Discussion: (3 comments)
Comments are closed.
More options: Share,
A Note from the Codirectors of the AEI-Brookings Working Group on Paid Family Leave
The AEI-Brookings Working Group on Paid Family Leave published a report in 2017 that focused on parental leave. Despite disagreements, we put forth a consensus compromise proposal for a federal parental leave policy that would allow working parents to take eight weeks of paid time off while receiving 70 percent of their wages up to a limit. We recommended financing the leave through an employee payroll tax, as well as cuts in spending that were not directed at low-income taxpayers.
This year, with a larger working group, we shifted our attention to paid family care and medical leave. Paid family care and medical leave would allow working families to take some weeks off work with a certain level of pay to take care of their own illness or meet their caregiving responsibilities toward family members.
A starting point for our work was establishing the need for such leave and the existing gaps in coverage. On medical leave, we find there often is a gap in availability of short-term care that would help bridge the divide between short-term medical need, covered by sick days, and longer-term medical needs, covered through Social Security Disability Insurance.
In addition, as with our earlier report, we highlight how changing family demographics have made the issue of family caregiving more relevant. Today, with both spouses working in most homes, providing caregiving comes at the cost of work. Further, with an aging population and the increasing demand for long-term care, it is more important than ever that workplaces and policies better accommodate the need for such leave.
Designing these paid leave policies, however, has engendered discussion and debate among policymakers. From the business perspective, paid leave creates a variety of worries. One is that the proliferation of state laws and regulations will make it increasingly difficult for businesses to operate efficiently across state lines and will raise the costs of doing business. Businesses may well prefer one federal law to 50 state laws. In addition, there is also an obvious cost associated with the lower productivity imposed by an absent employee or the wages that must be paid to a replacement. At the same time, paid leave may reduce turnover costs by encouraging employees to return to work after a leave.
Paid leave laws should be gender-neutral so that women are not disadvantaged in hiring decisions and so that care responsibilities are more evenly divided. They should also be designed in a way that does not burden small businesses excessively. And ensuring access for the least advantaged workers should be a primary goal.
This brings us to our working group, which over the past year has spent many hours trying to figure out the best design for a federal policy. Our working group included a diverse group of experts from different organizations, backgrounds, and perspectives. Some are academics with research experience in the area of paid leave. Others are more policy oriented, with experience dealing with the practical applications and implications of such a policy. Some have conservative leanings, and others are more liberal. But at the end of the day, we came together because of our common interest in the need for a discussion about paid family and medical leave.
Our group continues to endorse the need for parental leave. We also think that addressing the need for medical leave through a federal temporary disability insurance system should be given serious consideration. However, such a proposal needs to be considered in conjunction with reforms to Social Security Disability Insurance (SSDI) in recognition of the potential interactions between the two programs and to address the problems with the current structure of SSDI.
Our most contentious discussions centered on family caregiving leave. While many in our group favored moving forward on paid family care leave, some members did not think that the benefits of family care leave, as currently understood, outweighed the costs. The concluding section of our report addresses this disagreement in more detail.
In addition to our discussions on paid family care and medical leave, we invited some members of the group to write reports on rethinking social insurance to better serve the needs of working families. These are at the end of this compilation.
Finally, our group included three modeling experts from three prominent organizations who worked together to write a report on the costs of paid leave. This effort should be beneficial to the debate on paid leave, which often gets stuck on the thorny issue of cost. The effort illustrated that costs are sensitive to a policy’s design and to various assumptions about its effects. We will be providing an online platform for users to experiment with assumptions and policy parameters relating to paid leave proposals so that they can see the impact on cost estimates for themselves.
Our members have been generous with their time, thoughts, and expertise. They have attended many meetings and read through multiple drafts of this report. We thank them wholeheartedly for their investment in this project. We have also consulted advocates, outside experts, government officials, congressional staff, and business leaders. We thank them as well. We hope this effort will be useful to others by gathering in one place most of the data and research that currently exists, illuminating differences of opinion, and providing detailed estimates of the costs of paid leave.
Thank you to all who have contributed to this report and to those who find value in reading it.
