Cato Online Forum

To Grow Our Economy, Start with Paid Leave

By Heather Boushey
November 2014

Today’s families are a lot different than they were 50 years ago, yet they must make do with a basket of workplace policies implemented at a time when the vast majority of women didn’t work and there was someone at home to provide care for children or the elderly. Most families today struggle trying to balancing employment and care because most workers are also caregivers. A national paid leave program would enable workers to take temporary leave to recover from a serious illness, care for a newborn or ill family member, or for certain military purposes, which in turn would boost family economic security, worker productivity, the supply of labor, and overall economic growth.

Times have changed

Back in the 1950s, paid leave was not a pressing issue for most families. In the majority of families, dad would go to work while there was someone in the home, likely the mom, to take care of all of life’s big and little emergencies. This model worked. Yet three major economic shifts over the past half-century have changed this dynamic, making it increasingly important for workers to have access to paid leave.

First, family composition is dramatically different. Long gone are the days of “Leave it to Beaver” families. The share of children living in a married household with a breadwinner father decreased between 1960 and 2012 from 65 percent to 22 percent.1 Today, there is no new norm. Families at the very top of the income ladder are typically boast dual-career parents while those at the bottom typically have one parent, likely a single mother. In the middle, parents usually work both inside and outside the home.

Second, there are so many more women in the workplace. Between 1979 and 2012 women’s median hours increased by 739 hours, or by about 18 work-weeks a year.2 Further, many mothers work today because most families rely on more than one income. Between 1967 and 2012, the share of mothers who are breadwinners or co-breadwinners — that is, bringing home at least a quarter of family earnings — increased from 27.5 percent to 63.3 percent.3

Third, the share of adult children providing care to aging parents has tripled over the past 15 years.4 By 2030, it is estimated that the share of population ages 65 and older will make up one-fifth of the U.S. population.5 Further, many parents are sandwiched between providing care for their children and grandchildren and their aging family members.

Today’s care policies are not the solution

Most families up and down the income ladder lack options when it comes to balancing work and care. Further, differential access to both unpaid and paid leave further exacerbates economic inequality and stability.

The Family and Medical Leave Act provides 12 weeks of job-protected unpaid leave, yet only six-in-ten workers are eligible under the law. FMLA’s eligibility criteria exclude many workers, in particular young and part-time workers.6 And many eligible workers do not take leave because it because it is unpaid. In a recent FMLA survey, nearly half of workers — 46 percent — who needed leave did not take it because they could not afford to take it without pay.7

Access to paid leave is much even more limited. In 2013, the share of private-sector workers who received paid leave through their employer was only 12 percent.8 Further, access to paid leave varies by where a worker sits on the income ladder. Workers whose average wages are in the lowest fourth of the wage distribution are four times less likely to have access to paid leave through their employer than workers whose average wages are in the highest fourth of the wage distribution.9

A blueprint for a paid family and medical leave program

There is no question family leave is critical to family security and stability. Unpaid leave under FMLA has been used more than 100 million times by workers since it was enacted in 1993 despite its major shortcomings. What we need is an inclusive social insurance program. What would a national paid leave program look like?10 Well, we don’t have to start from scratch. California, New Jersey, and Rhode Island have implemented paid family leave programs by extending their existing temporary disability insurance programs.11 We have a lot of best practices from these states that we can incorporate into a national leave program. California’s program has been around for a decade.

First, our proposed paid leave program, like any social insurance program, should be available to all workers, including small business employees and the self-employed. Excluding a certain group from taking leave only exacerbates the gap between those who provide care and those who do not.

Second, eligibility should be tied to lifetime work history rather than current employment or job tenure. A paid leave program should follow the model of other social insurance programs, such as Social Security Disability Insurance, which bases eligibility on employment history and payment into the system.

Third, a national paid leave program should provide a reasonable amount of leave to all workers. Policymakers can follow the lead of the Family and Medical Leave Act, which provides 12 weeks of leave, or 60 workdays, per year.

