Americans are dismayed by stories about parents who can’t afford to take time off from work when a new baby is born or a family member is hospitalized. We believe money worries shouldn’t compound the challenges of stressful times that have such a profound effect on our personal health and happiness. That’s why Americans overwhelmingly want policymakers to take action to help people who lack paid leave benefits through their jobs.
This is a laudable instinct. Yet those who want to help people without benefits need to make sure that in seeking to solve one problem, they aren’t creating new ones. Unfortunately, that’s what often happens when government intervenes.
A law requiring all businesses to provide paid leave, for example, sounds like a straightforward way to solve this problem. Unfortunately, however, such a mandate would backfire on many workers — particularly women workers — by making them more expensive to employ.
Some businesses can absorb higher employment costs, but many can’t. Businesses facing increased costs have to compensate by raising prices on consumers or cutting other spending. Managers often have to find savings in their workforce and either reduce base pay or consolidate jobs. That means that while some workers would enjoy a new paid leave benefit as a result of a government mandate, others will be big losers from the policy, seeing their take-home pay cut or their jobs disappear entirely.
Ironically (but unsurprisingly), the people everyone most wants to help — those with the lowest pay and fewest benefits who are most vulnerable to significant hardship — are the ones most likely to suffer as a result of a mandate. Americans have witnessed this phenomenon with the minimum wage, as workers with lower education or fewer skills find their jobs eliminated and face high unemployment rates. Other employment mandates and family-friendly programs intended to help women have also been shown to lead to lower pay and less employment options.
This doesn’t mean that there is nothing that policymakers can do to help workers who lack family leave benefits. The Independent Women’s Forum recently released Working for Women report calling for the creation of “Personal Care Accounts” (PCAs), which would allow workers to save pre-tax income, which could then be used when they take time off for situations eligible under the Family and Medical Leave Act.
Employers could also receive a tax benefit for contributing to employees’ accounts.
Unused funds in PCAs could eventually be rolled into retirement accounts, which would also increase financial security for these workers and encourage people to be good stewards of these resources, judiciously using their leave time.
Of course, savings accounts won’t solve this problem for everyone: Workers scraping by day to day are unlikely to find a way to contribute to a PCA. Younger workers who haven’t had time to build up savings in their PCA accounts will also be vulnerable when they need to take leave.
Yet Americans are up to the challenge of helping these people. Private charities could be set up to open and fund PCAs for lower-income workers in need.
Consider that there are 4 million babies born each year in the United States. About two-thirds of the women giving birth are in the labor force. A $5,000 PCA for the poorer half of those mothers would require about $7 billion. That’s a big number, but not so incredible when you consider that charitable giving in the United States exceeded $350 billion in 2014. Family groups and progressive philanthropists could make this a charitable priority.
There is no magical, costless way to ensure that everyone has the time off that they need without harming people’s employment prospects. All proposals have their benefits and their drawbacks. Personal Care Accounts have the potential to help many workers and wouldn’t backfire on low-income workers by pricing them out of the labor market.
And unlike sweeping one-size-fits-all mandates and government programs, they also wouldn’t discourage companies from offering their own benefits or flexible work arrangements that can be win-wins for businesses and women. They are an option worth exploring further so that we can find ways to really help people who need time off from work, but who want jobs too.
