Paid Family and Medical Leave: An Issue Whose Time Has Come

Key Points

• A new report from the AEI-Brookings Working Group on Paid Family Leave highlights the benefits and costs of providing paid leave from the perspective of workers, businesses, and society.
• There was disagreement in the group about the specific design of a paid leave policy, but the group unanimously agreed that some form of paid parental leave should be offered to help workers at the time of birth, adoption, or fostering of a child.
• The report suggests a compromise plan for policymakers to consider. The compromise plan would provide eight weeks of gender-neutral paid parental leave, replace 70 percent of wages, and offer job protection. The policy would be fully funded by a combination of payroll taxes and savings elsewhere in the budget, with no increase in the deficit but also no adverse effects on low-income families.

Read the full PDF.

A Note from the Directors of the AEI-Brookings Paid Family Leave Project

Over the past year we have had the privilege of working with some of the most knowledgeable people in the country on the desirability and design of a paid family leave policy. Those we have consulted include not only the members of our distinguished working group but also many others—advocates, outside experts, government officials, congressional staff, and business leaders. We thank all of them.

What is paid family and medical leave, and why did we embark on this project? Paid family and medical leave policies enable workers to take time off to address certain life events and medical emergencies—the birth or adoption of a child (paid parental leave), one’s own illness (own medical leave), or family members’ illnesses (family care leave)—without sacrificing their entire paycheck. While it is reasonable to expect that employers should be willing to accommodate their employees’ needs at such times (and many do), a federal policy that establishes a statutory right to paid leave for working Americans, as is commonplace in other countries, is now a rising subject of discussion and debate in the US.

Both of us have written extensively about issues relating to single mothers, women’s labor force participation, and economic opportunity. Paid family leave affects children and families, it affects women’s ability to participate in the labor market, and it affects economic growth. Recent research suggests that when compared to other countries in the Organisation for Economic Co-operation and Development, women’s labor force participation in the US has stalled, and nearly a third of the gap can be explained by the lack of family-friendly policies such as paid leave.¹ If women are unable to continue their careers because their workplaces are less accommodating of their need for time off, this limits their ability to remain in the labor force and move up the income ladder. This is not just an issue for women, but for families as a whole, as women are now the primary breadwinners in more than 40 percent of all families, according to the Pew Research Center.²

Polls show overwhelming public support for paid family and medical leave. Support for the concept is bipartisan, with almost 71 percent of Republicans and 83 percent of Democrats in favor of a paid parental leave policy.³ Yet the United States is the only advanced nation that does not have a paid leave policy at the national level. The federal Family and Medical Leave Act, passed in 1993, offers 12 weeks of job-protected, unpaid leave, but only about 60 percent of the workforce is eligible for its protections.⁴

While the federal government has been slow to act on this issue, many private employers and states have recently come forward with their own benefit policies. Paid family leave is currently provided in California, New Jersey, and Rhode Island, and policies will soon be implemented in the state of New York and the District of Columbia. Tech companies such as Apple, Google, and Netflix offer many months of paid leave to accommodate the needs of working parents in their organizations. However, employer-provided paid leave is concentrated among high-income workers; a majority of those below median income received no pay while on leave.⁵

That said, paid leave generates a variety of concerns from a business perspective. Most obviously, there are business costs associated with paid leave if employers are simply mandated to provide it. For this reason, we think it is worth noting that no one in our working group favored an employer mandate. Instead, most—although not all of us—favored a slight increase in the payroll tax on employees, with a minority in favor of reduced federal spending in other areas to pay for a new benefit.

This brings us to our working group, which over the past year has spent a lot of time and effort trying to figure out the best design for a federal policy. Our working-group members represent a diverse group of experts from different organizations, backgrounds, and perspectives. Some are academics who have conducted research in the area of paid leave. Others are more policy-oriented with experience in government. Some have conservative leanings, and others are more liberal. But at the end of the day, we came together because we have a common interest in an improved system in the US.

We spent the bulk of our time discussing paid parental leave rather than paid medical or family care leave because of limits on our time and a lack of evidence on the costs of the latter. This focus does not mean we support only paid parental leave, as opposed to other types of leave.

We all believe the United States needs a paid parental leave policy. This is worth reiterating. There is little or no disagreement in our working group that the time for the US to adopt such a policy has come. While there are disagreements about the policy’s design, how we fund it, how long the leave lasts, who pays, and who is eligible, absolutely no one disagrees that working families in America today need to have access to some paid time off when a baby is born or adopted. It is in the spirit of compromise that we offer a plan that brings together these diverse elements and that could help move the US forward on this issue.

Our members have been tremendously generous with their time, thoughts, expertise, and willingness to read through multiple drafts of this report. We thank them profusely for their investment in this project. We also hope this investment will pay off by sparking a debate, shaping the conversation, and ultimately improving the lives of America’s families and the strength of its economy.

Aparna Mathur
Isabel V. Sawhill

Executive Summary

In the past few years, public interest in creating a federal paid family leave policy has grown. The three main purposes of paid leave are to assist those who need to take 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 toward paid paternity leave, 67 percent toward paid family care leave, and 85 percent toward paid leave to deal with one’s own serious health condition.⁶ However, there is less public knowledge or agreement on the best design for a paid leave policy.⁷

Over the past year, the AEI-Brookings Paid Family Leave Working Group has developed recommendations for a federal paid leave policy. While the focus of our work and this report is on paid parental leave, we recognize the importance of families being able to take time off for their own illness and to look after relatives. We encourage more research and analysis of how a paid leave policy could be expanded to incorporate leave for these reasons. However, this report focuses only on paid parental leave at the time of the birth or adoption of a child.

