Paid family leave wonkery -- part one

The New Republic's Josh Patashnik seems to misunderstand what The American Prospect's Dana Goldstein is saying here . Goldstein writes, correctly, that "the United States is one of only four whose government doesn't require employers to provide paid maternity leave. The others are Lesotho, Papua New Guinea and Swaziland." (Though, to be a stickler about it, Australia shares with the United States and those stellar economies of Lesotho, Papua New Guinea, and Swaziland the distinction of offering no guaranteed paid maternity leave whatsoever to its citizens).

Patashnik writes:

I would question, though, whether this is really something we want to be requiring employers to provide. Insofar as paid maternity leave is something we think we need (and it should be!), funding it is a shared responsibility that government needs to undertake, not employers. 

But he misunderstands what Goldstein -- and the Harvard/McGill study -- actually say. In the words of the report, unlike 169 of the 173 countries studied, the U.S. "guarantees no paid leave for mothers in any segment of the work force." Neither Dana nor the study says that employers themselves fund the benefit, and in fact, most mandated paid family leave programs are not directly funded by employers.

For example, European paid leave programs are largely funded by a payroll tax on employees or by general government revenues (though occasionally employer contributions are also required). The bottom line is that although paid maternity leave is guaranteed in most countries, mainly it's funded directly by employees and taxpayers, not employers. Which means that most paid leave programs are organized as Patashnik says they should be -- as "a shared responsibility that government needs to undertake, not employers."

The paid family leave program I am most familiar with -- the one in California that has existed since 2004 -- is fully paid for by employees, via a payroll contribution to the State Disability Insurance program. (And by the way, the amount of the tax is fairly miniscule -- the mandatory SDI contribution is 0.8% on a taxable wage ceiling of about 87K per year. It also should be kept in mind that upwards of 90% of the benefits paid out by SDI have gone towards workers on disability leave, not family leave).

Recently, Washington state and my ancestral homeland of New Jersey have passed paid family leave, though I confess that I've been so immersed in the details of the California program that I haven't yet looked into the policy particulars of the Washington and Jersey laws.

One final note on this issue -- in theory, the burden of a payroll tax on employers might actually get shifted to employees. Standard economic models predict that the extent to which employees would bear the burden would depend on how sensitive labor supply is to changes in wages (and labor supply tends to be relatively inelastic, for men at least). And, again in theory, even if wages don't fall, then employment should. Empirical studies of the impact of employer payroll taxes are ambiguous, but tend to show that, in the long run, the burden of the tax gets shifted to wages, with little long-run effect on employment. 

Okay, we've covered the finance basics of paid family leave. But what does economic theory predict about paid family leave? And what do empirical studies say about its economic effects? And hey, are the presidential candidates saying anything about this issue?

Well, I'm glad you asked! I was going to include all that info here, but I thought it might be a bit much for one post. So I'm going to parcel all that stuff out over the next couple of days. Tune in over the next couple of days for the thrilling, fun-filled upcoming episodes of my paid family leave series! I know you'll all be on tenterhooks until then.

Comments

[lemuel pitkin]

Hi. Came here from Yglesias.

Excellent post on an important topic.

Couple factual points: The New Jersey bill has only been passed by the State Assembly. Most likely it will be enacted soon, but it hasn't been yet. As far as the content, it's very similar to the California bill but the benefits are lower.

Also, you're confusing the issue slightly by referring to "maternity leave" rather than "paid family leave." About half a dozen states -- including New York -- allow for some paid maternity leave under their Temporary Disability Insurance programs, though relatively few women take advantage of it. But nobody is proposing new maternity leave programs; the goal is paid family leave, available to both men and women to take time off for a number of family contingencies, not just the birth of a child.

Other than that, this is a very solid presentation of the issues -- I've worked on paid family leave campaigns myself, and a lot of people (including the good folks at Lawyers, Guns and Money) make the same mistake as Patashnik, so it's an important point to clear up.

Note however that there is not a complete consensus among advocates that the social-insurance appraoch is best. The folks advocating for guaranteed sick days are quite insistent it should be benefit that the employer is required to provide & pay for. Of course there isn't necessarily a conflict here -- sick days and family leave are different in various ways -- but there is at least some tension.

[G. Williams]

I just discovered your site. Very good.
One comment: Australia doesn't have a weekly benefit for paid family leave, but it does have a $3,000 family lump sum upon the birth of a child, and 1 year of protected leave. The $3,000 is almost as much as the maximum total benefit under the pending New Jersey paid family leave bill ($524 weekly for 6 weeks), and more than the Washington law.
With respect to social insurance and paid sick days, they can readily complement each other.

[Kathy G.]

Lemuel and G., thanks for the info! G., I didn't know that about Australia, and I will mention it when I blog about this subject next (probably tomorrow).

[K]

Not that it matters to most people, but I must point out that the "family" in "family leave" absolutely omits same-sex couples in the U.S. (even married couples from Massachusetts and couples in the few other states that offer some legal recognition).

Objectively speaking, I strongly support family leave, despite the fact that my tax dollars (and, probably, lower wages) support programs from which I am denied participation.

[K]

Not that it matters to most people, but I must point out that the "family" in "family leave" absolutely omits same-sex couples in the U.S. (even married couples from Massachusetts and couples in the few other states that offer some legal recognition).

Objectively speaking, I strongly support family leave, despite the fact that my tax dollars (and, probably, lower wages) support programs from which I am denied participation.

[Kathy G.]

K., actually, domestic partners are covered under California's paid leave law. But I'm not sure if they are in the newer laws in Washington and New Jersey.