Why Paid Leave Matters for the Future of Business

At this time of year, as students return to campus, I find myself reflecting on why I became a professor and the principles I teach the business leaders of tomorrow. This year has been especially exciting, as employers have increasingly announced family-friendly policy changes -- and as President Obama has just taken a historic step to increase access to paid sick leave for government employees, while also calling for an unprecedented U.S. national paid leave law.

I am now even more confident that the U.S. is in the midst of revolutionary change in how we think about what defines a successful life and career. Companies and lawmakers are realizing what many of us have long known - that what is good for workers and their families is good for business and our economy, and that improvement at the national level is long overdue.

This is why I am proud that more than 200 of my esteemed colleagues from business and management schools across the country joined me last month in urging Congress to recognize the widespread benefits of ensuring all workers have access to paid family and medical leave. For the sake of the future business leaders we teach and the workforces they will direct, in this letter we called for passage of the Family And Medical Insurance Leave (FAMILY) Act.

The FAMILY Act would allow workers to earn a portion of their pay while they take up to 12 weeks of leave to deal with a serious health condition, including pregnancy or childbirth, or to care for a child, parent, or partner who has one. Leave could also be taken for the adoption of a child or for certain military caregiving needs. It would be paid for through small contributions from employers and employees.

Right now, millions of workers are forced to choose between job and family when serious illnesses or injuries arise. Just 13% of workers have access to paid family leave through their employers, and fewer than 40% have access to employer-provided personal medical leave. Data, within and across firms, show that employees' access to leave varies widely by industry, by job, by wage, and skill level.

That's a recipe for an economy that leaves too many people behind and undermines sound business practices. The effects ripple throughout our communities. Businesses suffer when employees have low morale and reduced productivity due to changes at home, such as having a baby or a sick loved one to care for. And I see the impact in the classroom, when students express concern that workplace challenges will thwart their family and career ambitions. In a longitudinal study of Wharton's graduating classes of 1992 and 2012, we found the percentage of those planning to have or adopt children fell from 79 to 42% over two decades. This baby bust was driven in part by fears of not having sufficient support to make life as a parent work.

In states, such as California, New Jersey, and Rhode Island where paid leave policies have already been implemented, we have ample evidence that they make good business sense while providing workers with the support they need to manage work and family. Paid leave reduces turnover and increases employee loyalty, which results in cost savings for businesses. It also enables employees to devote more time and attention to their home lives, which gives them a greater sense of control and increases efficiency, engagement and productivity.

Fortunately, some leading businesses recognize these benefits. Recently, tech companies like Microsoft, Netflix, and Adobe have expanded their leave policies in an effort to attract and retain top talent, and the experiences of companies like Google and Ernst & Young have shown that this works. Unfortunately, we cannot count on all businesses in all industries to be able (or willing) to make similar changes. That is why federal legislation is critical.

The FAMILY Act would create a national paid-leave-policy floor for all businesses, no matter their profit margin. It employs a familiar, tested insurance pool framework and spreads the cost of leave in a way that is affordable and responsible. Data from other countries and states that have adopted similar programs, along with research many colleagues and I have conducted, demonstrate that it is a sound and smart approach.

Those who have signed our letter in support of this legislation include some of the most distinguished business faculty from nearly 90 schools, including the country's most prestigious institutions. We hope that this adds to the tremendous momentum in support of paid leave, and to the efforts of advocacy groups like the National Partnership for Women & Families, which is leading the charge for the FAMILY Act. In this moment of opportunity, the nation must adopt a policy that is built for the populations, workforces, and businesses of today and tomorrow. There's no better way to celebrate National Work and Family Month!

This first appeared in the Harvard Business Review September 16, 2015.