[Special Feature: Changing Families and Child-rearing] Daisuke Uchida: Thinking About Paternity Leave

2024/03/05

On January 31, 2023, the revised "Cabinet Office Ordinance on Disclosure of Corporate Affairs" came into effect. Starting from the fiscal year ending March 2023, listed companies are now required to disclose information on human capital in their securities reports. The reason such disclosure is now required is the growing belief that when evaluating corporate value, it is important to assess not only traditional financial information but also intangible assets, represented by human capital.

In this context, the paternity leave uptake rate has become one of the human capital indicators that listed companies are required to disclose. (The Childcare and Family Care Leave Act, revised in June 2021, has required companies with more than 1,000 employees to disclose their paternity leave uptake rates since April 2023, so even unlisted companies may be required to do so.) While specific numerical targets are not set, the mandatory disclosure means that corporate efforts regarding paternity leave are now subject to public scrutiny. In this sense, developing an environment for paternity leave has become a significant management issue for companies.

The current Childcare and Family Care Leave Act, which guarantees workers the right to take leave for childcare, was enacted in 1992. It stipulates that workers, regardless of the parent's gender, can take leave until the child reaches one year of age, and companies cannot refuse such requests. Through repeated legal revisions to keep pace with changing times and improvements in income compensation during the leave period, Japan's current childcare leave system is now among the most generous in the world.

However, in Japan, childcare leave is taken almost exclusively by women, and the rate for men remains low. Looking at Figure 1, the childcare leave uptake rate for women has gradually risen from 49% in 1996 and has remained stable at over 80% since the mid-2000s. Meanwhile, the rate for men has been on a gradual upward trend since first exceeding 1% in 2007, but it remained at only 17% in 2022. Nevertheless, it is worth noting that the upward trend has become more pronounced in recent years, partly because the government has set a goal to increase the rate to 30% by 2025*1.

Paternity leave is considered one of the Work-Life Balance (WLB) measures aimed at promoting the balance between work and childcare for male workers. In Japan, the "Ikumen Project"*2, launched in June 2010 following the introduction of new systems such as the "Papa-Mama Childcare Leave Plus," has been working to encourage men to take childcare leave. As a result, people may often see this in conjunction with the term "Ikumen" (involved fathers). By taking childcare leave for a certain period and removing the burden of work, men are encouraged to participate actively in childcare and housework at home, which is expected to reduce these burdens that tend to fall disproportionately on women.

While paternity leave is expected to promote the division of childcare and housework, does the burden on women actually decrease in households where men take leave? Patnaik (2019)*3 examined the impact of paternity leave on the division of childcare and housework within households in Quebec, Canada, from 2005 to 2010, one to three years after the leave ended. The study revealed that when men took childcare leave, not only did their time spent on childcare and housework increase compared to those who did not, but women also spent more time in paid work and were more likely to be employed full-time.

These research results suggest that paternity leave can have a lasting impact on parental behavior and contribute to alleviating the uneven distribution of childcare and housework burdens within the home. However, not all studies have confirmed the impact of paternity leave on the division of childcare and housework.

Ekberg, Eriksson, and Friebel (2013)*4, who analyzed Sweden from 1993 to 2003, focused on childcare time when a child is sick and one parent must stay home as an indicator of the division of labor. The study found that taking paternity leave did not necessarily increase the man's share of childcare when the child was sick. This suggests that not all types of childcare and housework are shared equally within the home, and the impact of paternity leave may differ depending on the specific nature of the tasks.

Paternity leave is known to affect not only the division of labor within the home but also medium- to long-term marital relationships, such as childbirth and divorce. Duvander et al. (2019)*5 examined the effects of paternity leave on the birth of second and third children in three Nordic countries—Iceland, Norway, and Sweden—from 1995 to 2009. The study revealed that paternity leave had a positive impact on the birth of a second child in all three countries. This is thought to be because men taking leave creates an environment that makes it easier to choose to have a second child (though it should be noted that a similar effect was not confirmed for the birth of a third child).

While the above study analyzed the impact of an individual man's leave on subsequent births in that household, Lappegård and Kornstad (2020)*6 analyzed the impact of paternity leave on births within the region where the household resides. An analysis of Norway from 1989 to 2013 revealed that the paternity leave uptake rate in the residential area had a positive impact on the birth of first and second children, with the effect being more pronounced for the second child. This is thought to be because in regions where paternity leave is more common and male participation in childcare is seen as normal, social norms are formed that men should actively participate in childcare. Since male participation can be expected in advance, it becomes easier to realize childbirth plans.

