POLICY PAPER: PAID FAMILY AND MEDICAL LEAVE

Inadequate state and federal policies concerning paid family leave may force Marylanders’ to choose between their financial welfare and their family’s well-being when they need to care for a loved one—an untenable choice. The United States is one of the only advanced economies in the world that does not guarantee paid child or family caregiving leave. There are many kinds of family leave, but the most common is paid maternity leave for new mothers. Among the 38 members of the Organization for Economic Co-operation and Development (OECD), a group that includes the European Union, Japan, Australia, and the UK, only the United States has no paid maternity leave at the national level. Among other OECD countries, the average paid maternity leave benefit was 51 weeks in 2018. And more OECD countries are offering similar benefits to fathers. Korea and Japan provide a full year of paid paternity leave to new fathers. On average, OECD countries now provide more than 9 weeks of paid paternity leave. 

Countries, like Switzerland, guarantee a few days of paid leave per year to care for a sick child. Sweden offers workers up to 120 days each year to care for an individual child under 12, in addition to 100 days “per episode to care for a seriously ill family member or other close relatives.” 

Meanwhile, under The Federal Family and Medical Leave Act of 1993 (FMLA), U.S. federal policy only guarantees employees of qualifying businesses unpaid leave, which means that workers who cannot afford to forgo a salary are placed in an untenable position if they must take extended time off. Only 57% of Americans are currently eligible for unpaid leave under FMLA, and those who can access it may not be able to afford to take weeks of unpaid leave from work. Under the Federal Employee Paid Leave Act of 2020, an estimated 2 million federal employees now have access to 12 weeks of paid parental leave, but this is limited to the federal workforce.

It’s up to states to pass paid leave laws to fill the gap. As of 2021, only 11 states have passed some form of paid family leave. Although legislation has been introduced for several years, Maryland has not passed a comprehensive paid family leave law to date.

Compared to other states that enact progressive public policies in certain areas, Maryland has been slow to address the need for paid family leave. As of 2021, California, Massachusetts, New Jersey, New York, Rhode Island, Washington, and the District of Columbia have all implemented paid leave, with Colorado, Connecticut, and Oregon recently passing paid leave policies. Most of these policies give workers an average of seven weeks of leave and between 55% to 70% of wage replacement financed through employee payroll contributions. Additional state-by-state policy details can be found here.

Why We Need Paid Family Leave

According to Popular Information: 

“A 2017 study found “access to paid parental leave enables parents to spend more time with their children at or around the time of childbirth, which can advance childhood health and development.” Paid family leave “is associated with a reduction in low birth weight babies and lower rates of infant and child mortality, controlling for income and other factors that affect children’s health.” The potential benefits extend far into the future. Children from families with access to paid maternity leave had “lower high school dropout rates and higher wages…at age 30.”

There are also broader economic benefits. The National Partnership for Women and Families found “paid leave programs improve the labor force participation of family caregivers, reduce the likelihood that new mothers would fall into poverty and increase household incomes, and mean working people are significantly less likely to use SNAP or other public support programs in the year after a child’s birth.”

The inequitable impacts of current paid leave policies are especially concerning for women because they are more likely to leave their jobs to care for an immediate family member than men. According to the Maryland Women’s Law Center, Maryland women occupy a disproportionate percentage of low-wage jobs, most of which do not offer paid leave. Fifteen percent (15%) of working mothers who cannot access paid leave ultimately enroll in public assistance programs. 

The COVID-19 pandemic exacerbated and highlighted the urgency of this problem for women. Due to the pandemic, almost 3 million women left the American workforce by early 2021. Many left to provide childcare for children in virtual or homeschool, to care for family members who couldn’t access services, and others to care for family sick from COVID-19. One in four women who became unemployed in 2020 attributed their unemployment to a lack of child care. In addition to pandemic related caregiving causing women to leave the workplace, many women, particularly women of color, experienced disproportionate rates of unemployment. Nationally, unemployment rates for women of color were much higher by the end of 2020 than white women, partly because a higher percentage of Black and Hispanic women work in the service, hospitality and leisure industries that faced a precipitous drop in employment during the pandemic. This combination of caregiving and unemployment has made it difficult for many women to re-enter the workforce, amplifying the “motherhood penalty.” A recent study published in JAMA compared COVID related state closures of child care facilities with workforce participation of men and women during the pandemic; this study showed that “after state-level child care closures were lifted in June 2020, employment estimates did not return to pre-pandemic levels, nor were they equal between men and women, by December 2020.” Paid family leave programs could help more women return to the workforce, and are particularly needed in a post-pandemic economic recovery, and in the future to help women and families weather economic downturns. 

