Screening for Commitment: the Effect of Maternity Leave Use on Wages

This paper examines whether firms use participation in work-family policies to screen for a worker’s level of job commitment, an unobservable characteristic that affects productivity. We identify two conditions that differentiate screening from human capital explanations, and test whether the wage penalty associated with usage varies with these conditions. Specifically, we propose that the wage growth penalty from policy usage will increase with monitoring costs and with the quality of the screening technology if firms screen based on usage. We test and provide support for these propositions using the NLSY 1979, with paid maternity leave as the work-family policy of interest. We proxy for monitoring costs using a measure of job autonomy and capture a change in the screen’s quality with passage of the Family and Medical Leave Act (FMLA). JEL: D82, J16, M50