happens when some people take leave and some do not: the employer may attribute the characteristic of “prioritizes work” to people who forgo paid leave, and the characteristic of “does not prioritize work” to people who don’t.

In a pooling equilibrium, however, different types choose to imitate each other in order to get the same treatment by the second mover. If all new mothers and fathers were required to take leave, then them taking it wouldn’t tell you anything about the degree to which those new parents prioritize work.

In most cases, the second mover (the employer) benefits from having a separating equilibrium, and will take steps to achieve one whenever possible. For parental leave, a separating equilibrium is, in fact, beneficial to the supervisor making project assignment and promotion decisions, because his or her own performance will be judged based on the performance of his or her team. However, through many such decisions across an organization, this erodes diversity. Since diverse and inclusive teams produce better results, the business overall benefits from having a pooling equilibrium instead.

How to mandate paternal leave

As of 2015, seventy-nine countries had paid paternity leave laws (compared to 185 with paid maternity leave), and the list is growing. But having a law or policy offering the leave does not mean new parents will take it. The UK recently implemented a plan that allows couples to choose how to split the parental leave time the government guarantees the family, increasing the potential time off a father could take. However, only 1% of new fathers are taking the leave.

In order to move toward a pooling equilibrium, where most women and men take the parental leave they are offered, I suggest instead giving employees strong incentives. Make it so attractive that they one would be crazy not to take it. If the vast majority of new parents take leave, then using ‘don’t take leave’ as a shortcut to ‘prioritizes work’ won’t be helpful—the group will be too small.

Here are a few ideas of how to push employees who are new parents to take leave:

  • Monetary incentives: Give a bonus to employees who take the full leave to which he or she is entitled (you could even include vacation time in such a program, so non-parents aren’t excluded).
  • Non-monetary incentives: Give perks to those returning from a minimum leave, such as a prime parking spot or one day per week of working from home for a year.
  • Work-related incentives: Give a one-time priority of preference in client or project assignment usable within a year and a half of returning from a minimum leave.

One company cannot change the economic outcomes of a nation of women. However, it can reduce inequality and a lack of female representation within its own workforce. Increasing uptake of parental leave, particularly by men, is an essential step toward balancing the presence of women in leadership roles with that of men.

Not only will instituting such a policy clear the path for current female employees to advance into leadership, but it will make companies that do so particularly attractive to driven young women. Workplaces with an unambiguous opportunity for career growth have a competitive advantage over peers in recruiting the best and the brightest—allowing them to fill their pipeline with the next generation of top talent.

Cathy Barrera is the Chief Economist for ZipRecruiter.