According to the Center for American Progress

  • Only 20 percent of private sector workers had access to paid family leave in 2020 to care for a new child or a family member.
  • Only 42 percent of private sector workers had access to short-term disability insurance in 2020 to recover from an illness or injury.
  • Low-wage workers are less likely to have access to different forms of paid leave. For example, just 8 percent of workers in the bottom wage quartile—who on average earn less than $14 an hour—had access to paid family leave in 2020.
  • Black and Hispanic workers are less likely than white, non-Hispanic workers to have access to paid family and medical leave.

The General Assembly has the opportunity to address these inequities by passing comprehensive paid family leave legislation (the Time to Care Act) in the 2022 legislative session.

Policy Framework & Key Legislative History

The Center for American Progress identified key components of paid family and medical leave policies that are comparable to programs instituted by other advanced economies around the world:

  1. Paid leave should be available to all workers, regardless of their gender, whether they work full-time or part-time, and the size or sector of their employer.
  2. The proposal should provide “comprehensive” coverage for established reasons that an employee might take time off of work, including serious illness, to care for a relative, newborn, adopted child, or newly placed foster child, or to address any challenges resulting from a family member’s military deployment.
  3. Paid leave should be affordable for both employees and employers, and provide employees with a “significant portion of a worker’s usual wages” that will allow them to afford day-to-day necessities while they are out on leave.
  4. Paid leave programs should be grounded in an inclusive definition of “family” that includes multi-generational households and same-sex couples.
  5. Proposals should include provisions that prohibit retaliation by employers against employees who choose to take paid leave. 

None of the states that have passed a paid leave law have yet met all of these criteria for an effective public policy.

In 2018, the legislature took the important step of passing paid parental leave for state employees (SB859). State employees who are primary caregivers are eligible to receive 60 days of paid leave to be used following the birth or adoption of a child. Other legislative efforts such as the Maryland Healthy Working Families Act and Maryland Flexible Leave Act provide some family and parental leave, but do not provide paid parental leave. The Maryland Healthy Working Families Act, enacted into law in 2018, guarantees Maryland residents who work for certain large employers (i.e., those who employ at least 15 people) a limited amount of paid leave that they may use in the event of an illness or to care for an immediate family member. The Maryland Parental Leave Act, provides eligible employees with up to six unpaid weeks of parental leave if they have been working in a firm of 15 to 49 employees for at least one year. Unfortunately, many employees may elect not to take advantage of this benefit if they cannot afford to go without pay for over a month. 

2021 – Time to Care Act

Senator Antonio Hayes (D-Baltimore City) and Delegate Kris Valderrama (D-Prince George’s) have introduced the Time to Care Act each session of the Maryland General Assembly since 2019. The most current version of the bill establishes the Family and Medical Leave Insurance (FAMLI) program that would guarantee Maryland workers up to 12 weeks of leave with partial wage replacement that they can take for a qualifying event, including:

  1. care for a newborn child or a child newly placed for adoption, foster care, or kinship care with the individual during the first year after the birth, adoption, or placement;
  2. care for a family member with a serious health condition;
  3. attend to a serious health condition that results in the individual being unable to perform the functions of the individual’s position;
  4. care for a next-of-kin service member; or 
  5. attend to a qualifying exigency arising out of the individual’s family member’s deployment.

Under the proposed bill, employee leave would be financed through a payroll tax equally shared by workers and employers. Employee contributions must be less than or equal to 0.75% of their total salary. Employees who take advantage of the program would receive at least $50 per week of leave, but no more than $1000 per week, and the funds would be distributed through a state-administered insurance pool. The bill requires employers to continue providing employee benefits for the same amount of time that the employee is out on leave, and the employee must be restored to an “equivalent position of employment” when they return to work. 

