Parental Leave in Sweden

Jens Hansegard takes a nice look in the Wall Street Journal at Sweden’s generous parental leave policies:

The generosity comes at a cost. Exact figures aren’t available, but a report published by the Organization for Economic Cooperation and Development estimates public spending on parental leave cost 0.8% of gross domestic product, or the equivalent of $3.7 billion in 2007 alone.

Nevertheless, many Swedish politicians are arguing for even stiffer paternity requirements, including requiring dads to stay home a third month.

That’s obviously a lot of money to spend. On the other hand, there’s a pretty hard-headed economic rationale for publicly subsidizing child rearing. The basic idea that the government should pay for kids to go to school is uncontroversial, after all, and everyone acknowledges that newborn children need caretaking. There are some pretty basic trade-offs around people having kids and participating in the workforce. Insofar as refusing to subsidize parental leave time leads to fewer children or more mothers dropping out of the workforce, either alternative is going to be more costly than paying the piper. It’s not a coincidence that compared to other European countries, Sweden has both an unusually high birthrate and an unusually high number of women in the workforce—the former makes Swedish social insurance more sustainable in the long run, and the latter makes Swedish per capita GDP higher.