5 Things You Need to Know About the Paid Family Leave Program in Progressive’s $3.5 Trillion Package

COMMENTARY Budget and Spending

5 Things You Need to Know About the Paid Family Leave Program in Progressive’s $3.5 Trillion Package

Sep 27th, 2021 6 min read
COMMENTARY BY
Rachel Greszler

Research Fellow in Economics, Budget and Entitlements

Rachel researches and analyzes taxes, Social Security, disability insurance, and pensions to promote economic growth.
Now would be a terrible time for a federal takeover of paid family leave. Flavia Morlachetti / Getty Images

Key Takeaways

This proposal would use taxpayer dollars to cover the paid family leave benefits that are already being paid for by private employers.

The program could force what are often flexible and accommodating policies to instead conform to rigid and often more restrictive government’s rules.

The proposed federal paid family leave program would fail to significantly increase access to paid family leave among those lacking it.

We all want to have the ability to take leave from work when major or even minor life circumstances necessitate it. Having access to paid leave is incredibly important because without a paycheck, many workers cannot afford to take the leave they need.

Fortunately, there’s been a huge upswing in access to employer-provided paid family leave over the past few years—including to low-income workers who are the most likely to lack it. But now, a new federal paid family and medical leave program—part of the massive $3.5 trillion spending bill—threatens to halt that growth, impose rigid federal rules on workers’ existing paid family leave programs, and still leave many Americans without access to paid family and medical leave.

Here are five things you need to know about the proposed federal paid family leave program:

1. It May Spend More on People Who Already Have Access To Paid Family Leave Than on Those Who Lack It.

Unlike past proposals that sought to use taxpayer dollars exclusively to provide federal paid family leave benefits, this proposal would use taxpayer dollars to cover the paid family leave benefits that are already being paid for by private employers and 10 states that have their own paid family leave programs. 

Under the proposal, employers that already have paid family leave programs can apply for and receive grants covering up to 90% of the costs of leaves their workers take. States can receive grants covering up to 100% of the costs of their state-based paid family leave programs.

Considering that, by my estimates, private employers alone provide upwards of $125 billion worth of paid family and medical leave every year, $225 billion of taxpayer dollars—spread out over 10 years and aiming to cover both existing and not-yet-existent paid family leave benefits—seems like more than a stretch.

2. Another Unfunded Entitlement.

It should come as no surprise—considering that the proposed federal paid family and medical leave program will be run through the Social Security Administration—that it creates another unfunded entitlement.

President Joe Biden called for $225 billion to provide a new paid family and medical leave program. Yet, the Congressional Budget Office put a $573 billion price tag on a similar plan that didn’t call for sending potentially hundreds-of-billions-of dollars to private employers and state governments.

Just as Social Security was supposed to be self-funding and its payroll taxes were supposed to never supposed to exceed 6% (they’re more than twice that now), a federal paid family leave entitlement will require either rationing of benefits or massive tax hikes.

3. If You Like the Paid Family Leave Program You Have, You Probably Can’t Keep It.

According to the Bureau of Labor Statistics, the percentage of workers with access to paid family and medical leave increased 64% over just the past five years, and many companies that already had policies have made them more flexible and generous in response to the COVID-19 pandemic and the tight labor market.

But the proposed federal program could halt all that voluntary progress in its tracks and force what are often flexible and accommodating policies to instead conform to rigid and often more restrictive government’s rules.

Some of those rules include forcing employers to share their employees’ personal information with federal bureaucrats; allowing federal officials to override employers’ eligibility determinations; and requiring smaller employers to set aside pre-funded accounts, guaranteed by surety bonds, from which employer-provided benefits must be paid.

So much for just emailing your boss about how much time you need for leave and when you will be able to return.

In fact, forget emailing at all. Some employers have already responded to state paid family leave programs by cutting off workers’ access to email and other computer systems while they’re on leave. And it’s common practice for employers the operate in states with paid family leave programs to require workers to first go through the government program.

4. If You Don’t Yet Have Access to Paid Family Leave, You May Still Lack Access.

Low-income workers are less likely to be able to take paid family leave, but often that’s not simply because their employer doesn’t offer it. They may not know leave is available to them, they may not be able to pay their bills with only a partial paycheck, or they may fear losing their jobs if they take leave.

A federal program wouldn’t overcome those barriers, and despite their intent, government programs have consistently failed to benefit low-income workers. In California, for example, the lowest-income mothers are only one-fifth as likely to use the state’s paid family leave program as the highest-income mothers.

The federal proposal calls for a sliding scale of benefits capping out at 85% of wages, but it could still be hard for workers who are used to making $1,000 a week to pay their bills with only $720 per week. And whereas employers might now simply grant workers time off as needed even without a formal paid family leave program, they will likely now require workers to access the taxpayer-provided federal program where workers’ eligibility for benefits would be determined by distant bureaucrats and one-size-fits-all rules and regulations.

Finally, the proposal doesn’t guarantee that workers won’t lose their jobs if they take leave under the federal program, and low-income workers make up a disproportionate share of the 45% of smaller-company workers (fewer than 50 employees) that don’t have job-protected leave.    

5. Fraud and Abuse Could Be Major Problems.

About 16% of the draft legislative text for the paid family leave proposal is devoted to addressing fraud, abuse, and improper payments. That’s not too surprising, considering that abuse is American’s greatest concern with such a program, with about 50% of Americans concerned that “people will find a way to abuse this type of policy.” Already, significant abuse exists where workers are entitled to unpaid leave under the Family and Medical Leave Act, which some workers and employers instead refer to as the Friday Monday Leave Act.

On average, the Family and Medical Leave Act claims increase 31% when workers are assigned weekend shifts, and by 75% when assigned holiday shifts. In some workplaces, up to 45% of workers have “Family and Medical Leave Act certifications” that effectively allow them to take leave at will (the proposed legislation allows workers to take leave and not notify their employer until a full week later).

These abuses exist without workers getting paid for their leave.  Moreover, the legislation allows any individual to make a claim on behalf of another individual. Considering that taxpayers just sent an estimated $357 billion worth of pandemic unemployment insurance benefits to fraudsters, this program could pose serious fraud and personal identity theft concerns.

The proposed federal paid family leave program would fail to significantly increase access to paid family leave among those lacking it while disproportionately using taxpayer dollars to support leave that’s already paid for by private employers and state government programs.

There Is a Better Way to Support Paid Family Leave.

Now would be a terrible time for a federal takeover of paid family leave. The COVID-19 pandemic and the record-high 10.9 million job openings are making employer-provided paid family leave all the more common. Instead of implementing a one-size-fits-all federal program, policymakers should seek to build upon the recent increase in more flexible, generous, and accommodating employer-provided policies.

One way to do that is through the Working Families Flexibility Act, which allows employers to give lower-wage, hourly workers the choice of accumulating “comp time” instead of pay for their overtime hours. Another way to help workers—including the self-employed and gig-workers—is to enact Universal Savings Accounts so that Americans can save in a single, simple, and flexible account that they can tap whenever they want for whatever need arises.

This piece originally appeared in The Daily Signal