The Time to Care Act requires employees to take their 12 weeks of FAMLI benefits at the same time as their leave provided through FMLA. Unlike FMLA, the Maryland Healthy Working Families Act, and the Maryland Flexible Leave Act, the Time to Care Act applies to all businesses, regardless of the number of employees. Self-employed Marylanders may also initially participate in the FAMLI program for three years and choose to continue their enrollment thereafter.

Since introduction in the 2019 legislative session, the Time to Care Act has not made it out of committee in either the Maryland House or Senate. 

Responding to Opposition Arguments

Paid Leave Will Harm Business: According to the National Partnership for Women and Families, citing extensive research, paid leave improves worker retention, which saves employers money through reduced turnover costs; increases worker productivity;  improves employee loyalty and morale; and heightens American businesses’ competitiveness in the global economy.

Mandatory Provision Will Impact Smaller Businesses: Rick Weldon, President and CEO of the Frederick County Chamber of Commerce, fears what the mandate could mean for small businesses. Paid leave programs are often financed through some form of a payroll tax. Because employers might hire temporary workers to replace those who take paid leave and must pay those wages on top of the payroll taxes, small businesses are likely to require higher costs to run effectively. Nonetheless, available evidence demonstrates that Maryland businesses already offering paid leave to their employees “report positive or neutral impacts on their bottom line,” and are more likely to see their employees return to their positions, thus lowering costs associated with hiring and training. A 2017 national survey of small business owners and managers found that a majority of respondents support creating a paid family and medical leave insurance program similar to that proposed by the Time to Care Act, in which employees would receive a share of their wages while taking extended time off to care for a family member, newborn child, or recover from an illness themselves. In addition:

  • A study of California’s paid family leave program found that the vast majority of California employers reported a positive or neutral effect on employee productivity (89 percent) as well as profitability and performance (91 percent). Similarly, 87 percent of employers reported no added costs due to the paid family leave program, and 9 percent of employers reported cost savings.
  •  In California, although all employers reported positive outcomes overall, small- and medium-sized businesses (those with fewer than 50 employees and those with 50 to 99 employees) reported more positive outcomes than large businesses (100+ employees).
  • In New Jersey, the majority of small, medium, and large businesses say they have had no difficulty adjusting to the paid family leave law.
  • An analysis of employers in California found no evidence of higher wage costs or increased employee turnover when employees took paid family leave.

The Funding Distribution: Opponents of the bill question where the funding for the insurance program will come from, who will make the contributions, and how/if it will be divided between the employee and the employer. Luckily, there are a range of options for funding, including employee funded, employer/employee funded, and employer funded programs. Most states, such as California, Rhode Island, New Jersey, and New York, are exclusively funded through employee payroll contributions rather than joint employer/employee contributions. The most progressive policy approach includes joint employer and employee funded programs.

Allowing Small Businesses to Opt-in To the Program: One suggestion from the business community is to allow small businesses to opt-in or opt-out of the program. The Maryland Chamber of Commerce claims that many businesses are still in recovery from the 2008 recession and face too many other requirements to comply with the health insurance guidelines instituted through the Affordable Care Act (ACA). While this type of flexibility allows smaller businesses to opt out if they are unable to afford it, their employees would not be able to take paid leave for a qualifying event, leaving workers vulnerable to going without salaries for extended periods. 

Fully fund the Family and Medical Leave Insurance Program through Employees: One-third of the states that offer paid leave do so through employee contributions. This is accomplished through employee payroll taxes, which are deposited into a dedicated fund that is used to pay benefits to eligible workers and finance the program’s operating costs. As modeled through California’s paid leave system, Maryland workers would pay no more than 1.5% maximum contribution rate if a similar system was implemented in the state, but this cap is flexible based on the funding that employees need to adequately cover living expenses during their leave. 

Drawbacks to this model include deducting a larger percentage of employees’ income to fund the program than if contributions were divided between employers and employees, as they would be under the Time to Care Act. While other states have successfully implemented this approach to paid leave, making employees the sole contributors to the fund would disproportionately impact low-income workers in meeting their day-to-day expenses after investing a larger percentage of their paychecks into the fund. 

