Proposals to establish a national paid family leave program have gained momentum recently. President Trump even called for a plan in his State of the Union address. Yet past proposals have failed to square the circle of mandating paid family leave for workers without imposing substantial costs on businesses or the federal government. Fortunately, Sen. Marco Rubio, R-Fla., has authored a bill based on a proposal by the Independent Women’s Forum that appears to do just that. While concrete details still need to be hammered out, the idea provides taxpayers with reason to be cautiously optimistic that a fiscally responsible paid family leave solution could be on the horizon.
As of 2016, 87 percent of American workers did not have access to paid family leave through their jobs. Expanding the options for working parents would be good, but proposals to force businesses to offer a paid family leave benefit would impose costs that would show up elsewhere (likely in the form of higher prices or lower base salaries). On the other hand, leaving the government to subsidize parental leave would require an expensive new entitlement program. The American Action Forum estimates that the FAMILY Act, legislation proposed by Sen. Kirsten Gillibrand, D-N.Y., that would establish a 12-week paid family leave entitlement, would have a total cost of anywhere between $160 billion to an eye-popping $997 billion annually.
Rubio’s legislation, called the Economic Security for New Parents Act, takes a different approach. It essentially allows workers to collect future Social Security benefits early in exchange for delaying retirement eligibility dates for Social Security. The original proposal’s author, Kristen Shapiro, estimates that collecting parental leave benefits under this plan for 12 weeks would only require deferral of retirement eligibility by six weeks in order to maintain revenue-neutrality.
Tying parental leave to Social Security payments makes a lot of sense. Under current law, employers must allow employees 12 weeks of (unpaid) parental leave. The traditional method of paying for periods without any earnings is to take out a loan. Loans, put simply, are a means of accessing future earnings early in return for decreased earnings later on. Shapiro’s proposal can therefore be seen as the government providing a “parental leave loan” that carries no risk of default and holds no interest. Shapiro estimates the percentage of income covered by this paid leave proposal would be comparable to, if not better than, that of other developed nations.
Yet while the proposal is promising in concept, there are valid concerns about how a plan like this could veer off course. Some may seek to turn what is currently a budget-neutral approach into a subsidy by another name. For example, there would likely be haggling over expanding the benefits while shrinking the deferrals, eliminating the budget-neutral aspect of the proposal. Even more pernicious, politicians could look to the Social Security Trust Fund as a “piggy bank” to fund all manner of current spending with vague promises to cut future benefits. The emphasis should remain on maintaining budgetary neutrality, or else what is currently an innovative method of providing assistance to working parents could turn into yet another expensive entitlement.
As policymakers consider Rubio’s proposal, they should keep the original intent of the proposal in mind rather than allowing it to become sidetracked. Providing new parents with meaningful assistance in raising children at the expense of a few weeks’ delay in receiving retirement benefits is a more than worthwhile trade. However, with expected growth in entitlement spending already driving the vast majority of future spending, a costly new entitlement is the last thing our budget needs. Remaining budget-neutral must be a priority. If this can be accomplished, the proposal represents a promising method of helping working parents care for their young children.