With the debate over federal paid family leave in the US continuing, will employees step in to fulfil this need?
Paid family leave has been one of many contested political topics in the U.S. for decades and it appears the issue will continue to be debated, despite the momentum we have been seeing, as we enter month 20 of pandemic life. If Covid taught us anything, it’s that families need support. It’s unfortunate that the U.S. remains the only developed country without a federally mandated paid leave policy, but if there is a silver lining anywhere it’s that companies are siding with their employees to support childcare, elder care, parental and medical leave.
A recent survey conducted by Mercer found that employers are offering paid leave approximately 40% more today than they were in 20181, suggesting a modern approach to benefits packages is gaining traction. Furthermore, paid leave now includes paternal, adoption and elder or family care as well, with unlimited PTO becoming more popular. With rising health, humanitarian and climate crises affecting larger populations, employers who can support their workers through difficult times are making it a priority to do so.
There remains much room for improvement. Most employer PTO benefits are tied to state and local laws, which means that benefits often don’t include full pay unless an employee has remained with a company for a certain number of years. In addition, taxes may be collected on the paid benefit(s) or pay is provided only for the minimum timeframe as mandated by the state or local authority. This could lead to wildly different benefits from varying companies in the same state. One company may provide unlimited paid time off for eligible parental or medical leave; the other may choose to offer only the minimum few weeks mandated and allow additional time to be taken as unpaid. The larger the company (500 or more employees) the more likely it is for these benefits to be offered, but for the most part employers are having to compromise that time off to meet their bottom line.
This brings me to the million-dollar question: what is the real cost of paid leave? Research indicates that paid leave “increases labor market attachment, economic security, and the health and welfare of families and children, and has the potential to help businesses thrive, reduce spending on public benefits programs, and promote economic growth and competitiveness.”2 While the financial cost for employers is not small (e.g, compliance regulations, taxes, temporary hires), providing paid family leave ultimately leads to employee retention, increased productivity and fiscal expansion, among other benefits. Perhaps, the question should instead be, what is the cost of not offering paid leave?
Today, 75% of U.S. voters are in favor of paid family and medical leave3 and over half of employers surveyed by Mercer support a voluntary federal minimum standard for paid leave. This addresses the social aspect of the issue, however, economically speaking the U.S. could stand to gain $28.5 billion annually in economic growth3. Another way to look at it is the U.S. is currently potentially losing $28.5 billion annually by not instituting a federal paid leave program. When you think about it this way, that’s a good chunk of change that could be invested in working families and by extension back into the market.
Companies offering paid leave programs have started to try and bridge this gap, but it isn’t enough. Employers who were surveyed by The Society for Human Resource Management (SHRM) only offered paid leave between 35% and 55% of the time. They didn’t offer paid leave 100% of the time to all employees because of the cost factor4. As of March 2020, only 31% of Americans working in the private sector have access to some form of paid leave through their employer5; women of color and low-wage workers are the least likely to benefit. Paid leave in the private sector doesn’t typically cover 100% of employee income, fewer employees have access to these benefits and of those a disproportionate number are white and working for larger companies. This leaves people of color and those straddling the poverty line in a much more vulnerable position.
The effects of not being guaranteed an income and job security during times of crises are far-reaching and potentially devastating. Poverty lines lower, pay gaps widen – again, particularly for women and people of color – and economic opportunities become increasingly difficult to access. The implications are inter-generational and costly. We are seeing improvements among employers in addressing these types of needs but without support on a federal level families will have to continue worrying about choosing between their jobs and their families and health.
In the meantime, hug your caregivers today.
- Mercer, 2021 Survey on Absence and Disability Management, July 2021 https://www.mercer.us/content/dam/mercer/attachments/north-america/us/us-2021-absence-and-disability-infographic.pdf.
- Gault, Barbara; Hartmann Heidi; Hegewisch, Ariane; Milli, Jessica; Reichin, Lindsey. Institute for Women’s Policy Research. Paid Parental Leave in the United States, March 2014 https://iwpr.org/wp-content/uploads/sites/3/2020/09/B33R-Paid-Parental-Leave-in-the-United-States.pdf
- Corbett, Holly. Forbes, Why Cutting Paid Leave from Build Back Better Could Cost The U.S. $28.5 Billion, October 2021 https://www.forbes.com/sites/hollycorbett/2021/10/29/why-cutting-paid-leave-from-build-back-better-could-cost-the-us-285-billion/?sh=5da4afaa27a5
- Society for Human Resource Management, Paid Leave in America: An Economic Overview, August 2020 https://advocacy.shrm.org/wp-content/uploads/sites/3/2020/09/SHRM_Paid_Leave_US_Report_Final.pdf
- O’Niell Hayes, Tara. American Action Forum, “Estimated Cost of President Biden’s COVID-19 Paid Leave Proposal”, January 2021 https://www.americanactionforum.org/insight/estimated-cost-of-president-bidens-covid-19-paid-leave-proposal/