Beginning in 2019, California is set to implement a new law that requires companies fill around 40 percent of corporate board positions with women.^[1] This means California is following the lead of european countries including Norway, Belgium, France, Germany, Iceland, Italy, and Spain which have legislated similar reforms for corporate boards.

The California mandate may face federal and state legal challenges. However, assuming the law is implemented, observers will no doubt be interested to see whether it accomplishes its objectives. For example, will the law improve corporate leadership representation for women?

A study published today in The Review of Economic Studies sheds light on possible outcomes of California’s policy. The study reviews the effects of Norway’s 2003 reform which similarly requires companies fill 40 percent of corporate board positions with female directors, or be dissolved. As the study recounts,

“In theory, quotas can be an effective tool to improve gender equality… Because qualified women might be harmed by an absence of networks to help them climb the corporate ladder, quotas can provide the initial step up that women need to break this cycle. If discrimination is the key factor for the under-representation of women, quotas might help overcome business prejudice (and improve efficiency) by forcing more exposure to talented women in positions of power (Beaman et al 2009, Rao 2013).”

But rather than finding quotas improved corporate leadership representation for women, the study found quotas were helpful for the elite women that were appointed to corporate boards, but not female workers generally. For example, the authors find “no evidence of improvements for women working in firms most affected by the reform,” and board quotas were also not helpful to women who were qualified to be on boards but not selected for them.

Indeed, the authors find that “overall, seven years after the board quota policy fully came into effect, we conclude that it had very little discernible impact on women in business beyond its direct effect on the women who made it into boardrooms.”

In summary, if the law is intended to simply increase nominal women on corporate boards, this is likely to occur. But if California’s quotas are intended to help working women generally, or meaningfully change the trajectory of working women’s careers? If Norway is any indication, they probably won’t.

For more information on the results of corporate board quotas please see the Cato paper, The Nordic Glass Ceiling.

---

^[1] Two female directors are required for boards consisting of 5 directors, and three female directors are required for boards consisting of 7 directors.

Hours after I published Why Conservatives Shouldn’t Support Federal Paid Parental Leave, Ramesh Ponnuru criticized it and the work of other Cato scholars on the same topic.

Ramesh takes exception with my use of the new Cato paid leave poll that tested the conservative response to paid leave costs, estimated using the Democrat’s plan for paid leave (the only formalized Republican proposal for publicly-provided paid leave is Rubio’s plan, which is not popular).

Yet the context was former Senator Santorum’s article, which argued for reaching across the aisle to find agreement with Democrats on a federal paid family leave policy. Santorum leaves the ultimate design of the policy open-ended.

As Ramesh must know, the Republican plan for paid leave is not an appealing compromise for congressional Democrats. In fact, senator Rubio’s proposal has zero co-sponsors. On the other hand, the Democrat’s FAMILY Act has 34 co-sponsors in the Senate and 160 in the House. 

The national Cato 2018 Paid Leave Survey of 1,700 adults finds widespread support for creating a federal paid leave program, with 74% in favor. However, 69% of Americans would oppose establishing a federal paid leave program if it meant that fewer women would get promoted and become managers. But would establishing a federal program actually do this? Research suggests that it could and that’s why we asked about it on the survey:

Read about the full survey results and methodology here.

First, let’s consider the different career outcomes between women in the United States and women in Western Europe and Scandinavia. Academic research finds that American women are more likely to rise up the corporate ladder than their European counterparts who have access to generous family social welfare programs. 

An analysis of OECD countries reveals that American women are about 3 to 14 times as likely as Scandinavian women to be employed as managers with 14.6% of American women who are managers compared to 4.6% of Norwegian, 4.2% of Swedish, and 1% of Danish women. American women are also more likely than women in France (5.1%), the United Kingdom (7.8%), Germany (2.7%), and the Netherlands (3.6%) to hold managerial positions. 

