Parental Leave Is Great. Just Don't Mandate It.
Workers who receive paid leave after the birth or adoption of a child experience significant benefits. They can bond with their child without having to worry about a steep reduction in household income. There’s evidence that parental leave can improve the health outcomes of children and mothers. At a time when both dual-earning and single-parent households are common, time off with pay fills a void that’s larger than in previous decades.
The argument that the federal government should mandate paid parental leave has been gaining currency of late. In her presidential campaign, Hillary Clinton called for 12 weeks of paid leave after the birth or adoption of a child, with workers receiving at least two-thirds of their current wages (up to a ceiling). Combined with paid leave for other medical events, Clinton’s proposal carried an estimated price tag of $300 billion over 10 years. Ivanka Trump, President Donald Trump’s daughter, supports paid leave, a large factor in the White House decision to include a mandated six weeks of paid parental leave in its 2018 budget. Three states have implemented paid parental leave programs, as well.
A policy with obvious benefits, that already exists in a handful of states, and that enjoys the support of both Clinton and Trump seems like a no-brainer. So should the federal government enact paid parental leave?
President Barack Obama’s Council of Economic Advisers published a report in June 2014 with some facts about paid leave. Making use of survey data, the council found that 40 percent of working women report that they have access to paid time off work following the arrival of a new child. Many of these women work for employers that provide paid maternity leave in the absence of a federal government mandate, while others use sick days, vacation days, and other paid time off provided by their employer.
Many businesses, then, already find it in their interest to offer some form of paid leave. The federal government does not need to micromanage compensation packages for firms that don’t. Such micromanagement would almost surely result in unintended consequences, such as lower cash compensation for workers, and fewer women being promoted up the corporate ladder.
Lower-income workers with less education are much less likely to have access to paid leave than workers with more skills and higher incomes. The Obama administration’s report found that 72 percent of college-educated workers report access to paid leave, with high-wage industries the most likely to offer it. So why not target policy changes on low-income households? (More on that later.)
To lighten the burden on employers, some proposed paid-leave policies argue that the government should use tax revenue to pay for time taken off work. But the U.S. does not need another middle-class entitlement program. We are already sitting on several that are projected to experience large funding shortfalls. Unless voters develop an appetite for higher taxes, adding another entitlement benefit that will mostly help the middle class is imprudent. It is also irresponsible to the poor, who are likely to be the ones that suffer most if Social Security, Medicare, and Medicaid benefits need to be cut in the coming decades due to funding shortfalls.
And isn’t it a bit much for the federal government to require paid leave for new fathers? Among other reasons, men don’t experience the physical trauma of actually giving birth, and don’t need weeks to fully recover. Supporters say you have to offer paid leave to men because if you didn’t, then businesses would discriminate against women in hiring, promotion and compensation. But just because it’s offered to men doesn’t mean men will use it to the same extent as women. Even with a gender-neutral policy, shouldn’t we still be concerned about discrimination?
Finally, while it is often difficult, many middle- and upper-income households are already able to save money to finance time away from work following the arrival of a new child. Those who are able should be expected to pay for time off work themselves. So wouldn’t it be better for the government to mandate paid leave only for low-income workers?
It might be. But the important thing to remember about expanding parental leave through government action is that there is no way for the expansion to avoid burdening employers. Even if paid leave is financed by tax revenue, it still represents a significant disruption in business operations for employers, who would have to find ways to fill in the gaps left when workers are away. The burden would be even more significant for small employers.
Employers would probably respond to the disruption in part by hiring fewer less-educated women of child-bearing age. This cost is no small thing, and should weigh heavily in your decision to support mandatory paid leave.
Instead of micromanaging compensation packages and creating a new public program, there are better ways to help the working poor. Public policy should target assistance for the low-income, working households that need it, and help them save for the arrival of a new child. Expanding the earned income tax credit — a federal earnings subsidy for low-income households — would provide workers, who in large part already have access to unpaid leave under the Family and Medical Leave Act, the opportunity to save extra income to help them during their time without pay.
In addition, expanding this tax credit would increase workforce participation, a stated goal of many who support paid leave. But unlike mandated leave, it would encourage work directly, and would not place a burden on employers that would probably be passed on to low-income women.
An expanded child tax credit would also help expecting parents save, as would offering low-income workers the opportunity to save money tax-free for use following the birth or adoption of a child.
Mandatory paid leave would create invisible victims: less-educated women who don’t get jobs and don’t get promotions. Instead of transferring money to the middle class, why not focus on helping low-income Americans by making work pay? That would help low-income workers afford some time off after having a child in the process.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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Jonathan Landman at firstname.lastname@example.org