The Effects of Extended Parental Benefits on Parents' Employment and Earnings in Canada

Paid parental benefits, with individually earmarked time for mothers and fathers, aim to promote gender equality in labor force participation, wages, and childcare. The Canadian province of Québec expanded parental benefits over and above the federal policy in 2006 with the Québec Parental Insurance Plan (QPIP), which introduced paid paternity leave and lower eligibility criteria as its key features. This policy aimed to increase gender equality by encouraging fathers to use parental benefits and expanding coverage to low-income parents. Using Canadian administrative data and exploiting the policy changes in 2006 as a natural experiment, we examine the effects of Québec's extended parental benefits policy on parents' employment and earnings over 10 years after the transition to parenthood. First, we find that fathers' use of parental benefits had positive long-run effects on mothers' and fathers' earnings 8-10 years after a first birth. Second, we find that among women with low earnings before the transition to parenthood, QPIP increased the likelihood of employment 1-7 years after a first birth. This article provides the first evidence that a policy dramatically expanding parental benefits and encouraging use among both parents can have long-term positive effects on parents' labor market outcomes.