The economic case for DC’s family leave policy
Editor’s Note: Want productive workers? Give them paid family leave.
Want lower turnover? Give your workers paid family leave.
Want to keep your community’s economy thriving? You got it — paid family leave.
According to one economist, paid family leave is the answer to all three.
On Tuesday, the District of Columbia passed a new paid family leave policy — one of the most generous in the United States. As we reported last year, the United States and Papua New Guinea are the only two nations in the world to offer no paid maternity leave. And we’re the only industrial nation to not offer paid family leave.
Economics correspondent Paul Solman sat down with Heather Boushey, chief economist at the Washington Center for Equitable Growth, to discuss the new policy and why she thinks it will be a boon for not only workers, but for business and the District as a whole. Read that conversation below and for more, tune in to tonight’s Making Sen$e segment, which airs every Thursday on the PBS NewsHour. The following text has been edited for clarity and length.
— Kristen Doerer, Making Sen$e Editor
PAUL SOLMAN: So what’s happening now with paid family leave in DC?
HEATHER BOUSHEY: Well, here in the District of Columbia, the city council just voted by a wide margin to implement a paid leave program that will provide eight weeks of paid leave for new parents, six weeks to care for a sick loved one and two weeks if you have your own illness to be paid at 90 percent of your salary. We capped it at a fairly reasonable level. It’s very progressive. It means that lower-income workers are going to benefit a lot more than those at the top, and we’re going to make sure that everybody who works here in the District of Columbia has access to the kind of leave that allows them to care for their family and to keep their job.
PAUL SOLMAN: Who pays for it?
HEATHER BOUSHEY: So this is going to be paid for by a small tax on employers, a payroll tax just like the kind of payroll taxes that we all pay on our paycheck each week. It’s just like Social Security taxes. It’s a flat rate on paychecks that employers will pay.
PAUL SOLMAN: So isn’t this something that employers were resisting? I mean, it’s another tax on employers, in addition to the taxes they already had to pay for unemployment insurance, say.
HEATHER BOUSHEY: So what you saw in the District was some resistance from the employer community, but his passed by a very wide margin in DC city council, so there’s a lot of people actually think this is a good idea for the economy. What we know from other places around the country that have done this kind of policy – California, New Jersey, Rhode Island and New York – is that this has been good for business, and it’s taken a burden off of businesses. So even though they have to pay this tax, they don’t actually then have to pay if an employee needs to take leave to care for her child or to care for a sick family member. They can rely on this broader system.
So while there is this fairly small tax, there’s a big benefit to employers. We know that there’s a boost in employee retention, it improves labor supply. So this on net can be quite good for business.
PAUL SOLMAN: So let me understand. If everybody is paying into the system, it’s like insurance. In other words, if a person takes leave at your company, then it’s not just your company that’s subsidizing it.
HEATHER BOUSHEY: Exactly. It’s insurance that says that anybody who works here in the District of Columbia will be able to tap into this program. Employers will, of course, have to deal with the absence of their employee, but employers already have to deal with this.
So regardless of whether or not this program exists, people get sick, people have babies, people need to take time to care for an aging loved one. Employers already have a management problem, and they all have a cost problem, because their employee needs to be out for a few weeks to take care of their new child. They already have to deal with that, and of course, employers do that each and every day. What this insurance program does is sets up a system that actually helps their employee deal with the income fluctuation.
We know that when families have new children, it causes enormous income volatility for families. They see their income drop and that adds to their economic anxiety. We know that employees that have this benefit are more likely to come back to their employer, saving the employer costs on having to replace that person over the long term.
So it takes that burden off the employer and allows them to focus on just getting the job done. They are going to have to figure out what to do while that employee’s out of the office, but they already had that problem. It’s not a new problem for them.
PAUL SOLMAN: From the point of view of an employer, it’s now costing more out of pocket than it would have cost, right? You’ve got a tax to pay that you didn’t have to pay before.
HEATHER BOUSHEY: So from the perspective of the employer, they’re going to have this new small tax to pay, but there will be this new benefit for employees that will also ultimately benefit the employer as well as the local economy.
PAUL SOLMAN: How?
HEATHER BOUSHEY: Some good employers provide people benefits. Many do not. The ones that do not tend to be the low end of the pay scale. This program will give those employers a way to support their employees. The employees will get this benefit, making it more likely that their employee will come back to them — that’s a benefit for the employer over the long term and a benefit for the employee and all the while supporting families in their time of need.
PAUL SOLMAN: I see why this is good for employees, but what’s in it for me as the employer?
HEATHER BOUSHEY: Well, there’s a few things. One, as an employer you already have a management problem when your employee has a new child or needs to care for their ailing family member. You’ve got to replace the person, at least temporarily; it’s a tremendous pain to hire somebody new.
Many good employers have an additional cost right now, because they pay their employee sick time, or they already provide them with some sort of benefit, and many employers can’t afford to do that. For those employers that can’t afford to do this, this is a small tax that will then give that benefit — paid leave — to their employees, and that will make it more likely that their employee comes back to work for them. It’s going to improve job retention, and I need to stress this – that this is going to be good for the overall DC economy. So it’s not just about the challenges facing any one employer – it’s about how this all adds up to what’s good for the economy. If we see less turnover of employees because of this benefit, if we see income stability for families because of this benefit, that’s going to be a net good for our local economy.
PAUL SOLMAN: How? How?
