The effect of work/life balance policies on employee retention and profitability

Women in the United States are disproportionately underrepresented at the upper levels of law, medicine, and business. Some have suggested that combining high-powered careers with family demands is exceedingly difficult, causing women to quit work altogether or remain at the lower levels of professional work. Many companies adopt work/life balance policies such as maternity leave and emergency child care in an attempt to retain capable female employees.This dissertation performs the first examination of whether these policies have their intended effects by answering the question: Do work/life balance policies increase female employee retention rates? Since increased employee retention rates should result in cost savings for firms, yet the policies themselves can be quite costly, the study also examines the effect of such policies on firm profitability.I answer these questions using a unique data set of law firms. The National Association for Law Placement annually publishes a book, The National Directory of Legal Employers (NDLE), with firm-level data detailing which work/life benefits are offered by each firm along with information on the demographic composition of employees, type of law practiced, and much more. I use data for the past 10 years and firm fixed-effects models---this allows isolation of the effects of the policies on female employee retention and profitability in the presence of unobserved firm heterogeneity. Models employing firm and year fixed effects distinguish the effects of the policies from general trends in employee retention and profitability taking place over the sample period.I find that dependent care policies, such as child care referral services and flexible spending accounts, and wellness programs, such as employee assistance programs, are associated with increases in the retention of female employees. There is evidence that such programs are not a significant drain on company profitability. Since firms similar to those in this study can expect to realize gains in retention of employees and continued profit growth, it would behoove them to adopt certain types of work/life balance policies.