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Monday, February 6, 2017

Building on the Family and Medical Leave Act 24 Years On

Alexandra L. Bradley, National Academy of Social Insurance

Benjamin W. Veghte, National Academy of Social Insurance

On February 5th, the country celebrated the 24th anniversary of a groundbreaking federal protection for the needs of workers and families: the Family and Medical Leave Act (FMLA). The legislation was designed to assist families with the often complicated task of balancing work and family responsibilities. Qualified workers are eligible to use up to 12 weeks of unpaid time away from their jobs each year to provide care for a new child through birth, adoption, or foster care; to care for an immediate family member experiencing an illness or other serious health condition; to address certain circumstances arising from the deployment of a spouse, parent, or child; and/or to care for their own serious medical needs. They are also eligible for up to 26 weeks of unpaid leave to care for wounded service members and veterans in their families. The law provides job protection to workers on FMLA leave, and ensures the continuation of existing employer-sponsored health benefits.

Over the past 24 years, the FMLA has been used more than 100 million times by workers to help manage the dual demands of the work and family. However, in many ways, the law falls short in protecting working Americans and their families. Due to stringent requirements in terms of the duration of an employee’s tenure and hours worked with their current employer, and also in terms of employer size and location relative to their employees, fewer than 60 percent of workers are actually eligible for coverage under the FMLA. Even for those who are covered, though, the financial burden of taking unpaid time away from work for family or medical care needs is simply unrealistic for many. Workers who can afford to take unpaid time off are more likely to be White, highly educated, and wealthier than those who cannot.

In contrast, paid leave is available in some capacity to workers in every other advanced economy. A few states have led the way in the United States by developing their own paid leave programs for workers. For the most part, however, access to paid leave in the U.S. is sparse. As of 2016, 14 percent of civilian employees had access to paid leave through their employer to care for a new child or seriously ill relative. Thirty-eight percent had employer-sponsored temporary disability insurance to care for a serious personal health issue, and 32 percent did not have access to even one paid sick day for their own illness. As with access to unpaid leave, access to any of the aforementioned benefits is even less available to low-wage workers.

Meanwhile, the need for protections to support working caregivers is growing. Demands on caregivers have increased over recent decades, and will continue to do so moving forward. At the same time, American families have been steadily moving away from having a primary stay-at-home caregiver as households have come to increasingly rely on earnings from all adults capable of working. There is no full-time, stay-at-home parent in 72 percent of American families, either because both partners or a single parent are working. In addition, the care needs of the senior population are rising as the Boomer generation ages. With fewer working-age adults to care for these aging seniors, the ratio of caregivers to care recipients is tightening.

With the growing caregiver squeeze and the disparities inherent in our current system of leave provisions for family and medical care, what is the path forward for the nation’s public policies supporting working families?

There are many options that federal and state leaders could pursue. Social insurance is the policy design chosen by the vast majority of countries and three U.S. states that currently provide paid leave (in addition to New York’s program, which will go into effect in 2018). In a social insurance approach, employees and/or their employers contribute a small share of earnings to support a system that protects all workers against the risk of needing to take time off to care for a family member or their own serious medical needs. If the United States were to pursue a national social insurance program to provide paid family and medical leave to the vast majority of working people in the United States – an idea that has gathered increasing attention inside Congress, in the advocacy and research communities, and in the private sector over the last few years – such a program could be administered by the Social Security Administration, which already has the technology, field offices, and skilled staff required to run a national program. Other proposals have included parental leave savings accounts, tax credits for employers, restricting Unemployment Insurance to cover family and medical leave, and compensatory time (“comp time’). Each of these approaches have their own benefits and drawbacks, as well as differing impacts on families from different socio-economic backgrounds, that are important to consider in the development of any policy moving forward. Any policy should be evaluated by the number of workers who would be covered, the reasons for which they could take leave, the adequacy of the benefit in terms of financial reimbursement and duration of leave, and whether the proposal protects against workplace retaliation for using the benefit.