Lappegård et al. (2020)*7, who examined the impact of paternity leave on marital relationships (including cohabiting couples), analyzed the impact of paternity leave on subsequent separation (dissolution of cohabitation or divorce) in Iceland, Norway, and Sweden from 1993 to 2011. The study found that couples where the man took childcare leave were less likely to separate than those who did not, a trend consistent across all three countries. This is thought to be because taking leave allows for shared childcare and housework, improving marital satisfaction, and the father's involvement with the child strengthens family bonds.

These results are consistent with the analysis by Olafsson and Steingrimsdottir (2020)*8, which examined the effects of institutional reforms implemented in Iceland from 1990 to 2016 to promote paternity leave. The study revealed that parents who were able to take leave after the reform had a lower probability of divorce. Furthermore, this effect not only lasted for 15 years after the child's birth but was also stronger in couples where the mother's education level was higher than or equal to the father's.

So far, it has been shown that paternity leave can benefit wives, the companies that employ them, and society as a whole by promoting the division of labor, increasing births, and reducing divorces. How, then, can we encourage men to take childcare leave?

Previous research has pointed out the importance of policies that encourage paternity leave. According to O'Brien (2009)*9, who analyzed childcare leave systems in 24 countries across Europe and other English-speaking regions (USA, Canada, Australia) from 2003 to 2007, the use of statutory leave by men is highest when income compensation is substantial (50% or more of income) and the leave period is long (14 days or more). Additionally, a series of studies examining the effects of the "Daddy Quota" system (a system that allocates a certain portion of childcare leave specifically to men) introduced in Sweden, Norway, Iceland, and Canada found that the introduction of the system significantly increased the uptake of paternity leave.

It seems obvious that men would find it easier to take leave if the system is in place, but in reality, systems often go unused even when they exist. Particularly in environments where few men take leave, it is easy to imagine a situation where someone wants to take leave but hesitates to speak up due to psychological anxiety about the reactions of colleagues.

Dahl, Løken, and Mogstad (2014)*10 clarified the process by which a new system actually came to be utilized by examining whether the introduction of the Daddy Quota system in Norway influenced the uptake of paternity leave. In 1993, Norway introduced the Daddy Quota system, which allowed for an extra month of leave if the father took it, compared to if only the mother took it, in order to encourage male participation in child-rearing. Although couples in Norway could already take a total of one year of leave before then, in most cases only the woman took the full year, and the paternity leave uptake rate in the early 1990s was around 3%. Therefore, the Daddy Quota system established an additional period (one month) that only men could take to encourage more men to participate.

Analysis using data from 1992 to 2006 showed that the paternity leave uptake rate rose by 32% immediately after the system's introduction. This can be seen as a direct effect of the system being established. In addition, it was revealed that having a colleague (or a brother) who took leave increased the uptake rate by a further 11% (15% for brothers). Furthermore, if that colleague was a senior manager at the company, the boost effect was 2.5 times greater than that of a non-managerial colleague.

This influence from colleagues and others is called the "peer effect." Since the influence accumulates like a snowball—the first peer influencing the second, the second influencing the third—the paternity leave uptake rate in Norway reached a high level of around 70% in the early 2000s. It is thought that as colleagues, especially those in high positions, began taking leave, psychological anxiety about taking leave was alleviated, resulting in the system being utilized more effectively.

While the discussion so far has focused on research in Nordic countries where paternity leave is relatively advanced, research on Japan, where uptake has begun to progress in recent years, is also accumulating. Uchida et al. (2024)*11 used data on the number of paternity leave users by company to analyze the factors determining paternity leave uptake in large Japanese companies from 2004 to 2020 and its impact on performance. The study revealed that companies active in WLB measures, such as flextime and remote work systems, have higher paternity leave uptake. Furthermore, it showed that once uptake begins to progress, it becomes self-sustaining through peer effects within the company.