Another measure of corporate success is the share of women who serve on company executive committees—these include the CEO and those who directly report to the CEO. The 20-First’s 2018 Global Gender Balance Scorecard finds that a majority—53%—of American companies have three or more women on executive committees.⁽¹⁾ In contrast, only 14% of European companies have three or more women serving on company executive committees. Some argue that once a company starts to have three or more women on executive committees, the company culture changes to see women in leadership roles as the norm rather than the exception.

But correlation is not causation, as every good statistics student knows. Just because Western European and Scandinavian countries have generous paid leave programs and family policies doesn’t mean it necessarily causes fewer women managers in Europe. However, academic studies suggests that it might.

Studies have found that government-provided paid leave may lead to fewer women getting promoted and becoming managers because they take longer leaves than they otherwise would. Other studies have noted that employers, particularly smaller companies that have difficulty accommodating workers taking leave, may be less willing to hire female employees to begin with. Some argue that American women’s corporate success may be due to the fact that the United States does not provide generous family leave policies like Europe.

Because of this research, the Cato 2018 Paid Leave Survey examined what Americans think about establishing a federal paid leave program if it had harmed women’s careers.

The survey finds that voters would not be willing to sacrifice the progress women have made in the workplace if that were the cost of implementing a federal paid leave program: 69% would oppose while 29% would support making this trade-off.

A majority (57%) of mothers of children under three also oppose the idea if federal paid leave were to harm women’s careers. Majorities of Democrats (63%), independents (68%), and Republicans (77%), men (67%), and women (71%) all would oppose establishing a federal paid leave program if it meant fewer women would get promoted.

These data indicate that policymakers have good reason to evaluate the academic research on the effects of government-supported paid leave programs on the corporate leadership gender gap before inaugurating this new program. 

For public opinion analysis sign up here to receive Cato’s upcoming digest of Public Opinion Insights and public opinion studies.

 

Read about the full survey results and methodology here.

The Cato Institute 2018 Paid Leave Survey was designed and conducted by the Cato Institute in collaboration with YouGov. YouGov collected responses online October 1–4, 2018 from a national sample of 1,700 Americans 18 years of age and older. Restrictions are put in place to ensure that only the people selected and contacted by YouGov are allowed to participate. The margin of error for the survey is +/- 2.4 percentage points at the 95% level of confidence.

 

Both conservatives and liberals have proposed a federal entitlement program to provide paid family leave benefits. Ivanka Trump wants a new national plan, as does Alexandria Ocasio-Cortez. Some conservatives want to raid Social Security to provide paid leave benefits.

However, Vanessa Brown Calder has explained why government paid leave benefits are not the answer. Family leave is an expense that should be covered by employers voluntarily or by personal savings.

People should plan ahead for life’s contingencies and inevitabilities. Young people should learn to restrain their consumption and save so that they are prepared for costs down the road, including the costs of family leave, unemployment, and retirement.

Unfortunately, the natural inclination to save has been undermined by government. Rising hand-outs of all types have reduced the desire to save as well as the ability to save as taxes have risen to pay for the welfare state.

Fortunately, the government hasn’t yet completely killed a belief in personal responsibility and financial prudence.

A new survey by Emily Ekins examined public views about a possible government paid leave program. As an alternative to a new spending scheme, one survey question asked whether people favored tax-advantaged savings accounts that could be used for family leave costs. More than three-fourths (78%) of Americans approved, with strong support from Democrats, Republicans, men, and women.

Family leave expenses could be handled by Universal Savings Accounts (USAs), which would be a simple and flexible method for all Americans to save for all types of planned and unplanned expenses. The problem now, as Adam Michel notes, is that federal tax rules tell people, “Don’t bother saving unless you save for retirement.” But all types of personal savings are good, and none would face tax penalties with USAs within annual contribution limits.

As for paid leave proposals, there is a knee-jerk tendency in Washington to think that new spending programs are the answer to every challenge that people face. But the goal of public policy should be to wean people off government and remove barriers to self-sufficiency. USAs would be one step toward that goal.

With the impending arrival of Amazon HQ2, New York City and northern Virginia need to make some changes. At the top of the list is reforming zoning regulations to reduce the shock of a rush of workers and their respective families into already strained housing markets.

