Caleb Brown: This is the Cato Daily Podcast for Monday, March 19, 2018. I am Caleb Brown. Paid family leave is an idea that the Trump administration has kicked around for more than a year. But how would such a program function and why do prominent Republicans regard the benefit as conservative? Vanessa Brown Calder is a Policy Analyst at the Cato Institute. We spoke Friday. The paid leave proposal that the president mentioned very briefly in his State of the Union Address was essentially not the first time that we’ve heard this proposal from him. So, what was that initial proposal and where did it come from?
Vanessa Calder: Well, Ivanka has always been interested, I think, from day one in producing some type of paid family leave bill. And it has kind of transformed over time what exactly that looks like. Initially in the fiscal year 2018 budget, the Trump administration put out some very vague sort of vagaries around providing some type of paid leave that would be based on state unemployment insurance programs. And, basically, some type of savings in those unemployment insurance programs would be used to provide paid family leave at the state level, but through the federal program. That has now been, I think, a little bit, it has been disbanded and instead what we are talking about now is a proposal which has come from the Right which would be to use the Social Security program, the federal Social Security program, and allow people to borrow against their future benefits in order to provide themselves with paid family leave today. On the surface this sounds like maybe it is a good thing, and I think that superficially it sounds that way and so it has appealed to many people on the Right, because who doesn’t like a budget-neutral proposal that provides additional choices to people? Unfortunately, although it may be budget-neutral in the long-term, as we know, Social Security, the Social Security program, is insolvent and will be insolvent in 2034 or so. And in the short term, this would increase the number of obligations for taxpayers and probably expand that coalition, the coalition of interests that are interested in not allowing any of those reforms that are so necessary to the long-term success of our federal budget and sort of dealing with the federal deficit to occur.
Caleb Brown: Yeah, so there are, you say this idea is coming from the Right. And we can argue about whether or not Donald Trump is of the Right, but Mike Lee, Joni Ernst, and Marco Rubio are three Republicans that are essentially pushing this idea. How do they, because they argue that it is budget-neutral in the short-run, it is okay, how do they get away with saying that compelling this payment to people for decisions that they make that rightfully the government should have no interest in one way or another, how do they make the argument that that is a Conservative idea?
Vanessa Calder: Well, I think that one thing that they say is that it increases choice and increasing choice is great from a libertarian perspective. Again, I think that that would be something that would be really positive if we actually had something like personal savings accounts, which is something which is a proposal, or a reform to Social Security, which has been suggested in the past. Unfortunately, it did not go anywhere, and as a result we still have the same traditional Social Security program, which means that we do not really have anything there. So, there is nothing for people to actually withdraw their benefits from. They are basically, you would basically be just increasing the number of obligations for Social Security today, and that is a problem for Social Security’s solvency. I do not really want to get into the details of this program. I have kind of talked about it elsewhere on the Cato blog, and on The Hill, and other places. I think that in general it is a problematic proposal because it is superficially attractive, but at the same time it has very negative fiscal consequences for a program that is already really struggling.
Caleb Brown: Okay. So what arguments are, more broadly, what arguments are put forward to say this is a good idea?
Vanessa Calder: Well, there’s three arguments, and I think that the reason why it is important to cover these arguments is because regardless of what happens with the current proposal, we will continue to hear about paid family leave, and we will continue to hear about paid family leave interventions. And there are three arguments which are used almost ubiquitously, and they are kind of used and abused I would say, because they are not very good arguments to begin with. One of those arguments is that all other industrialized countries have paid family leave, and so we should have it too. Well this is kind of the equivalent of when you are a little kid and you tell your parent that, you know, Johnny or Sally is doing it, and so I should be able to do it too. It does not really matter that other countries or other people are doing it, what matters is how it worked out when they did do it. And, so, if we actually look at the consequences of paid family leave in other countries, we see that there are real tradeoffs and that there are costs for women. If you compare the United States with the Nordic countries, for instance, you see that in the Nordic countries the percentage of managers that are women is much lower than it is in the United States. In Norway, in Denmark, in Finland, that percentage hovers around 30%, and in the U.S., it is 43%. In other OECD countries with paid leave, women are just about half as likely as men to be managers, and they are about equally likely as men to be managers in the United States. And there are other issues as well. These paid family leave programs in other OECD countries seem to have contributed to a segregated labor force there, segregated by gender that is. So, women are not as frequently in male professions, and that is not the case here in the U.S., we do much better on those metrics. So, something that paid family leave advocates will often point to is they will say, well, labor force participation for women is much higher in these other countries than it is in the U.S., and it does seem that as you provide paid family leave, labor force participation increases for women a bit. It is generally because women are taking part-time jobs. Maybe they are not as committed to being part of the labor market, but they take part-time jobs so that they can get the benefits. But, unfortunately, at the same time that you have that happening, you also have sort of a downward pressure on women’s advancement. And if you care about equal outcomes and about sort of an egalitarian labor force, then you have to consider not only labor force participation rates, but also how women are doing as professionals, as managers, and how they are doing in traditionally male professions, which are all things that current advocates of these proposals completely disregard. And I think that we should also probably talk about why this happens. Just…
Caleb Brown: No, absolutely, because the, you know, the mechanics of how a program like this actually functions, what are the incentive impacts on employers? You talked about how women have higher labor force participation rates than these other countries, but if they are doing it primarily to take advantage of the benefit of not being in the labor force, and for a lot of women, I assume, they are not in the labor force because they are caring for children, whether or not they have left a job to do so.
