Paid Family Leave—Vital Benefits at an Affordable Cost

One Pagers

Paid family and medical leave programs benefit workers, families, employers, and society—but at what cost?  IWPR and IMPAQ International recently evaluated existing paid leave programs in three states, as well as the Family and Medical Leave Insurance (FAMILY) Act as it has been introduced in both houses of Congress.  Using data from the U.S. Department of Labor and the Census Bureau, the study determined that family leave could be offered nationwide at modest cost.

The United States is one of the very few industrialized countries that does not have a national policy to guarantee pay for workers for maternity leave, time spent caring for a seriously ill family member, or workers’ own illness.  Since 2002, however, three states have implemented paid leave programs.  The IWPR-IMPAQ International analysis assessed costs and benefits in California, New Jersey, and Rhode Island, using a simulation model developed by IWPR with economists Randy Albelda and Alan Clayton-Matthews to estimate the effect of those programs applied nationwide.  The researchers also assessed the effects of the proposed FAMILY Act using the same model.

The report concluded that instituting a national paid leave policy to cover own illness, child birth, and family care would cost less than 1 percent of total annual wages.  Depending on the specific policy adopted, the cost would range from 0.45 to 0.63 percent of nationwide payrolls.  Compared with current law, workers would be likely to increase their annual leave-taking—both paid and unpaid—by between 6 percent and 11.2 percent, depending upon the specifics of the program. This amounts to an average increase of only 1.4 to 2.0 days per year per worker.

Workers would benefit from newly available paid leave at different rates depending on the industry of their employer.  Firms in heavily-unionized industries, such as manufacturing, are more likely to provide their workers with paid time off.  Similarly, the better paid, more highly educated workers in industries like professional services, information, and financial activities tend to have more access to paid leave opportunities.  The result is that a national paid leave program would largely benefit workers who currently have unmet needs in fields including leisure and hospitality, education and health services, and other service industries.

Employer size also affects likely usage of leaves. Under current law, smaller businesses (those with fewer than 50 workers) tend to provide less paid leave than do larger firms.  While larger companies are more likely to provide paid leave, the report concludes that it is workers in larger companies who would use more leave if a nationwide policy were implemented, likely because the current federal Family and Medical Leave Act (FMLA) provides a job guarantee for leave takers only if the employer has 50 or more workers.  It is important to note that under the social insurance models operating in several states, all workers pay the same rate (up to a salary maximum), and, in the proposed federal program, all employers and employees would pay the same rate (up to a salary maximum), amounting to one-half of 0.48 percent of payroll.

Read more in the IWPR and IMPAQ International briefing paper, “Estimating Usage and Costs of Alternative Policies to Provide Paid Family and Medical Leave in the United States.”