How to Fix The United States Patchwork Policy of Paid Family and Medical Leave
By: Isabelle Moratti
Executive Summary
There is an inevitability for people in the workforce to find themselves in a situation that requires responsibility for a new child or a sick family member. Roughly, 40 million people care for aging loved ones on top of their possible responsibilities to children in the United States (“Paid Family Leave” ). This growing group, however, finds itself in one of the only countries out of 42 in the OECD to lack some form of a national paid parental and family leave policy (“Paid Family and”). This is part of a larger problem that those in favor of implementing a national policy call a “crisis” affecting working people, their families, businesses, and our nation’s economy. Romig and Bryant call the United States’ current position for paid leave rights in relation to other wealthy countries a “patchwork of federal, state, and local policies”. While paid family leave has shown to increase socioeconomic outcomes for lower income families, aid financial stability, and support job security, current policy has left workers vulnerable (“Paid Leave in the U.S.”). A passage of the currently proposed FAMILY ACT would provide a national entitlement to paid leave and broaden eligibility, allowing the United States to catch up with other advanced countries and protect its workers.
Introduction
Current Policy in The United States
Prior to 1993, the only protection for worker’s jobs came in the form of the Pregnancy Discrimination Act. This act was a large step in the fight for protecting U.S. workers jobs, but only in theory. Most women either failed to retain their jobs or return to any form of work after childbirth. To effectively provide job security beyond pregnant women, the United States took a crucial step in expanding job protection for U.S workers expecting a child or needing to take medical leave for family with the passage of the Federal Family and Medical Leave Act (FMLA). This was a landmark policy, providing a guaranteed twelve weeks of unpaid family leave. However, the FMLA was only intended to cover job protection, leaving any expansion of leave rights (duration, pay, reason) up to states and private sector businesses. It also has restrictions in that it is limited to companies with 50 or more employees and workers who have worked at the establishment for at least 12 months (“Paid Leave in the U.S.”). As of currently, there is a push in the United States today towards implementing a paid leave policy that has made it to proposed legislation. The FAMILY Act was introduced to congress in 2013. This proposed policy would seek a national paid leave standard with broader eligibility and financial security. (“The Family And”).
Issues #1: Eligibility and Accessibility
One of the main issues within the FMLA is constricted eligibility for the program, which has hindered accessibility to both paid and unpaid leave for millions of workers. One of the most recent studies done on FMLA statistics shows that only 56% of U.S. workers in 2021 were eligible (Brown). That leaves 44% of the population ineligible for a job protected unpaid leave program, forcing millions of workers either new to the job or working part-time hours in vulnerable positions. This vulnerability is particularly prominent within minority groups. Workers of color and lower wage workers are more likely to work in industries that disproportionately offer part-time and temporary work hours (like leisure or hospitality). Young, new parents also tend to find themselves in new work positions and cannot easily gain access to FMLA (Romig and Bryant).
Alternatively, another portion of workers who do not have access to these benefits are those who work for small companies or are self-employed. A lot of smaller companies are unable to afford the benefits that a larger company can afford. A 2019 KKF Employer Benefit Health Survey found that larger firms (100 people or more) were 35% more likely than smaller firms to offer paid parental leave benefits and firms with higher-wage employees were 41% more likely than those with fewer higher-wage employees (“Paid Leave in the U.S.”). This allows workers at larger companies not only the possibility of access to the FMLA but also their own employer benefit paid leave, and those who work at smaller firms without either. FMLA does provide a necessary length of 12 weeks secured leave, however, most leaves for workers are relatively short. Of those eligible for leave, more than 70% were back at work within 40 days (“A Look at”). This is in large part not being utilized as it is intended due to another large issue within FMLA which is economic/financial security.
