Time to give paid leave to the American workers who need it
This month marks the 25th anniversary of the passage of the Family and Medical Leave Act. We have come a long way since. As a result of this law, nearly 88 percent of civilian workers have access to job-protected unpaid leave for birth or adoption of a child, own medical illness and family caregiving.
Paid leave policies are in place in California, New Jersey, Rhode Island, and New York. Washington state and the District of Columbia will soon begin to phase in their paid leave plans. Many large employers have come forward to voluntarily offer paid parental leave to their employees. At the federal level, President Trump mentioned paid family leave as a policy priority in his recent State of the Union address.
However, we still have a long way to go. The National Compensation Survey shows that only a small fraction of workers across the country, 15 percent, have access to paid family leave. Access is even worse for the lowest wage workers. The problem arises because there is no federal program available universally to provide paid family leave to American workers. Instead, as mentioned earlier, there is a patchwork of policies at the state and employer level that provide varying levels of wage replacement to eligible employees.
As a consequence, there is wide inequality in access to paid leave across workers by income, by the size of the firm in which they work, the industry in which they work, and the state in which they live. Unfortunately, this has meant that the workers who are most in need of paid leave, who lack the financial resources to take unpaid leave, are the least likely to have access through existing structures.
This situation has to change. According to a Pew Research report last year, 30 percent of workers with household incomes under $30,000 said that they were unable to take leave when they needed it. Although there are many reasons for not taking leave, these workers primarily cited the loss of income during the period of leave and fear of losing their job. This is not surprising.
First, to qualify for job protection through the Family and Medical Leave Act, an employee must have worked over 1,250 hours with the same employer in the past 12 months, and the employer must have at least 50 employees within 75 miles of the worksite. Second, although some states provide paid leave, much of that leave does not come with job protection beyond the Family and Medical Leave Act. With the combined effect of these limitations, nearly 40 percent of low wage employees don’t qualify for job protection when they take leave. Moreover, the wage reimbursement rates in California and some other states are slightly over 50 percent, often insufficient for low-wage workers to feel comfortable taking time off.
Data from the Bureau of Labor Statistics show that workers can often try to patch together different types of leaves in the absence of a defined paid leave or medical leave benefit. However, relatively few workers have access to such defined benefits. In 2017, only 15 percent had access to any type of paid family leave, and 39 percent had access to short-term disability leave, either employer-provided or through the handful of state temporary disability insurance systems.
Another 34 percent had access to employer-provided long-term disability insurance, not including Social Security disability insurance. Workers are much more likely to have access to sick days and vacation days. Nearly 72 percent had access to paid sick days, and 74 percent had paid vacation. These more common types of short-term leave benefits play an important role in supplementing worker incomes during leave and employers often require workers to use these types of leave before applying for other types of leave.
However, many workers received no pay at all while on leave. Pew Research found that 47 percent received full pay, 16 percent received partial pay, and 36 percent received no pay. Not surprisingly, the probability of receiving no pay during leave was significantly higher for lower income workers, with 62 percent of those with annual incomes under $40,000 receiving no pay while on leave.
In a report by the American Enterprise Institute and the Brookings Institution last year, we highlighted several reasons to address this policy. Because of changing demographics over the last several decades, in most families, both parents are now working. In particular, the labor force participation rate of prime-age mothers has grown from a mere 47 percent in 1975 to over 70 percent in 2016. With neither spouse at home full-time, the challenge of balancing work and family has only grown over time.
Furthermore, due to the aging of the population and forthcoming retirement of the baby boomer generation, caregiving is becoming a key issue in families. Lack of paid leave often causes caregivers to drop out of the labor force entirely, or mothers to have gaps in their resumes that could harm lifetime potential earnings.
While a few states have adopted paid leave programs and employer support for these policies is rising, there is no substitute to instituting a basic floor of benefits at the federal level that is broadly available to workers across the spectrum. To this end, our working group recommended an eight week job-protected parental leave policy, at 70 percent wage replacement with a cap on benefits of $600.
The policy would be paid for by a payroll tax on employees and savings elsewhere in the budget. The reason we neglected to propose a similar plan for family and medical leave is that we did not feel we had enough research, data, and information on the leave gaps in those areas to make policy recommendations. That is an issue we are exploring further this year.
With the joint responsibilities of the workplace and the family increasing, the case for providing paid time off from work for specific family needs is more relevant than ever, and a federal paid leave policy could support the needs of millions of America’s working parents who currently lack access to paid leave through their employers or existing state laws. It bears reiterating the finding from our report. This is an issue whose time has come.