On the other hand, no impact of paternity leave uptake on corporate performance was confirmed. This result indicates that the expected positive effects of paternity leave, such as improved retention and morale, do not reach the point of increasing overall performance. At the same time, it also shows that the burden on companies caused by the absence of leave-takers, such as securing replacement staff, does not outweigh those positive effects and decrease performance. While there are social expectations for paternity leave, there does not seem to be a clear negative impact, such as a decline in corporate performance, as the number of users increases.

If improving paternity leave led to better performance, we could expect corporate managers to voluntarily work on it. However, if no effect on performance is confirmed, it may be difficult to expect voluntary efforts from managers. Of course, since it is something society desires, one method is to ask managers to promote it actively, but there are limits to encouraging paternity leave by relying solely on the goodwill of managers.

The benefits of paternity leave are not necessarily limited to the company employing the man; they extend to his wife, the company employing her, and society as a whole. In this sense, paternity leave involves externalities (problems that arise when one entity affects another but no one pays for it). Therefore, efforts by individual companies alone may result in paternity leave remaining at a socially insufficient level.

One way to address externalities is through policy intervention by the public sector. The mandatory disclosure of paternity leave uptake rates mentioned at the beginning can be seen as one such policy intervention. If paternity leave is socially desirable, companies that actively work on it will be highly valued when their efforts are disclosed to the public, while those that do not will be valued less. Since such evaluations are returned to managers as corporate reputations in markets such as the labor and product markets, managers of companies that work on paternity leave will be rewarded through the market. Of course, collecting and managing internal information also incurs costs, so it is not a matter of disclosing everything, but information disclosure can be one mechanism for rewarding managers for socially expected behavior.

Furthermore, policy interventions might be most effective if focused on companies where WLB measures, including paternity leave, are not well-developed. In companies active in WLB measures, a virtuous cycle exists where uptake progresses because the necessary environment is in place, and once it starts, it becomes self-sustaining through peer effects. Conversely, companies reluctant to implement WLB measures fall into a vicious cycle where uptake does not progress because they cannot provide the necessary environment, and as a result, they cannot enjoy peer effects, leading to further stagnation. Policy interventions are expected to create a starting point to turn this vicious cycle into a virtuous one and provide support to make paternity leave uptake self-sustaining.

*2 Ikumen Project

*3 Patnaik, A (2019) “Reserving Time for Daddy: The Consequences of Father's Quotas,” Journal of Labor Economics, 37, 4, 1009-1059.

*4 Ekberg, J., Eriksson, R., and Friebel, G. (2013) “Parental Leave─A Policy Evaluation of the Swedish “Daddy-Month” Reform,” Journal of Public Economics, 97, 131-143.

*5 Duvander, A. Z., Lappegård, T., Andersen, S. N., Garðarsdóttir, Ó., Neyer, G., and Viklund, I. (2019) “Parental Leave Policies and Continued Childbearing in Iceland, Norway, and Sweden,” Demographic Research, 40, 1501-1528.

*6 Lappegård, T., and Kornstad, T. (2020) “Social Norms about Father Involvement and Women's Fertility,” Social Forces, 99, 1, 398-423.

*7 Lappegård, T., Duvander, A-Z., Neyer, G., Viklund, I., Andersen, S. N., and Garðarsdóttir, Ó. (2020) “Fathers' Use of Parental Leave and Union Dissolution,” European Journal of Population, 36, 1-25.

*8 Olafsson, A. and Steingrimsdottir, H. (2020) “How Does Daddy at Home Affect Marital Stability?” Economic Journal, 130, 1471-1500.

*9 O' Brien, M. (2009) “Fathers, Parental Leave Policies, and Infant Quality of Life: International Perspectives and Policy Impact,” Annals of the American Academy of Political and Social Science, 624, 1, 190-213.

*10 Dahl, G. B., Løken, K. V., and Mogstad, M. (2014) “Peer Effects in Program Participation,” American Economic Review, 104, 7, 2049-74.

*11 Uchida, D., Urakawa, K., and Yu, Y. (2024) “The Diffusion of Parental Leave for Fathers in Japanese Firms: Exploring Antecedents and Performance Outcomes,” Japan Labor Issues, 8, 46, 21-38. (This paper is an English translation of the following: Uchida, D., Urakawa, K., and Yu, Y. (2023) "The Diffusion of Paternity Leave in Japanese Firms: Exploring Antecedents and Performance Outcomes," The Japanese Journal of Labour Studies, 751, 2/3, 108-121.)