Issue #2: Financial Equity
Half of those eligible for FMLA reported that lack of pay was the main reason they did not take leave (“A Look at”). The ones who do, typically dip into their sick/vacation days as well as savings to afford time off. A guarantee of only unpaid leave forces workers to either quit or reduce work hours, and takes money away from people, local communities, and businesses that rely on consumer spending (Glynn and Corely). Roughly 62% of respondents in one study taking no pay or partially paid leave reported financial difficulties (Horowitz). Any current paid leave that workers receive is either through employee sponsored programs or state sponsored insurance programs. The effect is compounding when viewed through a smaller lens. There are large disparity between lower socioeconomic status and accessibility, a group highly vulnerable in terms of financial security. Today, 62% of leave-taking U.S. workers earning less than $30,000 a year received no paid leave as opposed to only 26% of those earning over $75,000 annually (Horowitz).
There are only a handful of states that have made the move to add protected paid leave policy into their jurisdictions. These have been crucial to providing equity for workers. The states that have made paid leave policy core to their jurisdiction are recognizing the need of struggling workers and this expansion of paid leave rights is leading to crucial protection. With that said, the reach is minimal as two thirds of American workers do not live in these states (Romig and Bryant). When leaving paid leave up to the private sector employers, it limits outreach and doesn’t always compensate as well as it needs to. The National Partnership Organization found that only 23% of the workforce has paid family leave through their employers and just 40% has personal medical leave through some employer-provided disability program (Houser and Vartanian). This leaves a large majority of employees within the United States with two options. To take the leave and face consequences financially or limit their leave, facing the consequences of not being able to care for a new child or sick family member. This problem is especially detrimental to women. Women who work in lower-income jobs or part-time jobs are not only those who typically find themselves in a position of ineligibility of FMLA, but also in a position of financial insecurity. They are the ones who typically assume the role of care of a new child or family member, leading to high rates of female labor market detachment.
Issue #3: Women Labor Force Participation
The National Partnership Organization study found that women comprised 64% of those who did not take leave but needed it (“A Look at”). With the absence of a national paid leave policy, a study showed that maternal labor market detachment is around 30% following the birth of a child (Jones and Wilcher). Houser and Vartanian found that women who do receive paid leave show a stronger labor for attachment and wage increases in the year following a childbirth compared to those who do not take leave (Houser and Vartanian). As seen with the enactment of the Pregnancy Driscrimantion Act, a lack of subsidy for working mothers typically forces women out of their jobs and causes them to forgo future wage opportunities. However, lack of public subsidy for all women is not the only consequence of leaving paid leave policies up to the private sector and states. There is also a large influence in the inability of men to take paid leave they need. Typically, companies will provide maternity leave but not paternity leave. This effect on men leads to a larger gender inequity within the workforce. When men do not have this access, it forces women to take leave they cannot afford, and further drives them out of current employment positions. Paid leave would not only allow men protection in terms of their employment and financial security, but also further aids in women’s labor force attachment. Financial security for families as well as an aid for women’s labor force participation is crucial for the benefit of children and their development within the United States. Even further, allowing standardized paternal leave can strengthen benefits for both women and their children.
Recommendations
Broaden Eligibility
The first important aspect of fixing issues within the current national policy would be to broaden eligibility. The United States needs to implement a policy that allows maximum access to those who are most affected by the current lack of accessibility. The FAMILY Act, for example, would provide all workers in the United States with up to 12 weeks of partial income pay when they take leave for personal health conditions (including pregnancy/childbirth), the serious health condition of a child or partner, the placement of a child, and for military caregiver/leave purposes (“The Family And”). This seeks to eliminate the restrictions of workers’ access and provide more specific language regarding what you may take this paid leave for. Workers who are young, part-time, lower-wage, and self-employed would all be eligible for these benefits. Increasing access to paid leave nationally is also a huge step in closing the financial and economic vulnerability caused by the FMLA lack of financial security.
