Facing The Costs Of Paid Parental Leave

An AEI-Brookings Working Group on Paid Family Leave has been considering family leave policies during the last year or so, and some results of their deliberations appear in “Paid Family andMedical Leave: An Issue Whose Time Has Come” (May 2017). For the fortunate readers out there who don’t concern themselves with the political leanings of DC think tanks, the American Enterprise Institute tends to leans right, while Brookings tends to lean left. Thus, the report is based on views of knowledgeable experts from a range of political perspectives. (For those who want names, the Codirectors of the report are Aparna Mathur and Isabel V. Sawhill, and the other participants are Heather Boushey, Ben Gitis, Ron Haskins, Doug Holtz-Eakin, Harry J. Holzer, Elisabeth Jacobs, Abby M. McCloskey, Angela Rachidi, Richard V. Reeves, Christopher J. Ruhm, Betsey Stevenson, and Jane Waldfogel.)

Some of the themes in the report, while certainly worth making, are not especially new. For example, “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. … Polls show overwhelming public support for paid family and medical leave … with almost 71 percent of Republicans and 83 percent of Democrats in favor of a paid parental leave policy.”

But economists mistrust polls which ask if people would like to receive a pleasant new benefits, but don’t place equal emphasis on the costs. Thus, for me the most intriguing point in the report is that apparently no one in the Working Group, no matter their political leanings, favored requiring an employer mandate for employers to pay the costs of paid leave. As the report notes:

“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. … This approach is popular with the general public. However, we do not favor it for two reasons. First, it would be burdensome on employers, especially small businesses and those employing a disproportionately high share of likely parents. Second, it will likely lead to a reluctance to hire female workers of a certain age. … 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. ”