Fourth, paid leave salaries need to be generous enough so workers, especially low-wage workers, won’t jeopardize their economic security by taking leave. We can follow what has worked at the state level. Policymakers can set benefit levels at two-thirds of a worker’s weekly average wage as in New Jersey, and cap them up to a certain amount, as in California.

Fifth, the program needs to be inclusive of all types of families, especially since today’s families come in so many shapes and sizes.12 The program should use a broad definition of family so workers can take leave to care for extended family such as grandparents, aunts and uncles, and domestic partners.

Lastly, leave should be gender neutral, tied to the worker rather than the family. The Family and Medical Leave Act provides the same amount of leave to each eligible worker, regardless of sex. Although women are increasingly the family breadwinner or co-breadwinner, men’s earnings are still critical to family’s income, making it very difficult for men to take unpaid leave. Paid leave tied to the worker encourages men and women to take leave and share care responsibilities.

Why paid leave is good for economic growth

Many agree that paid family and medical leave is good for families, but many don’t consider how it benefits our entire economy. It does. In spades.

Paid family and medical leave would grow and strengthen the labor force. It would allow workers who would otherwise leave their jobs due to caregiving responsibilities to remain in the labor force. One study finds that paid parental leave policies are associated with higher employment-to-population ratios and decreased unemployment — particularly among women — in North American and European countries.13 Further, there is evidence that individuals who aren’t in the labor force will seek work with the availability of paid leave.14

Paid leave is good for business.15 As evidenced from the state programs, paid leave is not a “job killer.” In a 2009 and 2010 survey of California employers, 87 percent of employers reported that the state’s paid family leave program resulted in no cost increases, any 60 percent of employers said they coordinated their benefits with the family leave program.16

Paid leave can reduce worker turnover, which is costly for employers and crimps productivity. The median cost of turnover is about 21 percent of a worker’s salary.17 Further, availability of paid leave can reduce employee absenteeism from work. It is estimated that employee absenteeism due to work-family responsibilities costs employers about $500 to $2,000 per employee per year.18

Paid leave is critical for families’ economic security. Women lose an estimated $274,044 and men $233,716 in lifetime wages and Social Security benefits when the have to leaving the labor force early due to caregiving responsibilities.19

Paid leave provides income security to families who might otherwise need public assistance programs to help make ends meet. A study by the Rutgers University’s Center for Women and Work finds that women who took paid family leave after their child’s birth were 40 percent less likely to tap supplemental nutrition assistance in the year following their child’s birth, compared to mothers who returned to work but did not take any leave.20

Paid leave is important for raising the next generation to be productive members of our society.21 A national program would aid children’s early development by enabling parents, especially mothers, to stay in the labor force, thereby boosting household income, and provide time for parents to stay home and bond with their new child, which helps their long-term development well into adulthood.22

Families are important actors in our economy. If we want all families to be able to work, provide and care for their families, and contribute to our economic growth, a national paid family and medical leave insurance program is the next step. Now is the time for policymakers to wave the magic wand.

