In 1993, President Clinton signed the Family and Medical Leave Act, mandating 12 weeks of unpaid leave for employees who need to care for loved ones or bond with a newborn baby.

The Obama Administration wants to expand on President Clinton's legacy. Few Americans can take three months of leave without pay, and as the baby boomer generation ages, more and more Americans will need to provide elder care for their families.

In tonight's State of the Union, the President will announce his plan to expand paid leave for workers, starting with the federal government.

Betsey Stevenson, a member of the president's Council of Economic Advisors and a professor of Public Policy and Economics at the University of Michigan, is one of the architects of President Obama's parental leave plan.

She discusses her economic research on paid family leave, and explains why she believes the policy will benefit both workers and the American economy.

Paid Leave: The Economic & Social Impacts

“The president is calling for Congress to pass legislation that would allow millions of working Americans to earn up to seven days of paid sick leave per year,” says Stevenson. “The idea that workers should be able to earn paid sick leave is one that Americans around the country support.”

Stevenson says earned paid sick leave benefits have been supported by American voters—in November, Massachusetts became the third state in the nation (Connecticut and California were first) to guarantee paid sick days for workers, for example. Voters approved the sick leave ballot initiative by a margin of 60 percent.

“[President Obama] is also proposing $2 billion in new funds to encourage states to develop paid family and medical leave programs,” add Stevenson.

Under the president’s proposal, the U.S. Department of Labor will use $1 million in existing funding to help states and cities conduct feasibility studies that might aid municipalities in creating and implementing their own paid sick leave programs.

“Finally, [Obama] modernized the federal workplace by signing a presidential memorandum last week,” says Stevenson. “It directs agencies to advance up to six weeks of paid sick leave for parents with a new child. He’s also calling on Congress to pass legislation to give federal employees an additional six weeks of paid parental leave.”

As it stands right now, federal employees do not have the right to take paid paternity or maternity leave. Worldwide, only two nations don’t have some form of legally protected, partially paid time off for working women who’ve just had a baby: Papua New Guinea and the United States.

"What the research shows clearly is that adopting these types of family-friendly policies are good for parents, are good for workers, and it's good for the economy," says Stevenson.

Businesses that adopt paid leave policies often see positive results, Stevenson adds. A study of over 700 firms by the Centre for Economic Performance found that companies with work-life balance policies had higher productivity. Other research suggests that it can even boost corporate profits.

“When California implemented paid family leave a decade ago, lots of employers expressed concern that allowing for paid family leave would hurt their bottom line,” says Stevenson. “But six years into the program, in 2010, 90 percent of employers reported that the law did not negatively affect their productivity, profitability, morale or turnover.”

         The Hidden Cost of Paid Leave?

Kay Hymowitz, a fellow at the Manhattan Institute and author of "Manning Up: How the Rise of Women has Turned Men into Boys," agrees that leave is important for families. But she's skeptical of the models many economists hold dear.

“I agree with a lot of what [Stevenson] said,” says Hymowitz. “But I think what people need to understand is you don’t want to bring any magical thinking into this—it’s not like it’s going to solve the gender gap or have an enormous impact on inequality.”

Hymowitz says that it’s important how the United States implements paid sick and family leave programs.

In Sweden, new parents are entitled to 480 days of leave, and for 390 of those days, they receive 80 percent of their paycheck. As Hymowitz argues, while the Swedish plan might sound like a dream come true for American parents, those benefits have hidden costs when new parents return to work—especially, she says, for mothers.

“What’s happened there, and it’s something that no one anticipated, is that it’s added to the gender wage gap,” she says. “That may be a trade off some people are willing to make, but it’s not going to be to everyone’s taste. That’s one possible downside if you don’t do it right.”

A very long period of paid family or sick leave like the kind offered in Sweden can increase the gender pay gap because it means that women will be out of the workforce for a year or sometimes longer. Such a long leave of absence cuts down on the amount of employment experience a woman can bring to the table when comparing a male job candidate.

“The more the better doesn’t always actually turn out to be that way,” says Hymowitz. “There’s also another concern that I think people have to keep in mind which has to do with employers.”

Hymowitz says long periods of paid sick leave might be taken into account by hiring managers and others when considering job applicants.

“If one [applicant] is a young woman, let’s say 30-years-old and newly married, and the other is a guy in his 40s, you could see how [the employer] might hesitate if he’s going to be thinking about the future of his firm,” says Hymowitz.

Hymowitz concedes that there is no statistical basis for such a prejudice, saying that it would be “extremely difficult” to study the negative effect.

“However, it is inevitable that if you give too many kinds of advantages or benefits to one particular group you are going to disincentivize employers from hiring them,” she adds.

On the whole, Hymowitz says that paid parental and sick leave should not be handled by the federal government, but should be rolled out on a state-by-state basis.

“We have seen, as Betsey Stevenson said, some fairly successful experiments,” says Hymowitz. “They’ve been fairly modest by international standards, but they seem to be working well enough.”