In his first address to Congress, President Trump mentioned, among myriad other issues, paid family leave. He said, “My administration wants to work with members in both parties to … help ensure new parents have paid family leave.” He also said later in his speech, “The time for small thinking is over.”
He’s right. It’s time to think big and outside of the box to maximize benefit options for working parents.
For too long, the discussion about paid family leave policy has focused on mandates on employers or new government programs to guarantee new parents some paid time off from work. But those ideas represent small thinking on the paid leave issue.
When the government mandates paid time off, workers might see this as a new benefit. But there’s more to it than that. Even former President Barack Obama understood that mandates aren’t a magic wand. He said in 2008 (ironically, arguing against a health insurance mandate he later signed into law), “If a mandate was the solution, we can try that to solve homelessness by mandating everybody to buy a house.”
Employers have limited resources to dedicate to labor costs. Paid time off is a labor cost, because while workers are out with a new baby (or for any other reason), productivity slows or employers must find and pay temporary replacement workers.
This policy, popular in some other countries, can backfire on working parents — particularly mothers, the very people it intended to help. In countries with more generous paid-leave mandates, women face greater pay disparities, and fewer women climb the professional ladder to advanced positions.
Why? Employers want to hire workers who will be maximally productive. Women are much more likely than men to take time off for family reasons, and because employers know this, they may hire or promote fewer women when providing paid leave is mandatory. In fact, there’s some evidence that the Family Medical Leave Act, a 1993 law that requires large employers to offer 12 weeks of unpaid leave for family or medical reasons, has already led to some adverse selection against women in the work force. This effect would only increase with a paid leave mandate.
To avoid putting this burden on employers, some Democrats have suggested creating a new entitlement program within the Social Security Administration, funded by a new payroll tax, to pay workers two-thirds of their salary for 12 weeks of parental leave. This government-centric approach is also small thinking, as it would have many of the same downsides as mandated leave and other government entitlements.
If government sets a paid leave policy, through a mandate or entitlement, there’s risk that this policy will replace the options currently available to many workers. Even absent a government mandate, many employers offer paid parental leave today (some at full, not just partial, pay) along with work-from-home or other flexible options. Would these employers continue these offerings if a new government program became the norm?
Also, as is the case with other government entitlements like Medicare and Social Security, there would be an inherent unfairness to a paid-leave entitlement program. There are those workers who might pay into a paid-leave entitlement program and never have the opportunity to have a baby or take a family-related leave. We also have to ask, given the track record of other entitlements, whether a new paid-leave program would also face underfunding and long-term financial insolvency.
Instead of these small, old, government-centric ideas, it’s time to think big about how to maximize parental leave options. There is some good news: Many U.S. employers, recognizing the value of working parents and the demand for leave benefits, are offering more and more generous paid leave even in the absence of a mandate.
But we can do more. First, we can pass a pro-growth economic agenda that restores maximum resources to the private sector. A robust, competitive labor market is workers’ best friend when it comes to negotiating for the benefits that we demand.
Second, we can specifically address the issue of parental leave by allowing parents to save tax-free for an upcoming period of leave. At the Independent Women’s Forum, we’ve starting to advocate Personal Care Accounts. Workers, employers, or third parties (such as charities) could contribute and save tax-free, and then workers could use the money for situations eligible under FMLA. Unused funds could simply be rolled into retirement accounts. This would be a much fairer and more flexible way to help workers navigate and afford a period of time off.
Let’s hope that Trump really will think big about how to open more doors for working parents. The time for small thinking on this issue is over.
Hadley Heath Manning (@HadleyHeath) is a contributor to the Washington Examiner’s Beltway Confidential blog. She is a senior policy analyst and director of health policy at the Independent Women’s Forum, and a Tony Blankley Fellow at the Steamboat Institute.
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