Vanessa Calder: Right. So that is kind of what happens, is that although in the Nordic countries and in other OECD countries that have these policies they do provide the benefits both to men and to women, women capture or use virtually all of the benefits that are provided and they have even tried in places like Sweden to provide incentives for men to take paid family leave at the same rates as women has completely not worked. Only 14% of Swedish men take an equivalent amount of paid family leave as Swedish women, even after all these bonuses and tax incentives that have been provided. So, why is this happening? Why is it that women’s advancement is being impacted and women’s career progress is being impacted by providing paid family leave? It seems to be that on the employee side it is kind of what you alluded to, which is that women are provided incentives to be out of the workforce and to be out of the workforce for longer, and as a result of that they don’t have the qualifications when they need them in order to move up and really maximize their full professional potential.
Caleb Brown: But isn’t that, isn’t that also just a problem of, you know, women give birth to children and that is a fact and, you know, that would tend to impact one’s participation in the labor market.
Vanessa Calder: Absolutely. So, there are certain biological sort of considerations which a paid family leave proposal is not going to be able to deal with, and that is one of them, which is that women need time to rest and recover, right? Now, the question is how long they are resting and recovering and bonding with the baby for, and if there are incentives for them to be out of the workforce for much longer to do that, I mean in some of the Nordic countries they have something called care leave, which is basically you can be out of the workforce for multiple years, caring for your new baby. When you provide incentives to do things like that, then what you end up with is just kind of depressing women’s career progress over time. And that can be a problem if you care about equivalent outcomes. So, that is one of the issues. The other issue is on the demand side, on the labor demand side, so in other words for employers. So, employers, when they see that women are generally the ones that are taking these benefits, they say well, I am not particularly interested in hiring somebody who is going to be more costly. And they might be more costly because, let’s say, the government mandates that the employer provide benefits to women when they are out of the workplace, but they might also just be more costly because they are out of the workplace for different periods of time, and they are unpredictable in the way that they are engaging at the company. And, so, this leads employers to do something which is akin to kind of statistical discrimination. You just decide that women are more costly on average, and so, because of that, consciously or subconsciously, you won’t hire, or maybe you won’t train, or you won’t invest in women in the same way as you would for a man. And so those are some of the incentives that are created by paid family leave programs when they are institutionalized in this way, and definitely something that everyone should be aware of and should be very cautious of when they are talking about paid family leave proposals. And most people just ignore those things.
Caleb Brown: And so, even for women who have no plans to have children, this can affect them.
Vanessa Calder: Right. Because there is not really a way for employers to – it is against the law in most countries – to ask people whether or not they are interested in having children in the next few years. And so it forces employers to resort to this kind of statistical discrimination because there is no way to come to some type of negotiated agreement, or to understand whether or not you are talking to a woman who has absolutely no plans of having children, or you are talking to somebody who is going to have a lot of children and be gone in and out of the workplace for most of her 30s or something, let’s say.
Caleb Brown: So, how many Americans have access to family leave?
Vanessa Calder: So, that’s a great question and that brings us to another really bad argument, which is that only 15% advocates say of workers have access to paid family leave, and they use this statistic, it’s a Bureau of Labor and Statistics figure that they use, so it seems very reputable on its surface. Unfortunately, it is an extreme outlier if you compare it to any other federal data set or national survey. And, so, we can talk about those federal data sets and national surveys, but the reason…
Caleb Brown: Where is the bulk of the data, say, in terms of how many Americans have access to it?
Vanessa Calder: So, if you look at Pew Research, their polling says that 63% of workers had access to paid leave for parental, family, or medical reasons over the past two years. If you look at the National Survey of Working Women, it says the same thing, that mothers were, 63% of mothers were provided paid family leave. And if you look at other federal data sets, then they show something in the same area, somewhere in the 50s usually, 50% of employees or workers have access to paid family, or to paid leave, which is used for family purposes. So, that actually brings us to really the [inaudible] here, which is that frequently, when parents have a child, or adopt a child, they will save their various types of paid leave which they have been allotted, or they will save, they will use short-term disability, they will use their paid sick leave, they will use their paid vacation leave, and they will pool it together and they will create kind of a paid family leave for themselves. This is very typical. If you look at like an HR manual, a national HR manual, it will tell you this is what you should do when you have a child so that you have paid leave. But, unfortunately, that is not counted by the Bureau of Labor and Statistics. In order to count, you have to have paid family leave which is outside of any of the other paid leaves that you have that can be used for family purposes. So, it is kind of a peculiar way of looking at the data. What really matters is whether people functionally have paid family leave. It matters less exactly how it is defined in the manual, in the workplace manual or something like that. But that is what the Bureau of Labor and Statistics focuses on and they also don’t count leave like, something that has become popular now is PTO banks and unlimited paid leave plans even, and those things do not count under their definition of paid family leave. So, that 15% figure is really wrong and if nothing else, it is an extreme outlier or should be explained in detail why it is that we are coming to such an alarming statistic whenever it is used.
Caleb Brown: Okay. So then, with respect to the plan that, I mean, there have been multiple iterations of whatever the Trump plan is on this, but are any of these actually moving forward in a way that should be concerning to women, to employers and others?
Vanessa Calder: Yeah, so I think that the current proposal they are trying to build a coalition for it across ideological lines, so we will see how that goes. I mean, hasn’t – this isn’t the first attempt to try to do something along those lines and I am probably not the right person to act as a political analyst to know exactly how likely it is, but we will just kind of have to see how that rolls out.
Caleb Brown: Vanessa Brown Calder is a Policy Analyst at the Cato Institute. Subscribe to and rate the Cato Daily Podcast at iTunes and Google Play, and follow us on Twitter, @CatoPodcast.
