Why you should care
Startups are flourishing in countries that offer job-protected leave for employees. Should the U.S. do the same?
Jenny Wuori always wanted to be an entrepreneur, but she worried about the financial risk of starting her own company. More than 21 years into her career, she finally did it. Wuori co-founded YourPDi, an online platform that can store your important information — passwords, documents, receipts — all in one place. The Swedish entrepreneur says she was able to take the risk of starting her own business because her former employer, Swedish pharmaceutical company Sobi, let her work half-time while she pursued her new endeavor. If it didn’t work out, she would’ve been allowed to go back to her previous role.
That job security let Wuori put more energy into her startup, and today, she’s running YourPDi full-time. “Since you have a right to return to your work, you feel more calm and relaxed starting a business,” Wuori says. “You know that if it does not work out, you can always return and get your income at the end of the month.”
In Wuori’s home country of Sweden, her story is more common than you might think. The government allows full-time employees to take up to six months’ leave to start their own companies, as long as it doesn’t directly compete with the firm for which they work. The results of that policy, implemented two decades ago, are now clear: A Wharton study shows that Stockholm has the second-highest number of billion-dollar startups (unicorns) per capita, behind only Silicon Valley.
Others are following Sweden’s path. In Tunisia, the Startup Act that came into effect last year grants one year’s leave to public- and private-sector employees to pursue entrepreneurial initiatives. This guaranteed leave could be one reason behind Tunisia’s emerging reputation as the startup hub of Africa. In 2018, Tunisia ranked first in Africa on the Global Entrepreneurship Index — beating out Nigeria, Egypt and South Africa.
In Canada, there’s yet another example of how job-protected leave can help bolster an entrepreneurial endeavor. But Canada doesn’t let employees take leave to start their own companies — it was another type of leave that spurred entrepreneurism among women in the country. A 2016 study on Canadian women by the National Bureau of Economic Research showed that …
Taking a yearlong maternity leave boosted women’s entrepreneurship by 39 percent compared to male partners and those who took 6 1/2 months off.
Ting Xu, assistant professor of business administration at the University of Virginia, was interested in studying risk factors in entrepreneurship. From previous surveys on the topic, he knew that loss of career growth and financial stability were the most commonly cited concerns. But what if you were guaranteed to get your old job back? What if you could take an “entrepreneur-nity leave”?
In December 2000, Canada increased its national parental leave policy from 30 to 52 weeks. Maternity leave might not seem like the ideal time to start a business, but this 5 1/2–month increase in job-protected leave was significant. “It’s not about actually starting the business, full stop,” Xu says. “It’s about doing the research and the early stages.”
Xu noticed that in the years following the reform, there were many stories in the Canadian press about “mompreneurship” — women who were starting businesses while on maternity leave. In 2011, Danielle Botterell, author of the book Mom Inc., told Canada’s The Globe and Mail, “We think the trend of mompreneurship, particularly in this country, really took off when the government extended maternity leave to a year.”
When Xu looked at the data, primarily from the Canadian census, which is administered every five years by Statistics Canada, it matched what he saw in the headlines. Mothers who gave birth just after the cutoff date of the reform were more likely to report “self-employment” in the next census five years later. Women who had children before the 2000 reform did not enter entrepreneurship at the same rate, nor did the male partners of the women in the data set. Despite being offered a full year’s parental leave, fathers often chose to take less time for their leave or, in many cases, none at all.
Xu also found the resulting businesses started by women post-reform to be “economically meaningful” — many went on to become incorporated and hire paid employees.
But could it ever work in the U.S.? Right now, the U.S. is the only developed nation without a national parental leave policy. Only about 12 percent of employees in the country have paid maternity leave, typically no longer than three months. However, a few companies offer paid sabbaticals outside of parental or medical leave. Patagonia, for example, offers up to two months’ paid time off as long as you spend the time volunteering for an environmental group of your choice. Similarly, Timberland offers a paid “service sabbatical” of up to 24 months. Even McDonald’s offers an eight-week paid sabbatical for every 10 years you’re with the company. But convincing American firms to offer leave for employees to start their own businesses could be a tougher sell.
Still, Xu says his study has uncovered an important impediment to entrepreneurship — the fear of losing or disrupting a professional career. “There’s a stigma in the labor market that you can’t find a new job as good as the old one,” Xu says. “This protection is important to encourage entrepreneurship.”
Wuori also thinks more countries should offer job-protected leave, because not only is it great for employees but also: “I think and I hope great companies can arise from initiatives like this.”
Correction: The original version of this article misstated the number of weeks involved in Canada’s parental leave policy as of 2000.