Designing a paid leave policy to support our most vulnerable workers

BY ANGELA RACHIDI

• While the academic and political case for paid leave advanced considerably in recent years, questions remain regarding how a national paid leave program would affect low-wage workers.
• Research shows that many existing paid leave programs in the US and other countries impose costs on vulnerable populations due to regressive funding sources and fewer benefits to low-income parents caused by this group’s low program take-up rate.
• However, paid family leave programs offer significant advantages for low-income parents, increasing parents’ access to paid time off and benefiting low-income children financially and developmentally.
• Balancing these findings requires designing a public paid family leave program that supports low-wage working parents, limits private-sector benefit crowd out, and reduces the regressivity of funding.

Read the PDF.https://www.aei.org/wp-content/uploads/2020/10/Designing-a-Paid-Leave-Policy-to-Support-Our-Most-Vulnerable-Workers.pdf

A growing body of academic literature in recent years has highlighted numerous socio-emotional benefits from public paid leave programs. Much of this research has analyzed California’s paid family leave program, which, being established in 2004, is the longest-running state family leave program in the country.

While California’s program covers several categories of family-related leave, the most frequent users are mothers taking leave upon the birth of a child. They are therefore the most studied group. Research has consistently shown that the increased leave-taking among mothers due to the California program has resulted in many benefits.

It has increased mothers’ involvement with their newborns, both while they are on leave and after they return to work.¹ California mothers also reported better child health and maternal mental health when they had access to paid family leave.² Furthermore, mothers who access paid family leave in California breastfeed longer, on average, which is widely correlated to better health outcomes for children.³

Internationally, the experiences of countries such as Norway, which has offered four months of public paid maternity leave since 1977, allow scholars to better assess the long-term impacts such a policy would have on American children. One study found that paid maternity leave in Norway was associated with lower high school dropout rates and a 5 percent increase in children’s wages at age 30, providing a “flying start” to the next generation.⁴

The impact of paid family leave programs on maternal employment is less straightforward, but the research suggests some positive effects. Maya Rossin-Slater summarized the literature in a 2017 paper and concluded that short-term leaves, like those provided in states across the US, increased job continuity for new mothers. In a 2013 study, Rossin-Slater and others found that California’s paid family leave program increased the weekly work hours of mothers with young children. Charles L. Baum II and Christopher J. Ruhm in 2016 found that the California program increased the probability a new mother had employment in the year after childbirth.⁵

Another study found that California parents who took paid family leave were more likely to be working in the year following their child’s birth and showed less reliance on public assistance.⁶ In fact, women who took paid parental leave were nearly 40 percent less likely to go on public assistance in the first year after having a baby. Yet another recent study found that accessing paid leave decreased employment and earnings for new California mothers six to 10 years after childbirth, suggesting that certain features of paid family leave policies, such as whether job protection is included, can have different effects on employment for new mothers.⁷

The case for paid leave has also advanced among political and business leaders in recent years. Efforts to reform paid leave enjoy broad bipartisan support among voters, with one recent poll finding that 94 percent of Democrats and 74 percent of Republicans support a national paid leave policy.⁸ Accordingly, policymakers on both sides of the aisle have introduced proposals. These include bipartisan legislation such as Sens. Bill Cassidy (R-LA) and Kyrsten Sinema’s (D-AZ) proposal to allow families to pull forward child tax credits to use following a child’s birth, and the AEI-Brookings Working Group on Paid Family Leave proposed public eight-week paid parental leave plan.

Sens. Joni Ernst (R-IA), Mike Lee (R-UT), Marco Rubio (R-FL), and Mitt Romney (R-UT) put forward Republican proposals that would advance Social Security payments to cover up to 12 weeks of paid parental leave. And along with many Democratic cosponsors, Sen. Kirstin Gillibrand (D-NY) has repeatedly introduced the Family and Medical Insurance Leave (FAMILY) Act, which would provide 12 weeks of paid family, parental, and medical leave funded by increasing payroll taxes.

In the past two years alone, federal workers were given 12 weeks of paid parental leave by the National Defense Authorization Act for Fiscal Year 2020, companies extending paid leave benefits to mid- and lower-wage employees began to receive tax credits through a provision in the 2017 tax reform legislation, and emergency paid leave provisions were passed in response to the COVID-19 pandemic. The introduction of public paid family leave programs in states (now in nine plus the District of Columbia) and an uptick in company offerings have also increased coverage.⁹

Even so, gaps remain in workers’ access to paid family leave benefits. In 2019, only 17 percent of civilian workers had access to paid family leave, though more reported using other types of paid time off for family leave.¹⁰ Many workers are able to use sick days, vacation days, and other types of personal leave to provide paid time off for family-related events such as childbirth. Still, only 40 percent of workers reported having access to some type of paid leave for the birth of a child.¹¹

Among low-wage workers, access to both formal and informal paid family leave policies is particularly minimal. Low-wage workers have less access to formal paid family leave policies through their employers, and they are less likely to say they could take any time off from work for family-related reasons.¹²

It is the most vulnerable workers—those who have limited resources and the least access to paid family leave options from their employer—that a public paid leave program should support. It is therefore crucial to explore whether public paid family leave policies might be more costly than beneficial for low-wage workers.

Read the full report.

Angela Rachidi is a Rowe Scholar at the American Enterprise Institute.