Amazon has promised 25,000 jobs to each headquarters city, and that could mean up to 25,000 new Amazon workers in each area. In addition to Amazon-specific jobs, tech jobs have a multiplier effect, and it is estimated every new high tech job creates five non-high tech jobs. That would mean 125,000 new jobs each in New York City and northern Virginia as a result of Amazon’s move.

It’s likely that a portion of these workers and their families reside within New York City and northern Virginia areas already. But even adding part of 125,000 workers and their respective families to Long Island City and National Landing will add pressure to housing markets in these neighborhoods.

Housing prices are already high in both places: the median home in Queens, NY (where Long Island City is located) is valued at $640K and the median home in Arlington, VA (where National Landing is located) is north of that, at $660K. These figures are roughly three times the national median home price, and prices in both markets are on-trend to grow over the coming year.

Complacency by officials in the face of increased demand will lead to continued declines in housing affordability. Without proactive regulatory reform, New York City and northern Virginia will continue shutting working class people and minorities out of their communities, which is what happened in San Francisco when tech workers arrived and city officials remained complacent about regulatory policy.

So, what can be done? Local government needs to reduce regulatory barriers to housing development to contain housing costs. Here are a few ways they can do that:

1. Increase allowable development density — yes, even in New York City.

Maintaining or improving housing affordability means ensuring housing supply meets demand for housing. But in urban areas, land in the most desirable areas has already been developed, so in order to increase housing supply developers need to build up. Unfortunately, New York City and northern Virginia prohibits this through their zoning codes. 

Despite its reputation for towering high rises, the majority of New York City is zoned for one- or two-family homes. And surprisingly, an estimated 98% of residential structures in Queens — where Amazon HQ2 is located — are three stories or less. With Amazon on its way, restrictions on density must be relaxed to accommodate growth. New York City must continue increasing allowable density in the boroughs.

Meanwhile, although Virginia’s National Landing location is relatively more dense than many locations in the DC/​Virginia metro area, its neighbors to the North and South have severely restricted development density. For example, large swaths of DC are zoned for three to four story homes (see: Capitol Hill), and between one-third and one-half of Alexandria, Virginia is zoned for single family homes (Amazon Headquarters is partially located in Alexandria). DC and Alexandria should upzone and let property owners decide if it makes sense to build more densely.

2. Relax or eliminate parking requirements.

Outside of Manhattan and a few locations in Long Island City, parking is mandated in New York City, even in transit-connected areas. These requirements should be relaxed so individuals can decide what the appropriate ratio of parking to housing is. Developers are more familiar with consumer’s needs than New York City’s planners are, and it’s likely many buildings require less parking than what’s currently mandated.

Providing parking comes at a substantial cost to developers, which pass unrecouped costs on to tenants. Streetsblog recently reported on a New York City developer that paved a basement and parts of first and second stories to provide city-required parking in a transit-connected area that didn’t need parking to begin with. The developer estimated the mandated parking requirement resulted in a $12 million-plus loss, and the space could have been used for something more productive.

Amazon HQ2 is located in Long Island City, where parking requirements are higher than the New York City average. And although parking requirements were reduced for new subsidized housing near transit in New York City in 2016, the changes did not apply to market-rate residences, so parking requirements for market-rate residences still need an overhaul.

3. Streamline permitting processes.

Under Mayor De Blasio’s administration, New York City has made efforts to improve the building permitting experience and increase permitting transparency. Still, there are problems. For example, the City’s environmental permitting process, which is invoked in the case of “most discretionary land use actions considered by the City Planning Commission” is lengthy, costly, and unpredictable.

Estimates suggest that environmental permitting costs between $100,000 for and $2.5 million for a typical construction project, and takes 6 months to complete. Exempting projects that are likely to be compliant would increase efficiency and reduce costs.

Although northern Virginia doesn’t have local environmental assessment laws like New York City does, cities like Alexandria, Virginia have an excessive amount of regulation and development oversight. For example, there is “a 200 page design guideline guidebook on the special considerations associated with development in this historic downtown area alone… In Alexandria, there are around 25 citizen boards managing architectural, archaeological, environmental, historical, urban design and related planning considerations for proposed development. This number excludes task forces with other specific planning functions, like determining parking standards for new development.”

