The White House has reintroduced a paid parental leave proposal in the 2019 budget. President Trump proposed six weeks of paid parental leave run through state unemployment insurance systems. This is the same plan the White House proposed last year and is similar to the one floated during the 2016 campaign. But the plan has struggled to gain traction on the right, given its lack of a clear funding source and the potential for higher state payroll taxes to pay for it.
A new proposal by Kristin Shapiro of the Independent Women’s Forum and Andrew Biggs of the American Enterprise Institute may help break the logjam. Their plan would allow working families to claim Social Security benefits early in life, when they become parents, and “pay” for it later by delaying retirement. They estimate that a paid parental leave benefit of 12 weeks would require individuals to delay retirement by only six weeks. The benefit for an average worker at age 25 would be about $1,175 per month.
There are reports that Sen. Marco Rubio (R-Fla.) and the White House are considering the Shapiro-Biggs proposal, and there is much to like about the plan. There is a strong economic and social case for paid parental leave, helping women stay in their jobs and improving the health outcomes of parents and children. The proposal requires no new payroll taxes, a key point for conservatives, or spending cuts to other programs, a key point for Democrats.
While the Shapiro-Biggs proposal gets around the sticky issue of taxes and spending offsets by giving workers the choice to claim their Social Security benefits early, this financing workaround presents significant challenges of its own that need to be addressed. The most obvious issue is the solvency of Social Security. The program’s trust fund is set to run out in 2034. Once it is empty, the payroll taxes that fund Social Security will only cover 75 percent of the benefits for which people will be eligible.
Building a parental leave program into Social Security, and allowing parents to draw out benefits at the same time that Social Security pays out record amounts of benefits to Baby Boomers, will burden the new program with the uncertainty and solvency problems of Social Security. It would also bring forward the date at which the Social Security trust fund becomes insolvent. If the benefits paid to retirees face effective haircuts, then the benefits to parents claiming Social Security early will presumably face the same haircuts.
To be sure, paid parental leave would be a drop in the bucket compared to annual Social Security expenditures at less than one percent annually. In other words, Social Security needs to be reformed and made solvent irrespective of paid parental leave, which on its own likely would move the insolvency date forward by a handful of months at most.
But the trajectory of entitlements in the United States is one of the most significant challenges the country faces. It’s not enough to tack on a new program to an existing entitlement without answering the hard questions. How do we reform existing programs so that the uncertainty surrounding benefits receipt can be resolved?
Policymakers could demonstrate a commitment to solvency by pairing the creation of paid parental leave program with reforms to Social Security that strengthen the trust fund. A good starting place is the reforms proposed by the bipartisan Simpson-Bowles plan, including raising the retirement age and making adjustments to the inflation measure.
The second issue is opening up Social Security for multiple uses other than retirement. If a worker can draw weeks of Social Security for parental leave, why not for medical leave or family leave? Even more broadly, could Social Security funds be withdrawn for housing or educational expenses? This would exacerbate the aforementioned fiscal issues, and it raises a much broader question. What should our worker insurance programs should look like for the 21st century?
Perhaps our existing system of labor benefits that disproportionately delivers benefits to workers at the end of their working life is overdue for a closer look. Another concern is the lack of any mention of job protection outside of the Family and Medical Leave Act, which excludes 40 percent of workers, and particularly low-wage workers, who have the least access to leave from their employers.
None of this is to say that the hurdles are necessarily insurmountable. But there’s much hard work to be done to make it work well for American families who need it. As part of the American Enterprise Institute and Brookings Institution working group on paid family leave, we proposed a policy which would provide eight weeks of job-protected paid parental leave, paid for by a combination of employee payroll taxes and spending cuts not targeted at low income households, and administered through Social Security.
This was not an easy compromise either. But it is encouraging to see increasing consensus across the political spectrum for a federal paid parental leave benefit, and new ideas that can transform this thinking into reality should be welcomed.