One worry of a proposed policy as such is how it affects employers trying to compete to keep workers and productivity high if they are forced to now provide financial compensation for wages. Vanessa Calder argues that individuals will adapt to this type of government intervention, creating adverse effects such as wage reductions. This will happen because employers are likely to want to limit costs in order to compensate depending on productivity level, so the new benefit is not “free” to the employee after all. Those concerned with adverse effects and allowing its accessibility would be surprised to know that research shows it doesn’t affect their productivity all that much. California was the first state in the United States to implement its own paid family leave law in 2004. This law is financed through payroll tax on employees and adding to an existing insurance program for temporary disability to new mothers. Appelbaum and Milkman’s study showed that 91% of employers specified the paid leave services have no effect or a positive effect on their company’s performance and 89% no effect or a positive effect on their company’s productivity (Appelbaum and Milkman).. Additionally, a broader eligibility will include fathers as they now will have equal access to paternity leave as women do maternity leave. This closes current gaps in businesses that might only provide maternity leave by opening access to fathers, further enhancing overall labor force participation, and growing the economy. A study done by Romig and Bryant found that because the FAMILY Act would use the same work history requirements as Social Security Disability Insurance, 83% of all workers aged 21–64 meet these proposed new requirements. This type of access to paid leave standard would be crucial in covering all minority groups who would otherwise be ineligible and target accessibility to those who need it the most (Romig and Bryant). A broadened eligibility would standardize for all employers, making it easier for people to take leave they need without fear, as they must provide to everyone equally and so do their competitors.
Federal Entitlement to Paid Leave
The second important factor that needs to be included is a new family and medical leave policy is pay. Like the case in California, The FAMILY act ensures that workers will earn 66% of their monthly wages, up to a capped amount. One of the main reasons why the FMLA has been the only form of national leave protection in the United States is because those who push back against a paid leave policy cite financing as a huge roadblock. Many believe that this would be a significant cost to businesses and the individual worker. Whether that be through increased taxes for businesses or the implication for wages and employment amongst workers. (“Paid Leave in the U.S.”) The FAMILY act would be financed through small payroll contributions by both the employee and employer, 2/10 or 1% each (2 cents per $10 in wages), or less than $2.00 per week for a typical worker. That way there is not full responsibility placed on businesses to fund these options nor solely on the individual. All the payroll contributions would cover both insurance benefits and administrative costs. (“The Family And ”) Firms in the private sector are actually being highly affected by the lack of a national paid leave policy. Firstly, are turnover costs. There are high rates, averaging 1/5 of an employee’s salary to replace workers who leave. Turnover costs can be significantly reduced if employees are encouraged to not only stay in the labor force but with their current employer (“Paid Family”). Through the current payment plan of the FAMILY Act, the burden would be placed equally on both firms and employees, offsetting the amount of costs the firm would likely have to pay or the consequences that would occur.
It is not just firms who individually bear costs, but the economy as a whole also bears significant costs of choosing not to opt into paid leave. The current estimated hidden costs lost in wages due to lack of access to paid leave in the United States is $20.6 billion (Glynn and Corely). A large majority of people who take unpaid leave as it stands now opt into state or federally funded public assistance. When workers, men, or women, take leave paid, their long-term earnings and wages are protected with job security. Statistics showed that both men and women who take paid leave have a significantly lower chance of seeking public assistance or food stamps a year after a child’s birth (Houser and Vartanian). So, the economic cost that states and governments are already providing in the form of welfare or public assistance could be mitigated through a national paid leave program. This would allow many workers to not only take the time they need but be able to do so financially without risking future wage earnings or savings. Additionally, paid leave encourages and allows women to take financial secured leave. 54% of women are more likely to report wage increases in the year following a child’s birth when reporting they took 30 or more days of leave as compared to those who don’t (Houser and Vartanian). While individuals would be losing a percentage of their income to fund the implementation of the FAMILY Act, there would be a real time benefit of not losing a significant portion in their stream of income during leave.
Conclusion
If the United States wants to stay competitive in the global economy it must catch up to other nations. To do so, it can work to pass the FAMILY act which aids in fixing the current patchwork system with its strong benefits for eligibility and financial support. The FAMILY has elements that would significantly eliminate a lot of the holes affecting workers within the current system. Specifically, it stands to provide a more equitable approach to paid leave standards that will aid in the support of lower-income families, people of color, and women. As it stands, the United States is at risk of a continued crisis not only affecting workers but of major costs to their national economy. Paid leave at a national level provides financial security, workforce participation and equity, greater economic mobility, and productivity within businesses. (“The Family And”). The effect of a national paid leave standard would aid businesses and grow the economy, as well as protecting families and aiding in socio-economic mobility. Allowing paid leave support for all types of workers protects jobs and boosts overall labor force participation.
References
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