Aparna Mathur, American Enterprise Institute
Isabel V. Sawhill, Brookings Institution
Public interest in paid family and medical leave policies has grown in recent years, and such policies have now been enacted in six states and the District of Columbia. The three main purposes of paid leave are to assist those who need to take a leave from work for the birth or adoption of a child, to care for an ill family member, or to address their own serious illness. The idea that workers should receive paid leave for different purposes has broad public support, with 82 percent favorable toward paid maternity leave, 69 percent favorable toward paid paternity leave, 67 percent favorable toward paid family care leave, and 85 percent favorable toward paid leave to deal with one’s own serious health condition.1 However, there is less public knowledge or agreement on the best design for a paid leave policy.2
In June 2017, the AEI-Brookings Paid Family Leave Working Group released a report focused on parental leave, which included a compromise proposal for a federal paid parental leave policy. Over the past year, our working group has turned its focus to paid family care and medical leave.
In Chapter I, we present data on the changing demographics of working families and the types of paid leave to which working families have access. The American workforce and family structures have changed dramatically over recent decades. Although these changes have brought substantial economic benefits, it is increasingly difficult for many Americans to balance the demands of work and family. We highlight how, in addition to alleviating these work-family constraints, paid family leave offers important economic and health benefits for workers and their family members.
In Chapter II, we discuss the status of existing state and international paid leave laws. In the absence of a federal policy, five states and the District of Columbia have passed paid family and medical leave policies, and Hawaii has a temporary disability insurance system. Some employers also offer paid family leave, but these benefits are less frequently available to low-income workers, precisely those who are most in need of assistance because they are less able to afford an unpaid leave of absence from work.
In 2017, this working group identified eight principles to guide policymaking for paid parental leave: limiting hardship for families at their time of need, maintaining long-term attachment to the labor force, supporting the healthy development of children, ensuring gender neutrality, minimizing costs to employers, ensuring access for the less advantaged, incorporating a shared contribution on the part of workers, and fully funding any new benefit. In Chapter III, we apply these principles to family care and medical leave, and we introduce the additional principles of flexibility, simplicity, and inclusivity. We also identify and discuss the key parameters in the design of paid family care and medical leave policies.
In Chapter IV, we assess a handful of existing proposals addressing paid parental, family care, and medical leave. These include the FAMILY Act, President Donald Trump’s proposal, the Economic Security for New Parents Act, tax-favored savings accounts, and the Workflex in the 21st Century Act.
In the previous phase of this project, which focused on parental leave, our working group endorsed a compromise proposal of eight weeks of paid parental leave with a replacement rate of 70 percent of wages up to $600 per week. Our working group also supported medical leave through a federal temporary disability insurance system, implemented with reforms to the existing disability insurance systems. However, we did not agree on a federal program to provide paid family care leave.
In addition to this work, we asked four members of this working group to coauthor two reports on rethinking the social insurance system. Heather Boushey and Elisabeth Jacobs consider the changing nature of US employment, the economic risks that families face, and how our employer-based social insurance systems may be ill-suited to the future of work. They develop four principles for paid leave in the context of rethinking the social insurance system: covering the full spectrum of care-based needs, covering all workers, implementing federal administration of the system, and ensuring gender neutrality.
Doug Holtz-Eakin and Ben Gitis coauthored a second report addressing the relevance of the social insurance system for paid family leave. They focus on the fiscal imbalances in existing social insurance programs, rising debt levels, and, in this context, the difficulty of adding any new responsibilities to the system. They propose a hybrid approach to implementing paid leave by allowing tax-deductible contributions to an account for paid leave up to $6,000 annually, with federal assistance provided to low-income families.
Finally, three working-group members—Ben Gitis, Sarah Jane Glynn, and Jeffrey Hayes—estimated the costs of different forms of paid leave, based on their experience modeling paid family and medical leave policies. Importantly, they collaborated to explore and reconcile the differences between their methods and how these affect estimated costs. They estimate the costs of a hypothetical paid leave program—providing paid parental, family care, and medical leave for up to eight weeks per year, with a replacement rate of 70 percent up to $600 per week—using three different methodologies.
They find that the cost of such a policy ranges from 0.23 percent of total wages if take-up rates follow patterns in New Jersey’s program to 0.61 percent of total wages if leave usage follows Family and Medical Leave Act data. The main drivers of these differences are the underlying data sources used and assumptions about program participation. All the estimates strongly suggest that paid medical leave would be the most expensive and family care leave the least expensive, with parental leave falling between these two.
Comments are closed.
Expert analysis from AEI's Economics Policy scholars
1789 Massachusetts Avenue, NW, Washington, DC 20036
© 2019 American Enterprise Institute