Alternative Policy Ideas for a Strong State Family Leave Program

Job Protection/Anti-Retaliation Provision: Most employees avoid utilizing their FMLA benefits due to the lack of job security. This extends to state paid leave laws. For example, when California’s paid leave program was enacted in 2004, the take-up rates for eligible mothers only went from 25% to 40%, largely because workers worried about the lack of job protection or that “taking leave would make their employer unhappy or hurt their opportunities for advancement.” Fortunately, three states一Rhode Island, New York, and New Jersey一offer job protection/anti-retaliation provisions within their paid leave programs. They can be used as models for implementing such a provision in Maryland.

Offer a Fixed Weekly Cash Benefit: Systems that offer a fixed weekly cash benefit ensure that the lowest wage workers are covered when they need to take paid leave by offering 100% of wage replacement for low-income workers. The cost of this program would depend on which model Maryland chooses to implement, but would minimize costs for employees and the employer, thus potentially generating more bipartisan support from state legislators. 

One major drawback to this proposal is that middle- and higher- income workers may not receive a sufficient weekly wage replacement to cover their living expenses. The final program would need to increase the weekly wage replacement cap in order to adequately replace wages for middle and higher income workers. It would also need to be grounded in an inclusive definition of what constitutes a “family,” guarantee coverage for both part-time and full-time employees in businesses of varying sizes, and prohibit employer retaliation against employees who elect to take paid leave for a qualifying event.

Create a Statewide Earned Income Leave Benefit: The American Action Forum (AAF) devised the Earned Income Leave Benefit program as a less expensive alternative to the Family Act in 2016. It is structured after the Earned Income Tax Credit and would provide up to $3,500 over 12 weeks to workers who make below $28,000 annually. AAF estimates that the program would give 8.4 million low-income workers access to paid leave and cost between $1.5 billion and $17.9 billion annually. While this proposed benefit program has been designed for implementation at the national level, it could be enacted at the state level as well.

Similar to the EITC, the program structure risks creating a high rate of improper payments. This can be addressed by ensuring that administrators of the program use real time payroll data to “verify worker wages” and using “intermediaries such as tax preparers to verify income and family structures.” Nonetheless, the program fails to satisfy a crucial criterion of effective paid leave policies by instituting an income cap–not all workers will receive paid leave benefits under this proposal. Moreover, unlike the Family Act, the Earned Income Leave Benefit program has not been sponsored by a member of Congress.

Federal Policy Solutions

The FAMILY Act

The Family and Medical Insurance Leave Act (FAMILY Act), sponsored by Sen. Kirsten Gillibrand (D-NY) and Rep. Rosa DeLauro (D-CT), was reintroduced in Congress for the fourth time in 2021. The newest proposed version of the program would provide workers with two-thirds of their monthly wages when they take up to twelve weeks of time off from work for personal medical or family-related reasons, including recovering from a serious illness, caring for a family member, and adoption or childbirth, among other reasons. All workers would be eligible for the program and, like the proposed Time to Care Act, it would be funded through employee and employer payroll contributions. 

Creating a national paid family and leave program would ensure that the benefits of the Time to Care Act are not limited to Marylanders, but expectations for the FAMILY Act’s passage are not high. The bill was introduced in Congress in 2013, 2015, 2017, and 2019, and it has never made it out of committee, in either the Senate or the House.

The American Families Plan

According to journalist Judd Leggum of Popular Information

Paid family leave is part of Biden’s “American Families Plan,” which is currently winding its way through Congress. The Biden proposal would provide paid family leave in a wide range of circumstances, including ” for the birth or adoption of a child, to care for a family member with a medical condition or for a personal serious health condition.” But the length of the leave is relatively modest. Americans would be eligible for 12 weeks of paid family leave. That’s about five fewer weeks than the OECD average of paid maternity leave in 1970. Biden’s proposal would phase the 12-week benefit in over a decade to reduce the cost… 

The paid family leave proposal is being included as part of a reconciliation package, which means it could be approved in the Senate without any Republican support. The U.S. Chamber of Commerce, which represents nearly all major corporations, is doing everything it can to make sure that doesn’t happen… 

No Republican in Congress is expected to support the reconciliation package or its paid family leave benefit. But the package also faces opposition from some Democrats. 

 

 

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