The debate over a national paid leave mandate is beginning to take shape in a U.S. Senate committee hearing that took place on Tuesday, May 18, 2021. The main focus of the debate involved concern from Republicans relating to funding while Democrats predicting it would boost the economy and women’s workforce participation.
Congress is set to consider creating that federally-run paid family and medical leave program, as a part of the broader American Families Plan proposal. The paid family and medical leave component would let American workers take up to 12 weeks of paid leave for the birth or adoption of a child, the worker’s or a family member’s serious illness, and other reasons related to military service or domestic violence.
The White House estimates this would cost $225 billion over a decade—a price tag that’s held down by phasing in benefits so that the full 12 weeks only becomes available in the final year of that phase in period (year 10 since the inception of the program) and every year thereafter.
Tuesday’s hearing reaffirmed the challenge that bipartisan support to get a comprehensive paid leave mandate through the Senate will be difficult, as Republican members of the Health, Education, Labor and Pensions committee took turns questioning the wisdom of tax increases to pay for the program and the potential impact on small businesses. If bipartisan support doesn’t come, Democrats would have to try to pass a paid leave program through the Senate’s budget reconciliation rules with just 51 votes, a move that might limit their ability to include provisions such as job protections while workers take leave.
The alternative argument to the federally-run paid family and medical leave program proposal is that Congress should pursue other options for encouraging businesses to provide paid leave and flexibility to their workers, such as tax credits, and allowing employers to give workers the option between overtime pay and accumulating comp time.
Millions Left Workforce
Some believe that ensuring nationwide paid-leave access for all workers would strengthen the economy, in part by helping encourage a return to the workforce for the 2 million women who left it during the pandemic.
In a recent virtual meeting with Labor Secretary Marty Walsh on Monday, business executives and employees from Adobe Systems Inc., Danone SA, JP Morgan Chase & Co., and Levi Strauss & Co. shared their experiences with providing or making use of paid leave policies in their workplaces. This is a continued reflection that some U.S. businesses have shown a growing openness to a national paid leave policy, albeit one that depends on how the program is designed.
“The United States has been behind most of the world in supporting our workers,” Walsh said on the Monday call, noting the issue is personal to him as his family could have benefited from access to paid leave when he was diagnosed with cancer as a child. “Our families and our businesses are paying the cost for this inaction.”
Costs vs. Benefits
Vicki Shabo, a senior fellow on paid leave policy at the New America think tank, stated in Tuesday’s hearing that making paid family and medical leave available nationwide would boost the economy and improve the country’s competitiveness against global peers, who already provide some form of national paid leave.
A uniform national standard also would benefit large, multi-state employers that must navigate compliance with varying state laws, said Marianne McManus, a vice president of health and benefits at IBM who spoke on behalf of the American Benefits Council. This would make sense as there are currently nine states plus the District of Columbia who have enacted their own paid family and medical leave programs covering most private-sector workers, each with different standards, eligibility requirements, etc.
On the other hand, small, single-state businesses might suffer if they have to offer this new benefit to their employees where they haven’t had to previously while also enduring the responsibility on funding this new program, which is also unclear at this point.
Additionally, small businesses tend to offer flexible, ad-hoc time off arrangements for their employees but can’t afford or handle the administrative burdens of the same kind of paid leave policies that companies such as IBM offer, said Beth Milito, senior executive counsel for the National Federation of Independent Business.
The funding for this program is a huge question. Where will the money come from? Will there be a new payroll tax introduced and imposed on employers and/or employees to cover this new benefit? These questions have not yet been addressed publicly which leaves both sides of this issue hesitant to fully support or oppose the proposal.
Some Republican senators spoke against creating a new payroll tax—as the nine current state programs are funded. Given the uncertain future of the financially troubled Social Security and Medicare trust funds, which could require considering future payroll tax increases, adding yet another payroll tax to fund a federally-run paid family and medical leave program would be almost impossible to pass.
The FAMILY Act, a national paid leave proposal by Rep. Rosa DeLauro (D-Conn.) and Sen. Kirsten Gillibrand (D-N.Y.), calls for funding the program with a payroll tax of 0.4%, although an estimate from the Social Security Office of the Chief Actuary last year found the tax would need to be 0.62% to sustainably pay for the program.
As always, we will continue to monitor this situation and provide updates as they become available. If there are any questions please do not hesitate to contact us or visit our website for the latest news and updates.