Summary: On 25th Anniversary of the landmark Family and Medical Leave Act (FMLA)—which guarantees job-protected, but not paid, leave—the evidence is clear: paid leave would provide economic benefits for families and the country at an affordable price.
Despite initial fears among skeptics that it would hurt business, protections guaranteed by the Family and Medical Leave Act (FMLA)—passed 25 years ago this week—are now a cornerstone of U.S. employment law and human resource policy, providing peace of mind to millions of workers who have started families, faced serious illness, or cared for a loved one, all without hurting their employer’s bottom line.
To those of us involved in the public dialogue around family leave in the early 1990s, the passage of the FMLA was a win-win-win for workers who no longer had to choose between good health and a good job; for employers who saw reduced turnover costs and healthier, more productive employees; and for taxpayers who had subsidized the lack of a job guarantee for own illness and family care through unemployment insurance and public assistance programs.
FMLA was step one. Almost three decades later, workers are still waiting for step two—paid family and medical leave.
Access to paid leave in the United States varies. The United States is the only high-income country, and one of a few countries in the world, that do not guarantee some pay to women during maternity leave. While most U.S. workers receive some pay while on leave—usually through paid vacation, other “paid time off” hours, or short-term disability insurance, with a small percentage (15 percent) having access to leave for all FMLA-covered reasons—one in three workers who do not receive any pay while absent from work are disproportionately likely to be low-wage workers. These are the workers least able to afford such a leave.
In addition to the economic benefits, studies have shown that access to paid leave improves breastfeeding outcomes, lowers infant mortality rates, and is associated with other health benefits for mothers and children.
As pressure mounts to develop national legislation, policymakers are grappling with how to design a paid leave system and how to pay for it. Costs will vary depending on the length of leave guaranteed and the percentage of wages that will be guaranteed while on leave. But new estimates show that current serious proposals will not break the bank and will have lasting benefits.
Some have proposed a social insurance style system that provides universal coverage, while others propose using tax credits. Social science research shows that the social insurance model provides more bang for the buck.
Analysis suggests that, because a tax credit for paid leave rewards voluntary employer behavior and will mostly go to those employers who are already providing paid leave, it is unlikely to benefit the workers who need it the most, those with fewer skills who earn the lowest wages. A tax credit approach to paid leave is also untested, whereas four states have paid leave insurance systems: California (passed in 2002), New Jersey (2009), Rhode Island (2013), and New York (2016).
While it is too soon to evaluate the impact of New York’s law (which began to pay benefits on January 1, 2018) rigorously, the other three provide rich case studies and data on leave-taking behavior, that inform our economic assumptions about costs of providing paid leave nationally. We now have more reliable estimates of how much a national paid leave program would cost than we have ever had, as well as good estimates of its benefits.
The Institute for Women’s Policy Research (IWPR) has estimated the costs of the FAMILY Act that has been introduced in both sides of the U.S. Congress (H.R. 947 and S. 337) to provide partially paid leave for family and medical leaves to eligible workers for up to 12 weeks in a calendar year. Using our paid leave economic simulation model, developed across 20 years by economists at IWPR and the University of Massachusetts-Boston and Northeastern University, we found that the costs for benefits and administration for a national program based on the proposed federal FAMILY Act would cost $28.3 billion or 0.47 percent of taxable earnings. This equates to about $2.44 per week for a worker with average earnings of $54,000 per year, assuming employers and workers share costs equally.
Our estimates rely on the best available data on who takes leave and for how long, whereas some competing estimates make exaggerated assumptions about the prevalence and lengths of leaves. In addition to costs, we also estimate the benefits, such as reduced employee turnover and greater job stability. Research has shown, for instance, that first-time mothers who utilized paid leave were 26 percent less likely to quit their jobs after the birth of their first child.
Using a social insurance model, paid family and medical leave can be implemented at an affordable cost, spread equitably among all employers and workers, and can provide vital benefits to many workers, especially those in lower wage industries, who are the least likely to be able to take time off from work due to childbirth, illness, or caregiving.
The need for a paid leave system has been clear for at least 25 years and we have decades of evidence to guide us. What exactly are we waiting for?
Heidi Hartmann, Ph.D., is an economist, MacArthur Fellow, and president of the Institute for Women’s Policy Research. Jeffrey Hayes, Ph.D., is a sociologist and program director on job quality and income security at the Institute for Women’s Policy Research.