HEATHER BOUSHEY: It’s going to maintain family incomes. You’ve got a new child coming in to the family – that’s when a lot of families see a big income shock. This is going to help smooth that out. They’re going to be able to go out and keep buying diapers and formula and all the things that they need.
PAUL SOLMAN: As opposed to moving out of town.
HEATHER BOUSHEY: Yeah. And it’s going to increase the probability that people see the District of Columbia as a great place to work. It’s going to increase the ability of employers to lure good talent here to the District. And that’s what we’ve seen in other places that have done that. What DC is doing right now – they’re not going out to the wild blue yonder doing something we don’t know anything about. There are other states that have implemented these kinds of programs, and they found that they’ve been good for families, good for businesses and good for those economies.
PAUL SOLMAN: There’s a lot of concern about communities retaining their economic vitality at this point with some people just leaving. So you’re saying for any given community, employers now share the cost of family leave, and of course, the employees benefit and therefore stay or even come into the community, whereas they wouldn’t have without this policy.
HEATHER BOUSHEY: Yeah. You could add something really important, which is that we live in an economy where the vast majority of families have all caregivers in the workforce. You have mom and dad, you have people who are caring for elders. Most people have jobs, and this kind of policy makes it possible for people to actually live their daily lives, provide the care for their kids and their sick loved one when they need to and focus on their day jobs and do that job really well.
So what we know is that it boosts our labor supply, especially among women and people who have care responsibilities, it increases job retention for people, because people are more likely to keep their job when they have the tools to actually make it possible to balance all of these competing challenges in their daily life.
And all of that means that the economy is able to tap into that talent. It means that families have higher incomes all else equal so that they can spend that money in their community.
So this is the kind of policy that actually makes work possible for families, and that is a net good for our local economies.
PAUL SOLMAN: So this is a race to the top, as opposed to a race to the bottom.
HEATHER BOUSHEY: Certainly. And thinking about racing to the top or the bottom, you’ve already asked about the cost, right? Who’s going to pay for this? The reality is that right now, people in the District of Columbia are already paying for this. They’re paying for it through lost incomes, they’re paying for it through maybe losing their job and not being able to maintain it, because they don’t have this added benefit. That’s hurting both families, and it’s hurting employers. So this is a sane and sensible way to say: It’s not unexpected that people are going to have children or sick family members. It happens to all of us at one point or another. We need to plan for it. We need to have good policies that actually support our labor force and support our businesses, so that we can grow our economy.
PAUL SOLMAN: In the current environment, I can imagine a lot of people listening saying: You know, this is just the same old liberal policies of the past that really haven’t changed the direction of the American economy. It’s been going on with some people doing fabulously well at the top while more and more people struggle at the bottom.
HEATHER BOUSHEY: Yes. So I have a few reactions to that. First off, the United States now has lower employment rates for both men and women compared to most of our economic competitors in the developed world. Economists have been looking at why, and one of the reasons is because we don’t have these basket of policies. We don’t have policies that actually allow families to go to work and provide care. That is a net loss to our economy.
PAUL SOLMAN: So every month when the Bureau of Labor Statistics does their survey for the jobs report and asks 60,000 families, “Have you looked for a job?” about 5 million people or more say, “No, I haven’t looked in the last year.” But when asked, “Do you want a job?” they say yes. Are those are the kind of people you’re talking about?
HEATHER BOUSHEY: Exactly. And I’m also talking about people who may think to themselves they can’t even answer yes, because they’re so frustrated with this labor market that doesn’t make it possible for them to fulfill their responsibilities at home and work. And this is both men and women.
Of course, you see it more among people with young children and people that have elderly parents. We have an aging society. People are caring for an elder, and people in their 50s and 60s want to keep their job, but need to have the flexibility to care for their ailing loved one. That is lowering American labor force participation rate in measurable ways, which is harming our national economy.
PAUL SOLMAN: And we are at something like an all time low with regard to labor force participation rate, right?
HEATHER BOUSHEY: Yes, for both men and women. So for men it’s been this long term slow decline and then a drop off in the Great Recession. For women it had been going up, but it plateaued in the late 1990s. Research has shown that a big part of that flattening of labor force participation is because we don’t have policies like paid family medical leave, child care and access to supports for help aids to care for ailing loved ones. These are real economic issues.
PAUL SOLMAN: It could become too generous though, couldn’t it?
HEATHER BOUSHEY: What do you mean by generosity? All of us were born at some point, and at some point, unfortunately, most people get sick or need to care for a loved one who is sick. I mean, that’s just acknowledging the reality of how we have to have labor market policies that allow people to have families, which is why we work in the first place. We have to have policies that allow us to be able to focus on our jobs and be highly productive employees. You need to be able to have policies that allow us to adjudicate between those two.
PAUL SOLMAN: For the last 10 or 20 years there’s been a surprisingly low productivity rate for American workers. Do you think that paid family leave has anything to do with it?
HEATHER BOUSHEY: What is productivity? Productivity is how well you use your work force and combine it with capital and all the things inside of a workplace to produce more efficiently. Well, if you’re inefficiently using the talent at your disposal in the workplace, then that’s going to lower productivity. What we see time and time again is that employers and communities – states, cities, governments – that don’t take seriously the need to make sure that their workforce is able to be highly productive at work are going see lower productivity growth. The basket of policies that give workers the time to get back to work and to focus on their jobs with the right sort of boundaries and support so that they can also care for their families – those are policies that improve productivity within workplaces and of course aggregate out to affecting U.S. productivity overall.