Notes

1 Philip Cohen, Family Diversity Is the New Normal for America’s Children (Council on Contemporary Families, September 4, 2014).
2 Eileen Appelbaum, Heather Boushey, and John Schmitt, The Economic Importance of Women’s Rising Hours of Work (CEPR and Center for American Progress, April 2014).
3 Sarah Jane Glynn, Breadwinning Mothers, Then and Now (Washington, DC: Center for American Progress, June 2014), http://cdn.americanprogress.org/wp-content/uploads/2014/06/Glynn-Breadwinners-report-FINAL.pdf.
4 MetLife Mature Market Institute, The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents (Westport, CT: MetLife Mature Market Institute, June 2011).
5 U.S. Administration on Aging, “Aging Statistics,” accessed October 16, 2013, http://www.aoa.gov/Aging_Statistics/.
6 Heather Boushey and John Schmitt, Job Tenure and Firm Size Provisions Exclude Many Young Parents from Family and Medical Leave (Washington, DC: Center for Economic and Policy Research, 2007).
7 Jacob Alex Klerman, Kelly Daley, and Alyssa Pozniak, Family and Medical Leave in 2012: Technical Report (Cambridge, MA: Abt Associates Inc., September 7, 2012), http://www.dol.gov/asp/evaluation/fmla/FMLA-2012-Technical-Report.pdf.
8 U.S. Bureau of Labor Statistics, “Table 32. Leave Benefits: Access, Private Industry Workers, National Compensation Survey, March 2013” (U.S. Department of Labor, 2013), http://www.bls.gov/ncs/ebs/benefits/2013/ownership/private/table21a.pdf.
9 Ibid., 32.
10 Heather Boushey and Alexandra Mitukiewicz, Family and Medical Leave Insurance: A Basic Standard for Today’s Workforce (Washington, DC: Center for American Progress, 2013), http://www.americanprogress.org/wp-content/uploads/2014/04/FMLA-report-summary.pdf.
11 Linda Houser and Thomas P. Vartanian, Pay Matters: The Positive Economic Impacts of Paid Family Leave for Families, Businesses and the Public (New Brunswick, NJ: Center for Women and Work, January 2012); Rhode Island Department of Labor and Training, “Temporary Disability Insurance,” accessed October 16, 2013, http://www.dlt.ri.gov/tdi/.
12 Cohen, Family Diversity Is the New Normal for America’s Children.
13
Christopher Ruhm and Jackqueline L. Teague, “Parental Leave Policies in Europe and North America,” Gender and the Family Issues in the Workplace, 1997, 133–56.
14 Jochen Kluve and Sebastian Schmitz, Social Norms and Mothers’ Labor Market Attachment: The Medium-Run Effects of Parental Benefits, IZA Discussion Paper (Washington, DC: Institute for the Study of Labor, April 2014), http://ftp.iza.org/dp8115.pdf.
15 Council of Economic Advisers, The Economics of Paid and Unpaid Leave (Washington, DC: The White House: Executive Office of the President of the United States, June 2014).
16 Eileen Appelbaum and Ruth Milkman, Leaves That Pay: Employer and Worker Experiences with Paid Family Leave in California (Washington, DC: Center for Economic and Policy Research, 2011), http://www.cepr.net/documents/publications/paid-family-leave-1-2011.pdf.
17 Heather Boushey and Sarah Jane Glynn, There Are Significant Costs to Replacing Employees (Washington, D.C.: Center for American Progress, November 16, 2012), http://www.americanprogress.org/issues/labor/report/2012/11/16/44464/there-are-significant-business-costs-to-replacing-employees/.
18 Corporate Voices for Working Families, After School for All: A Call to Action from the Business Community, 2004.
19 MetLife Mature Market Institute, The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents.
20 Houser and Vartanian, Pay Matters: The Positive Economic Impacts of Paid Family Leave for Families, Businesses and the Public.
21 Heather Boushey and Alexandra Mitukiewicz, Job Quality Matters: How Our Future Economic Competitiveness Hinges on the Quality of Parents’ Jobs (Washington, DC: Washington Center for Equitable Growth, June 2014), http://ms.techprogress.org/ms-content/uploads/sites/10/2014/06/062014-parental-jobs.pdf.
22 Raquel Bernal and Anna Fruttero, “Parental Leave Policies, Intra-Household Time Allocations and Children’s Human Capital,” Journal of Population Economics 21, no. 4 (October 2008): 779–825.


The opinions expressed here are solely those of the author and do not necessarily reflect the views of the Cato Institute. This essay was prepared as part of a special Cato online forum on reviving economic growth.
Heather Boushey is executive director and chief economist at the Washington Center for Equitable Growth.