This web of decision makers and regulations will reduce housing development in the area south of National Landing and push prices up. In order to accommodate growth, Alexandria must overhaul and streamline this process.

Besides these recommendations, New York City and northern Virginia can relax construction standards and codes, reduce rehabilitation requirements associated with remodeling existing housing stock, reduce impact fees and exactions on development, legalize non-traditional affordable housing (accessory dwelling units, single room occupancies, manufactured housing, etc) where applicable, and expand urban development areas in Virginia. In order to avoid penalizing future and existing development, cities can collect taxes on land value instead of property.

New York City and northern Virginia have a lot of work to do to overhaul regulatory barriers to housing supply and provide an affordable home for current and future residents. The good news is there are a lot of ways to get started.

Recently I’ve received some criticism on my position on paid leave as outlined in Parental Leave: Is There a Case for Government Action? In my report, I provide evidence that the private market is providing a growing amount of paid leave over time and I suggest that providing paid leave through a government mandate or social insurance program is likely to include a variety of trade-offs and/​or may not meet some of advocate’s purported objectives.

Although Nathan J. Robinson’s criticism of my report is steeped in vitriol, it still provides an opportunity to clarify my position. If I had to boil his critique down to one or two major criticisms, it would be that, in his view 1) I did not include a representative discussion of the benefits of creating a government paid leave program (and some of these benefits are mentioned in papers I cite for costs) and 2) I do not take the same position as certain academics I cite.

To the first point: Although not obvious from the paper, when I speak about paid leave publicly, I almost always first state that paid parental leave holds benefits for companies and parents and I am in favor of businesses voluntarily providing paid leave.

Moreover, voluntarily provided paid parental leave arguably holds greater benefits for parents than government supported or mandated leave, because employers incorporate the costs and benefits of leave-taking into their business model and therefore have reduced incentives to discriminate against likely leave-takers, including childbearing-age women. 

Why focus this paper on government supported leave’s trade-offs? First and foremost, because research groups and news outlets have spilled untold amounts of ink describing possible and likely benefits of government supported paid leave elsewhere. Those benefits are mostly well-known in policy circles and easily understood.

The main contribution of this paper is to challenge the prevailing view that government benefits could be realized without costs or trade-offs to workers (and indeed, workers’ lives may not be “markedly improved” after all, once associated trade-offs are taken into account). Indeed, the paper is intended to bring some balance to the existing debate by outlining trade-offs that are rarely seriously considered.

The paper is not a comprehensive review of the paid leave literature. However, it does carefully and accurately relay findings from the paid leave literature on potential costs and trade-offs of government intervention.

The second criticism–that I do not share all the same views on paid leave as academics I cite–does not make sense. Think tank scholars and academics cite other scholars all the time whom they disagree with on many points. 

As always, I enjoy hearing thoughtful criticisms of my work but the Current Affairs’ critique is off the mark. Moreover, by selecting two Cato studies and drawing conclusions about the whole of Cato research, Robinson commits one of the logical errors he spends so much time deriding: cherry-picking.

Max Gulker of the American Institute for Economic Research has a great short paper out summarizing the problems with a federal jobs guarantee. It echoes many of the issues that I raised about such a program on this blog.

One thing that is often underappreciated is just the sheer scale of the programs proposed. For reasons I outlined, the true numbers could potentially be much higher than the Levy Institute and Center on Budget and Policy Priorities (CBPP) worked proposals. But even taking their numbers as given, the estimated 10.7 million participants according to CBPP and 12.7–17.5 million from Levy would make the federal program by far the world’s largest employer, if thought as a single firm or entity.

Consider the striking chart below.

At the Levy report’s upper-bound estimate, the numbers employed would exceed the world’s nine largest employers combined. Even the CBPP’s lower estimate would only be marginally below the employment level of the world’s five largest employers combined.