The hard economics of paid family leave in Colorado

Let’s take the emotion out of the question of maternity leave for a moment — writes the political columnist who is seven months pregnant and once cried at the mere thought of having to put her first-born in day care — and focus instead on the economics.

Lawmakers in Colorado are considering the FAMLI Act, which would create a $568 million to $1.6 billion income tax to fund paid family leave benefits for working Coloradans who are dealing with a long-term illness or caring for a sick family member, a newborn or newly adopted child.

The bill has been considered before and is modeled after a 0.9 percent income tax in California, in place since 2004, that offers several weeks of partially paid leave to employees.

Both programs are intended to operate like short-term disability insurance policies. In Colorado, to avoid required voter approval for tax increases, the mandatory employee payroll deduction would disingenuously be called a “premium.” I’m not buying that — voters should have the say on what is obviously a huge tax increase — but that doesn’t mean the FAMLI Act is bad public policy.

House Bill 1001 is likely to fail in the state Senate, where Republicans killed a similar measure in 2017, but with President Donald Trump pledging to make paid family leave a top priority of his administration in 2018, this is a good opportunity to take a hard look at the finances of one solution to the problem: mandating employee buyin to a government-run shortterm disability plan.

According to the U.S. Census Bureau, in 2016 the median salary in Colorado was just over $62,000. For someone who makes that much — not rich but also not impoverished — the cost of the FAMLI Act would be $620 a year (assuming the highest tax rate allowable). That would get them an insurance policy that would provide 66 percent of their salary for up to 12 weeks for an event that qualifies under the federal Family Medical Leave Act.

That benefit would be around $9,443 pre-tax.

By putting $620 a month into a savings account, it’d take just over 15 years to save that amount. Little use if the need arises at year two of employment and the employee doesn’t have savings to cover a period of lost wages.

Such an insurance policy would be a good bet, especially if the person uses the maximum benefit more than once over the course of a career. The average American is still having two children and no one is immune from the risk of cancer or tragic accident.

But the economics of the FAMLI Act look worse the higher up the economic chain you go. The bill caps the benefits at $1,000 a week, or $12,000 from a single claim. No one in their right mind would pay $2,000 a year for their entire career on an insurance policy that would pay out $12,000 per rare incident, especially to someone making $200,000 a year, likely with savings to cover any temporary lost wages.

Like all taxes in America, the rich would be subsidizing the poor. That’s part of the safetynet contract.

But that’s missing the point. The fact is, we don’t need paid family leave for those who make enough money to save for time off when a child is diagnosed with cancer. The top earners in America already have access to employer-sponsored short-term disability plans that can cover at least a portion of their salary during such catastrophe, if not even richer benefits. Even as a journalist, I will be able to cobble together 11.6 weeks of paid leave by using an employer-purchased short-term disability plan and all of my accrued sick and vacation leave, and I had a similar experience when I took 12 weeks’ leave for my first child.

No, we need paid family leave to support the single mom who is working two part-time jobs in the service industry. Neither of those jobs are likely to offer paid leave, and if they do offer sick leave or vacation time, it’s unlikely to be enough to make a meaningful dent in three months of emergency leave. Employers at this income level will likely never offer their employees the kind of paid leave or disability insurance necessary to cover leave — the responsibility unfortunately falls to everyone else.