Why Biden and Democrats are dropping paid vacation time from $ 1.75 trillion plan is a smart move

When President Joe Biden’s “Build Back Better” plan emerged from negotiations with Democratic lawmakers on Thursday, one widely promised item was dropped: paid time off to care for a new child or care for a parent. sick. This came as a surprise, as Biden and most Congressional Democrats have campaigned on the issue and, at least in the abstract, the polls show strong support. Indeed, a survey by my own organization, the Cato Institute, found 74 percent of Americans – including 88 percent of Democrats, 71 percent of Independents, and even 60 percent of Republicans – support the idea.

As has been demonstrated in California, it is the wealthier women who have benefited from paid vacation.

Given the political pressure progressives in particular are sure to exert to reinstate the measure before the plan is passed, it is not entirely certain that the measure is dead. That’s why it’s important to understand why paid time off – as appealing as it sounds – might actually do more harm than good.

With Congress more concerned with timing than content, there has been little opportunity to seriously debate the issue. Yet there are real downsides to adopting another massive and expensive national program, especially given rampant inflation and rising national debt, not to mention the potentially pernicious unintended consequences for this particular program.

By virtue of the law in force, workers can take up to 12 weeks of their work following the birth of a child or to face a family emergency without risk of being made redundant. However, they are not automatically paid while on leave. Biden had proposed that the federal government now covers part of the cost of this compensation on a sliding scale, under which low-income workers would receive the most compensation by receiving up to 80% of their salary.

But is this federal spending really the best use of limited resources? The paid leave scheme initially envisaged in the Build Back Better law was estimated cost up to $ 225 billion. Federal programs are already heavily focused on families with children. The Build Back Better law, with subsidies for child care and an extension of the child tax credit, would continue this trend. Such policies can redistribute wealth from adults without children to those with children, from men to women, from male breadwinners to other types of households and, more importantly, from low-income workers to working-class workers. middle or high income.

As has been demonstrated in California, it is the wealthier women who have benefited from paid vacation. The benefit is highly concentrated among high-income women, with the median female participant earning $ 10,000 more than working women in general. University of California, Davis researchers speculated this is because the highest paid women were more likely to be aware of the jobs for which they were eligible for compensation, and more likely to accept less than full pay in exchange for time off. But whatever the reason, this reality of redistribution poses a dilemma for those who support parental leave in the abstract but are also interested in reducing income inequalities and creating a more inclusive economy.

Likewise, for those who wish to encourage women’s participation in the labor market, a family leave mandate raises concerns that employers are less likely to hire women. While the high-profile case of Transport Secretary Pete Buttigieg’s paternity leave shows that both men and women can benefit from parental leave, women remain much more susceptible to take advantage of such options. At a time, employers fear that, even with federal grants, employees being absent from work for long periods is not free.

As a result, some employers may be more reluctant to hire younger women who they believe will be more likely to take time off work. Such discrimination may be illegal, but there are many ways employers can get around the rules. Indeed, after California implemented its six-week parental leave program in 2004, the rate and duration of unemployment increased among women of childbearing age – and to higher levels than older women, Californian men and women in states without such a program.

Parental leave can also reduce women’s wages. As former Treasury Secretary Larry Summers has underline, “If wages could adjust freely, these expected cost differences would be offset by wage differences”. In short, employers care about the total cost of hiring a worker, not how those costs are split between wages and various benefits. Increases in one area will likely lead to reductions elsewhere in order to keep total compensation at the same level.

European studies suggest that the unintended consequences of requiring parental leave may include lower pay, higher unemployment and fewer managerial positions for women overall. Other research even suggests that because women are more likely to take parental leave, leave programs “Are likely to reinforce the traditional division of home care work”, with housekeeping “institutionalized as the norm for many women”. As one study puts it, women who take leave mean they are available for housework “during a critical period of family negotiations,” which “then sends a clear message about who should provide the labor. family ”. Thus, parental leave can perversely reduce gender equality.

The implementation of a federal program also prevents the private sector from intervening on its own. The Cato Institute offers generous parental leave benefits, as do most large companies. According to a Society for Human Resource Management survey, more than half of employers (55%) now offer paid maternity leave, while 45% offer paid paternity leave and 35% offer paid leave for extended family care for reasons such as a spouse or child. sick child, numbers that are steadily increasing.

More and more employers are trying to accommodate their employees in different ways, for example by allowing more use of flexible hours. Others allow the use of disability benefits following childbirth. In the absence of a federal mandate, these companies are able to develop a benefit plan that best meets their needs and those of their employees. Twelve weeks off won’t work for all companies – or all workers – so it’s best for both parties to design options to suit each particular circumstance. Ultimately, this empowers women by giving them more choice and an ability to make decisions for themselves about the types of tradeoffs on the benefits they value most.

Even the a political boost to the democrats what is expected from the expiration of parental leave may be overestimated. The same polls that show such support for parental leave also show that support drops sharply when costs, monetary and otherwise, are included. With all of that in mind, Congress was wise to take a pass this time around. Parental leave – and the likely consequences of its implementation – should be fully publicized so that the drawbacks as well as the benefits are clear before such a significant change is authorized by the federal government.

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