In the course of our work, we developed eight principles to guide policymaking in this area. They include preventing family hardship when a baby is born or adopted, maintaining long-term attachment to the labor force, supporting children’s healthy development, encouraging gender equity, 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. We also explored the design of a policy in more detail, looking at such elements as who should be eligible, the generosity of the benefit (wage replacement), job protection, and financing mechanisms.

We assessed three existing proposals in light of these principles: the FAMILY Act introduced by Sen. Kirsten Gillibrand (D-NY) and Rep. Rose DeLauro (D-CT), the proposal introduced by President Donald Trump during his campaign, and the Strong Families Act sponsored by Sens. Deb Fischer (R-NE), Angus King (I-ME), and Marco Rubio (R-FL).

We are a diverse group of experts, many of us with government experience in both Democratic and Republican administrations. In the end, we did not agree on such questions as the generosity of the benefits, how to pay for them, whether they should be focused on low-income families or made available to the middle class, how strict the eligibility rules should be, and how much job protection should be provided. But it is worth noting that we all agreed a paid family leave policy is needed in the US.

In addition, we came up with a compromise proposal that we put forward for others to consider. Its key elements are benefits available to both mothers and fathers, a wage-replacement rate of 70 percent up to a cap of $600 per week for eight weeks, and job protection for those who take leave. It would be financed in part by a payroll tax on employees and in part by savings in other parts of the budget. Because too little is known about how this might work in practice, we called for an independent study of the consequences.

None of us found this compromise entirely to our liking. A majority of the group would have supported something more generous. A minority wanted to limit any new benefit to something like $300 a week and to make it available to low-income families only. But in these partisan times, we felt an obligation to work toward a compromise that all of us could support to some extent. We believed this was better than doing nothing when the US is the only developed nation without a national paid leave policy. The remainder of the report provides more detail on all these issues.

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. With the growth of female labor force participation and the decline of two-parent households, 63 percent of children now live in households in which all parents work.⁸ 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 parents, children, and the economy as a whole by strengthening women’s attachment to the labor force and economic growth.

In Chapter II, we discuss the status of existing state and federal leave laws. The only existing federal leave law is the Family and Medical Leave Act, which offers eligible workers up to 12 weeks of unpaid leave for certain purposes. In the absence of a federal paid leave policy, five states (and the District of Columbia) have passed and three states have implemented their own paid family and medical leave policies. Unfortunately, policies implemented to date have been characterized by a lack of public awareness and low take-up rates. Some employers also offer paid family leave, but these benefits are typically unavailable to low-income workers, precisely those who are most in need of assistance because they may not be able to afford an unpaid leave of absence from work.

Chapter III discusses the eight principles outlined above and identifies the key parameters in the design of a paid family leave policy. Chapter IV contains further details on our assessment of existing proposals and our compromise proposal.

In the course of our research and discussions, we became convinced that more research and data are needed before we felt ready to recommend a federal paid leave policy for family care and medical reasons. We hope to address these gaps in the coming year. We also hope to address where parental leave fits in the larger social insurance system in the US—a system that provides income to those who are retired, permanently disabled, or temporarily jobless but that arguably needs to be modernized to deal with changes in the labor force and the nature of work.

Our working group met numerous times and engaged in a spirited and constructive discussion of these issues. We did not agree on every issue, but we all agreed it is time to provide some paid time off for new parents, especially the least advantaged. We hope our efforts will help educate others on the best way to move forward in expanding American workers’ access to paid leave when they need it most.

Read the full report.

Notes

1. Francine D. Blau and Lawrence M. Kahn, “Female Labor Supply: Why Is the US Falling Behind?” (working paper, National Bureau of Economic Research, 2013), http://www.nber.org/papers/w18702.
2. Wendy Wang, Kim Parker, and Paul Taylor, “Breadwinner Moms,” Pew Research Center, May 29, 2013, http://www.pewsocialtrends.org/2013/05/29/breadwinner-moms/.
3. Claire Groden, “An Overwhelming Majority of Americans Support Paid Parental Leave,” Fortune, April 15, 2016, http://fortune.com/2016/04/15/an-overwhelming-majority-of-americans-support-paid-parental-leave/.
4. Jacob Alex Klerman, Kelly Daley, and Alyssa Pozniak, Family and Medical Leave in 2012: Executive Summary, Abt Associates Inc., September 13, 2013, https://www.dol.gov/asp/evaluation/completed-studies/Family_Medical_Leave_Act_Survey/EXECUTIVE_SUMMARY_family_medical_leave_act_survey.pdf.
5. Jacob Alex Klerman, Kelly Daley, and Alyssa Pozniak, Family and Medical Leave in 2012: Technical Report, Abt Associates Inc., April 18, 2014, https://www.dol.gov/asp/evaluation/fmla/FMLA-2012-Technical-Report.pdf.
6. Juliana Horowitz et al., “Americans Widely Support Paid Family and Medical Leave, but Differ over Specific Policies,” Pew Research Center, March 23, 2017, http://www.pewsocialtrends.org/2017/03/23/americans-widely-support-paid-family-and-medical-leavebut-differ-over-specific-policies/.
7. Ibid.
8. Council of Economic Advisers, The Economics of Paid and Unpaid Leave, Executive Office of the President of the United States, June 2014, https://obamawhitehouse.archives.gov/sites/default/files/docs/leave_report_final.pdf.