The various policy options listed above – as well as a more extensive discussion of the policy landscape and challenges – are discussed in detail in the Caregiving section of the Academy’s recent Report to the New Leadership and the American People on Social Insurance and Inequality.

What do you see as the most promising policy approaches to support workers in their balancing of work and caregiving responsibilities?

All Comments

The question to be answered is if someone chooses to have children and stops working and expects paid leave while not working, who is paying to person when they are not productive? My wife and I have 3 children, we knew my wife would be unable to work for some period of time and we planned for this event by saving and reducing discretionary spending after the births.
Thank you for your comment, Charles. How such a program would be financed is one of the core questions to discuss and assess in the development of paid leave policy -- or any policy, for that matter. There are many options to consider. The existing state social insurance programs are funded through an employee payroll tax, so workers are essentially self-insuring against the risk of needing time off. Another option is a payroll tax on employers, who also stand to gain from a more universal policy since they no longer need to self-finance a paid leave benefit for their employees, and since higher workforce retention is ultimately better for their bottom line. Alternatively, the tax could be shared between employers and employees, as is the case with Social Security and Medicare. Whatever financing mechanism is chosen, paid family and medical leave policy (like the unpaid FMLA benefits) is not intended to be long-term in nature; rather, such a program is meant to cover temporary absences from the workplace due to a family or personal medical need for an employee who intends to return to work. We greatly appreciate your contribution to the discussion on this developing and important issue.
In your response to Charles, you indicate "... Another option is a payroll tax on employers, who also stand to gain from a more universal policy since they no longer need to self-finance a paid leave benefit for their employees, and since higher workforce retention is ultimately better for their bottom line. ..."

So, you recommend employers finance benefits for employees of other companies? More importantly, please share actuarially-certified studies that show causality - how offering paid leave to all employees in a company improves desired retention - how paid leave retains those who are effective or "top" performers and at the same time, avoids retention of those who are not effective performers. That is, there are many, many other options most employers would prefer to deploy that are dramatically better at achieving retention objectives than a general mandate to fund a new entitlement with new taxes. That is, once sick leave is detached from the specific employer, it is no longer a retention device for that employer, right?

This looks like just another opportunity for legislators and the president to tax today's workers to create another entitlement (that will likely also apply in the future to individuals who are not working, or who stopped working) - all with an eye on buying votes. You suggest expanding Social Security's disability benefits/administration to remove the elimination period (currently six months) and/or to change the definition (expect to remain disabled for at least a year) and/or to extend disability benefits to individuals so they can leave work to care for family members. Don't forget, the OASDI trust fund (Social Security for old age, survivors and disability income) is already running out of money, and particularly, the DI element.

First, focus on reasonable fixes for the underfunded entitlements we already have before you suggest buying votes with new entitlements.
BenefitJacik, thank you for your comment. As a clarification, the Academy is not recommending any particular one of the options listed above. They are all options to consider and, as you suggest, each has its own associated benefits and challenges.

The state programs that are currently being implemented (California, New Jersey, and Rhode Island) are delivered through an employee-sponsored payroll tax. California's program has been in place for the longest period of time, and research on the effects of that program have indicated that the vast majority of employers report either positive or neutral effects of the program on productivity, profitability/performance, turnover, and morale. However, other localities in the process of developing their own paid leave programs have considered and/or favored the option of the employer-sponsored payroll tax (e.g., the District of Columbia).

The Academy has written extensively over the years on the OASDI trust fund's solvency, most recently in its Report to the New Leadership and the American People on Social Insurance and Inequality. The Report includes sections on Social Security, Disability, and also Caregiving, where the topic of Paid Family and Medical Leave is discussed in greater detail. The Report, which was developed with the input of numerous experts in each respective field, as well as citations with supporting research, can be found at the following link: https://www.nasi.org/research/2017/report-new-leadership-american-people...

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