June 27, 2022
It’s good that Democrats have dropped paid family leave
When President Joe Biden’s "Build Back Better" plan emerged from negotiations with Democratic lawmakers Thursday, one widely promised element had been dropped: paid leave to care for a new child or tend to a sick relative. This came as a surprise, since Biden and most congressional Democrats campaigned hard on the issue and, at least…

When President Joe Biden’s plan was unveiled from negotiations with Democratic lawmakers on Thursday, one of the most sought-after elements had been dropped: paid time to care for a newborn child or to tend to a sick relative. It was surprising, considering that Biden and most congressional Democrats had campaigned vigorously on the issue. Surveys also show strong support for the idea. Indeed, a poll by my own organization, the Cato Institute, found 74 percent of Americans — including 88 percent of Democrats, 71 percent of independents and even 60 percent of Republicans — back the idea. As has been shown in California, women who are more financially secure have taken advantage paid leave.

Given the political pressure progressives will bring to get the measure back to life before it is put to a vote, it is not certain that the measure has been repealed. It is important to understand the reasons paid leave, as appealing as it sounds, could do more harm than good.

Congress is more concerned with timelines than content and there has not been much opportunity for serious debate on the matter. There are serious drawbacks to enacting another large and costly nationwide program, especially given the rising inflation and ballooning national debt.

Under current law, workers are able to take up to 12 weeks off from their job following the birth of a child or to deal with a family emergency without risk of being fired. They are not paid automatically during this leave. Biden had proposed that the federal government now cover part of the cost of this pay on a sliding scale, under which low-income workers would receive the most compensation by getting up to 80 percent of their wages. But is this spending the most efficient use of scarce resources? The paid leave plan originally envisioned in the Build Back Better Act was estimated to cost as much as $225 billion. Federal programs already heavily favor families with children. This trend would be continued by the Build Back Better Act with child care subsidies, and an extension to the child tax credit. These policies can help redistribute wealth, from childless adults to children to those with children. They also allow for the transfer of wealth from male breadwinner households to other types of households and, most importantly, from low-income workers to middle- or higher-income workers.

As has been shown in California, women who are more financially secure have used paid leave. The benefit is heavily concentrated among higher-earning women, with the median participant earning $10,000 more than working women more generally. University of California, Davis researchers speculated this was because better-paid women were more likely to be aware of and at jobs in which they were eligible for the compensation, as well as more inclined to accept less than full pay in exchange for time off. This redistribution reality presents a problem for people who support parental leave but also want to reduce income inequality and create a more inclusive economy.

Similarly, for those who want to encourage the participation of women in the workforce, a family leave mandate raises the prospect that employers will be less likely to hire women. While the high-profile case of Transportation Secretary Pete Buttigieg’s paternity leave shows that both men and women can benefit from parental leave, women remain far more likely to take advantage of such options. At the same time, employers fear that, even with federal subsidies, having employees take long stretches away from their job is not cost-free.

Employers may be less inclined to hire younger women if they think they will take more time off from their job. Employers have many options to get around such discrimination. Indeed, after California implemented its six-week parental leave program in 2004, both the rate and length of unemployment increased among women of child-bearing age — and at higher levels than among older women, California men and women from states without such a program. Parental Leave may also lower women’s wages. As former Treasury Secretary Larry Summers has pointed out, “if wages could freely adjust, these differences in expected costs would be offset by differences in wages.” In short, employers care about how much it costs in total to employ a worker, not how such costs are split between wages and various benefits. To maintain the same compensation, increases in one area will likely result in decreases in others.

Studies from Europe suggest that the unintentional consequences of mandating parental leave can include lower pay, higher unemployment and fewer leadership positions for women overall. Other research even suggests that because women are more likely to take parental leave, leave programs “are likely to reinforce the traditional division of care work in the home,” with homemaking “institutionalized as the norm for many women.” As one study put it, women taking leave means they’re the ones available for housework “during a critical time of household negotiation,” which then “sends a clear message about who should provide family labor.” Thus, parental leave may, perversely, reduce gender equality.

Providing a federal program also stops the private sector from stepping up on its own. As do many major companies, the Cato Institute offers generous parental leaves benefits. According to a survey by the Society for Human Resource Management, more half of employers (55 percent) now offer paid maternity leave, while 45 percent offer paid paternity leave and 35 percent provide paid extended family care leave for reasons such as a sick spouse or child, numbers that are increasing steadily.

Still more employers are trying to accommodate their employees in different ways, for instance by allowing greater use of flex time. Some allow the use of disability benefits after a birth. These companies can create a benefit program that suits their needs and their employees’ needs, even if there is no federal mandate. The same 12 weeks of leave will not work for all companies or every worker. Therefore, it is more beneficial for both sides to tailor options to each individual situation. This empowers women by giving them more options and allowing them to choose the benefit trade-offs that are most important to them.

Even the political boost to the Democrats that’s expected from passing parental leave may be overestimated. The same polls showing such strong support for parental leave also show that support drops precipitously when costs, monetary and otherwise, are included. All of this being said, Congress was smart to give up. The likely effects of parental leave should be discussed in detail before any major changes to the federal government are made.

Michael Tanner

Michael Tanner is a senior fellow at the Cato Institute in Washington, D.C.

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