Highlights
Republican lawmakers are taking a “giant leap forward” when it comes to paid family leave. After decades of inaction and caution, several Republican proposals to fund paid family leave are now making their way through Congress.
Senator Deb Fischer’s (R-Neb.) bill, which incentives employers to provide up to 12 weeks of paid leave through a tax credit, particularly to low wage workers, made it into law as part of the December 2017 Tax Cuts and Jobs Act. Senator Marco Rubio, along with Senator Mitt Romney (R-Utah), just introduced the “New Parents Act,” which would allow new parents to pull forward their Social Security benefits to finance paid leave. This is also the framework for Senators Mike Lee (R-Utah) and Joni Ernst’s (R-Iowa) “Cradle Act,” which would allow parents to claim between one to three months of social security benefits early while delaying benefit receipt later in life by two to six months.
Even as I write this article, other bills are being drafted. A Republican counterpoint to the Democrat’s “ FAMILY Act” appears to be taking shape (the “Family and Medical Insurance Leave Act” would allow 12 weeks of paid leave for workers to use for medical and caregiving needs, including for new parents). This is a tremendous moment because compromises are often made when differing proposals compete for consideration. How can policymakers make the most of this opportunity?
Let’s first talk about the Republican framework that is the backbone of both the “Cradle Act” and the “New Parents Act.” The idea that people can use their Social Security retirement benefits early to finance their time off has several advantages.
- First, Social Security is the best administrative agency to handle this new program. This agency already collects the precise data needed in order to figure out details like employment history of the worker, wage replacement rates, and duration of benefits, since this type of lifetime information is used to determine disability benefits or retirement benefits. This is also the agency that would house the “FAMILY Act.”
- Second, the benefit formula guarantees a progressive wage replacement rate, which means that lower-wage workers would see higher-wage replacement rates than higher-wage workers. It is clear from looking at the data that low-wage workers are the least likely to have access to paid leave policies and would benefit the most from higher-wage replacement rates, which makes this policy design crucial.
- Third, the policy is gender neutral and would allow both mothers and fathers to take leave for the same duration. In addition, it is a voluntary program, meaning people can choose whether they want to take advantage of it or not, but they are not required to, as would be the case under a payroll tax.
- Fourth, it is designed to be revenue neutral, which means that people would pay back into the system exactly what they took from it.
- And fifth, and, perhaps most critical for conservatives, is that it imposes no new taxes on either businesses or employees.
However, there are also some obvious drawbacks to this approach. The proposals tack on a new program to Social Security, which, irrespective of adding a paid leave program, is expected to run out of funds by 2034. This adds significant uncertainty about whether the program will be sustainable in the long-run to help future generations of new parents. If funds are expected to run out, will benefits have to be scaled back at some point?
Another concern is whether people who do pull forward their social security benefits will face more economic insecurity when they reach retirement. Will they be able to afford delaying receipt of benefits to compensate for pulling forward benefits earlier in life? It appears that the people most likely to use the program will be the most vulnerable workers, who are also likely to be the least financially able to delay receipt of retirement benefits.
Republican and Democrat proposals for paid leave seem to be at opposite ends of the spectrum. But they actually have a lot in common. Most important is the recognition that paid leave is a matter of critical importance for working families.
Moreover, the proposals do nothing to expand who gets job protection during the period of paid leave. Currently, about 40% of workers do not qualify for job protection under the Family and Medical Leave Act either because they work in small businesses with fewer than 50 employees, they do not have the requisite hours with the employer, or they don’t meet some other eligibility criteria. Without some kind of job protection, workers who have access to paid leave may still not take advantage of it since they may worry about losing their job if they do. Therefore, access to paid leave for low-wage workers may still continue to be an issue under these proposals.
Finally, while concerns have been raised that allowing Social Security to be used for paid parental leave makes it more likely that the program will expand to other uses, others feel that the program does not go far enough to provide strong support for broader purposes like paid medical and family care leave.
On the face of it, the Republican and Democrat proposals for paid leave seem to be at opposite ends of the spectrum. But they actually have a lot in common, especially when it comes to the principles underlying the policies. Most important is the recognition that paid leave is a matter of critical importance for working families.
As we highlight in the AEI-Brookings Working Group Report on paid leave, allowing access to paid time off is not just important for families, it is also valuable for the economy. If we want to boost labor force participation rates, particularly among women, moving forward on this front is critical. Furthermore, gender neutrality is key: both mothers and fathers should be allowed equal amounts of paid time off. Also, the duration of leave and the level of benefits should be adequate so that workers feel comfortable taking time off but also maintain their attachment to the workforce. And finally, in terms of administration, Social Security is the agency best equipped to handle this type of program.
The biggest differences between the Republican and Democrat proposals involve the scope of the policy and the funding mechanism. While the “FAMILY Act” covers all three reasons for leave, Republican proposals, such as the “Cradle Act,” only apply to parental leave. Also, while the “FAMILY Act” applies a new payroll tax on employees and businesses to fund the leave, the “Cradle Act” relies on existing funds in the Social Security program and some general revenues.
These differences are not insurmountable and can be resolved through compromise if both sides are willing to come to the table. But getting started is key. For instance, why not begin with parental leave, but leave the door open for a future compromise on paid medical and family care? As is becoming increasingly clear, we need more research on these two aspects of the policy to gain a good understanding of what a federal policy should look like. And both sides already agree that Social Security will need repair, irrespective of whether or not a parental leave program is tacked onto it or not.
Compromise is hard. It means accepting a plan that is less than ideal from one party’s perspective, as we discovered within the AEI-Brookings Working Group. Both sides need to ask themselves whether waiting for their perfect plan is better than moving forward with a compromise. Let’s hope the answer is no. It’s time to take that “small step” forward.
Aparna Mathur (@aparnamath) is a Resident Scholar in Economic Policy Studies at the American Enterprise Institute.
