Column: Paid family leave is a great idea, but not if we hit up Social Security for the money
The downside of “American exceptionalism,” that beloved mantra of “freedom-loving” conservatives and libertarians, is that it tends to leave Americans on the lower end of the income scale bearing the burden of exceptions.
Case in point: paid family leave. The United States is exceptional in being the only industrialized nation—indeed one of only three nations on the planet—without a federal paid family leave covering the first weeks of parenthood. (The other two exceptionals are Papua New Guinea and Oman.)
Paid parental leave as a concept is favored by the public and bipartisan blocs in both houses of Congress. The obstacle has been finding a way to pay for it. Two conservative writers recently stepped forward with a novel idea: Take the money out of Social Security. We’ll term the idea interesting, which is not the same as saying it’s good.
Parental leave is associated with lower infant mortality, increased well-baby care...and high school graduation rates and life earnings for the child.
Kristen Shapiro, Independent Womens Forum
The plan was set forth by Washington attorney Kristin Shapiro and Andrew Biggs in the Wall Street Journal. (Shapiro published a more detailed version on the website of the libertarian Independent Womens Forum; Biggs is a fellow at the conservative American Enterprise Institute and a former deputy commissioner of Social Security.) Their primary concern is to make paid family leave “budget neutral” — and fiscally neutral for Social Security itself.
There lie the problems. The proposal leaves unexplained why a federal paid family leave program has to be offset by any budgetary givebacks, via Social Security or otherwise. Is it really plausible that the United States, almost unique in the world, can’t afford to fund a benefit that is so plainly beneficial to the community at large?
First, here’s some background. The benefits of paid family leave are well-understood. Shapiro listed the most important in her white paper: “Parental leave is associated with lower infant mortality,” she reported, along with “increased well-baby care, childhood vaccination rates, likelihood and duration of breastfeeding, and high school graduation rates and life earnings for the child.”
Yet paid family leave is a relative rarity in the U.S., available only to an estimated 13% of workers, according to the Bureau of Labor Statistics. Managerial and supervisory workers have the highest percentage of access at 24%, service employees (7%) and factory workers (6%) the lowest.
The federal government’s sole initiative is the Family and Medical Leave Act of 1993, which requires employers with 50 or more workers to grant full-timers up to 12 weeks of unpaid leave every year, with a reemployment guarantee. Obviously, that leaves out everyone but employees of bigger companies who can afford to lose a paycheck for three months; only about half of all U.S. workers are eligible at all.
Employers in highly competitive fields (think Silicon Valley and Wall Street) tend to be more generous. And five states — California, New York, New Jersey, Rhode Island and Washington — and the District of Columbia provide limited disability benefits at a fraction of full-time pay. California, for example, provides up to 70% of average weekly pay for a maximum of six weeks and a maximum weekly payout of $1,216. The money comes from the state disability program, which is funded by a capped tax of 1% up to a wage limit, which is $115,000 this year.
The only other congressional initiative is the Family And Medical Insurance Leave (FAMILY) Act co-sponsored by Sen. Kirsten Gillibrand (D-N.Y.) and Rep. Rosa DiLauro (D-Conn.), which has been introduced for the third time since 2013. The bill would provide up to 66% of earnings for up to six weeks, funded by a shared employer and employee payroll tax of 0.4%.
That brings us back to Social Security. Shapiro and Biggs propose offering mothers and fathers the equivalent of Social Security disability for up to 12 weeks of leave. The payout would have the virtue of being progressive—that is, lower-income workers would receive a proportionately higher stipend.
But unlike traditional Social Security disability coverage, the recipients would be required to pay the money back by delaying their Social Security retirement benefits. The authors estimate that 12 weeks of family leave payments taken by workers in their 20s would require only six weeks of retirement benefit deferral, since retirement benefits claimed in one’s 60s are certain to be much larger.
Social Security advocates point out several downsides to this plan. It would translate into an increase in the retirement age, which is inherently unfair to lower-income and African American workers. It will burden women more than men because they’re likelier to take parental leave and likelier to spend longer periods caring for their newborns at home. And it will place a new administrative load on the Social Security Administration, which is already struggling to work through budget cuts to deal with the responsibilities it has now. Shapiro and Biggs assert that the agency can manage the new task without further administrative resources, but that’s doubtful.
Another downside involves thinking of Social Security as an all-purpose piggy-bank for social programs. This dates back to the Obama Administration (at least), when it used a temporary payroll tax cut to fund a low-income financial benefit. Social Security was made whole by the Treasury, and the maneuver was made necessary by Congressional Republicans’ refusal to reauthorize an existing low-income work credit, but it was a perilous undertaking that could have resulted in a permanent raid on Social Security resources. Already there’s an idea lurking around Washington to allow people to apply Social Security benefits to their student debt, which only raised the question: How much will be left when they’re ready to retire?
The real question is why Social Security should be dragged into the parental leave issue at all. Biggs told me by email that relieving employers of the duty to provide the benefit out of their own pockets removes the incentive on employers to pay women less or hire fewer women. Using the existing Social Security disability formula, he added, means “we don’t have a big debate over how much to pay.” He calculates that his system would “pay about as much on average as other countries, but it would be progressive and help low-earners more.”
The idea appeals to Biggs in part because Social Security is within his area of expertise. “It’s not as if it’s a slam dunk that no other idea could be better,” he said, “but it seemed to have some advantages that are worth looking at.”
That’s fair enough as far as it goes, but it sidesteps the question of why the U.S. can’t provide workers with paid family leave out of its existing resources. Shapiro estimates that the program would provide about $7 billion a year in benefits if 2 million parents, or about 25% of all new parents, claimed them; she calls that sum “a drop in the bucket.”
She’s right. It’s not as though the U.S. doesn’t have access to the money, since the government plainly has enough to gift corporations and the wealthy with some $1.5 trillion in tax cuts over the next 10 years. Among major corporations, Apple alone will receive a tax benefit of nearly $50 billion by repatriating its foreign cash at the amnesty tax rate provided under the tax cut bill signed by President Trump in December.
That’s enough to fund about seven years of national paid parental leave, based on Shapiro’s estimate. And that’s just one company. So, yes, the cost of parental leave is a “drop in the bucket,” but the benefits are immeasurable. The United States should provide paid leave, but leave Social Security out of it.