Working Paper

Leave to Stay: Paid Parental Leave and Employee Retention

Updated September 2026

Firms use benefits such as paid parental leave (PPL) to attract and retain employees. In the U.S., which lacks broad public PPL benefits, firms increasingly provide this benefit. Systematic evidence of its benefits remains limited, due in part to the absence of comprehensive data on firm policies. Using a novel, hand-collected database of firm policy changes, this paper estimates the causal effect of PPL expansion on employee retention using a differences-in-differences approach. PPL expansions reduce departure rates by 3.1%, an effect equivalent to a permanent wage increase of 1.8%. I propose that PPL affects retention through multiple concurrent mechanisms that vary in sign and magnitude across workers. Subgroup heterogeneity supports this account: women's retention gains concentrate among the lowest-paid and most junior workers, where PPL's income insurance value is greatest, and attenuate at senior ranks, where the career disruption costs of leave offset them. Men's gains span the salary distribution and, unlike women's, do not attenuate at the top. Retention responses do not rise with predicted fertility, suggesting the retention effects of PPL extend beyond likely leave-takers. For managers, these results show that PPL can function as a meaningful retention instrument for men as well as women, with a net effect for the firm that depends on workforce composition.

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