Forgotten Federalism? Let States Decide on Paid Leave

In the State of the Union address last week, President Trump said he was “proud to be the first President to include in my budget a plan for nationwide paid family leave -- so that every new parent has the chance to bond with their newborn child.”

Indeed, Trump’s budget last year did include a provision for paid parental leave. The proposal was thin on details but suggested the paid leave program would build on the existing unemployment insurance program, and the White House budget projected it would cost taxpayers around $2 billion annually. 

Based on the applause, Trump's national paid leave idea has some support. But sympathetic Republicans should temper their enthusiasm and recall their professed support for federalism. Afterall, it wasn't long ago that federalism was an animating issue of the Republican party, and it's still just as relevant to economic policy questions today.

How does federalism apply to paid leave? Federalism can't eliminate government-supported paid leave's costs or unintended side effects. Still, allowing localities to experiment with different lengths, types, and features of government-supported paid leave --or no government-supported leave at all-- is superior to a one-size-fits-all nationalized approach because different constituents have different policy preferences that can be honored more easily under this approach. Also, the variation generated by a diversity of state and local approaches can clarify the policy debate by providing useful information on outcomes.

Moreover, advocates of government-supported paid leave can rest assured that states have been successful at adopting paid leave programs without federal help; California, New Jersey, Rhode Island, New York, Washington, Massachusetts, and D.C. have all enacted paid leave policies which are in effect or will be soon, and legislators in Vermont, Colorado, New Hampshire and many other states have proposed or are actively pursuing paid leave policies.

Even cities have passed paid leave policies. For example, San Francisco passed mandated paid leave, unfortunately one of the worst possible formulations of government-supported leave. And last week two Los Angeles city council members proposed businesses top-up California's state paid leave benefits and provide up to 100 percent of employee wages for 18 weeks of leave. 

Republicans eager to implement national paid leave should know that government-supported paid leave is likely to appear in a state or city near them soon. It would be wise to let local knowledge drive policy decisions in this realm, rather than Washington.