Leave paid family leave to employers and states
President Trump’s latest budget includes a proposal to give families six weeks of paid leave after the birth or adoption of a child. First daughter Ivanka Trump has since been making the rounds, on the Hill and off, drumming up support.
But there are at least three reasons to reject a federal paid family leave (PFL) program.
First is the crowding-out effect. A federal mandate would curtail or derail some existing and expanding nonfederal programs.
A 2016 Kaiser survey found that 34 percent of American workers work for firms that offer paid parental leave. Many others have access to informal paid leave through vacation and sick days or short-term disability insurance.
Some large firms are competing to see who can provide the most generous leave benefits, while more and more smaller firms are following suit as best they can.
Moreover, a handful of states have enacted paid family leave programs. While not ideal, at least the costs are transparent. The states pay for the benefit by levying a tax on workers, ranging from 0.34 percent in Rhode Island to 1.2 percent in New Jersey.
But states would be crazy to keep their own programs when their residents could get similar benefits for “free” via federal taxpayers. And even if federal leave benefits were less generous, businesses would be tempted to drop their existing PFL programs, shift workers onto the federal program and use the savings to gain an edge up against competitors.
The second problem with any federal paid family leave program — even Mr. Trump’s limited proposal — is that it could easily snowball into a massive new entitlement. That’s what has happened with every other U.S. entitlement program.
Social Security’s Disability Insurance program started out about the same size as the envisioned PFL program. It has since exploded in size, scope and costs (as well as in fraud, abuse and misuse). Today it sends monthly benefit checks to one of every 20 working-age adults.
Already, PFL advocates have blasted the president’s proposal as “amateurish, inadequate, insulting.” “On literally every aspect,” they complain, “it falls short.” If a federal PFL policy becomes law, it will face immediate pressure to expand, and each expansion would drive up taxpayer costs.
The American Action Forum estimated that a federal PFL program providing up to 16 weeks of paid leave (the goal of many PFL advocates) would cost upwards of $300 billion per year.
Finally, a PFL program would entrench conflicted interests into federal law. Whether to work or stay home with their children is a personal choice all parents must make. The federal government should neither subsidize nor penalize those decisions.
But a federal PFL policy would do just that. It would pay working parents to stay at home with their new children, but not stay-at-home parents who do the same thing. That’s like saying that working parents’ time with their children is more valuable than that of stay-at-home parents. That’s simply not true.
Although PFL policies can increase women’s likelihood of returning to work and thus their longterm earnings, there are also benefits of parents staying home with their children, including positive effects on children and stay-at-home-parents’ volunteer work in schools and other charitable roles.
With conflicting economic and social benefits and consequences, the ideal role for the government is to remain neutral, neither subsidizing nor penalizing parents, whether they choose to stay home with their children or to work outside the home.
That doesn’t mean federal policymakers can’t help working families in other ways. They could actually do a lot more to increase families’ economic well-being and access to family leave. They could, for example, enact pro-growth tax reform that increases workers’ take-home pay. They could promote — rather than impede — flexible work arrangements. They could cut costly regulations so that employers can better afford to provide benefits — such as paid family leave — that their workers desire.
Better yet, lawmakers could do all three.