United States: Think Tanks Release Compromise Proposal For Paid Parental Leave

Last Updated: June 15 2017
Article by Michael J. Lotito and Ilyse W. Schuman

The American Enterprise Institute (AEI)-Brookings Working Group on Paid Family Leave has issued a new report analyzing the costs and benefits of implementing a national paid leave program, and laying out a compromise proposal for lawmakers to consider. The compromise outlined in the report—Paid Family and Medical Leave: An Issue Whose Time Has Come—suggests providing parents eight weeks of paid parental leave, during which they would be entitled to 70% of their wages up to $600 per week. The proposal includes job protection provisions, and would be funded through payroll taxes and other budget savings. While this proposal has not yet been introduced as standalone legislation, the president's focus on paid leave—both during the campaign and through his budget proposal—indicates policymakers will be looking closely at this issue.

The report referenced several studies showing bipartisan support for some form of paid family leave. One poll cited found that nearly 71% of Republicans and 83% of Democrats favored a paid parental leave policy. The report notes, however, that while all Working Group members agreed on the need for some form of paid leave, none were 100% satisfied with every part of the compromise scheme.

In formulating this compromise, the Working Group examined three existing paid leave proposals: the FAMILY Act introduced by Sen. Kirsten Gillibrand (D-NY) and Rep. Rose DeLauro (D-CT); the proposal announced during President Trump's campaign and included in his proposed budget; and the Strong Families Act sponsored by Sens. Deb Fischer (R-NE), Angus King (I-ME), and Marco Rubio (R-FL).

The FAMILY Act would provide workers with up to 12 weeks of paid leave for the same purposes as those allowed under the federal Family and Medical Leave Act. The program would be financed through joint payroll contributions from the employer and employee. Eligible employees would be entitled to receive up to 66% of their regular wages, up to $1,000 per week.  

The president's proposal would entitle new parents to receive six weeks of paid parental leave. The program would be implemented through states' unemployment insurance (UI) programs in conjunction with the federal government. Funding mechanisms and entitlement amounts remain unclear.

The Strong Families Act would offer employers a nonrefundable, capped tax credit for providing paid family leave. Employers would have to offer at least two weeks of paid family and medical leave, and offer employees at least a 100% wage replacement rate to qualify for the tax credit.

Chapter IV of the Working Group's report discusses the pros and cons of these programs in greater detail. The other chapters of the report present data on the changing demographics of working families and the types of family leave available to them, discuss existing state and federal leave laws, and examine the key principles and parameters in designing a paid family leave policy.

Notably, as employers that operate in multiple jurisdictions are well aware, some states and localities have enacted their own employee leave laws, creating a patchwork of employer obligations. Chapter II of the report discusses these regional leave entitlements, including paid medical and parental leave. For example, the report explains that five states—California, Hawaii, New Jersey, New York, and Rhode Island—have temporary disability insurance (TDI) programs, which allow women to use this benefit shortly before and after childbirth. Meanwhile, California, Rhode Island, New Jersey, New York, Washington and the District of Columbia have passed paid family and medical leave laws, although those in Washington, New York, and the District of Columbia have not yet been implemented. In addition, many cities have passed their own paid leave acts.

The Working Group developed eight principles to guide the discussion in crafting a paid leave program. These include: preventing family hardship when a child is born or adopted, maintaining long-term attachment to the labor force, supporting children's healthy development, encouraging gender equity, minimizing costs to employers, ensuring access for the less advantaged, incorporating a shared contribution on the part of workers, and fully funding any new benefit.

Whether Congress adopts the Working Group's suggested proposal, or considers these guiding principles in developing an alternative, is anyone's guess. What is more certain is that this issue is gaining traction, so employers should anticipate continued focus on paid leave at the federal level. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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