There is growing momentum for paid family leave in the United States, and particularly paid parental leave. Since 2002, eight states have enacted paid family and medical leave entitlements, and federal legislators have introduced multiple bills on the subject. The most compelling reason for a federal parental leave program is the need to support low-income families, who are significantly less likely to receive paid leave from their employers. And the most common proposal for such a program is to create a new entitlement funded by a payroll tax. Despite the best of intentions, however, a parental leave entitlement could hurt the very families that it intends to help.
Parental leave entitlement programs can have a negative redistributive effect—i.e., they tend to transfer income from low-income families to middle- and high-income families. Numerous studies of state and foreign parental leave entitlement programs all raise serious concern about the extent and prevalence of this effect. While more research is warranted, the effect appears to occur because low-income workers are substantially less likely to collect benefits from such programs.
Although this issue has received little attention, policymakers should be aware of it as they consider various parental leave proposals. Fortunately, there are ways to expand access to family leave that would not risk redistributing income away from low-income families. For example, programs such as Social Security Earned Leave could make parental leave affordable without imposing a tax on low-income families to fund a program from which they receive disproportionately little benefit.