Thanks to California and New Jersey's state programs, we actually have a good idea of the cost to employers and employees.
How much would it cost to have mandatory, paid family leave in the U.S.? The United States is the only developed country that doesn’t guarantee paid leave for workers who are new parents. The federal Family and Medical Leave Act gives workers the right to 12 weeks of unpaid leave. Last month President Obama reignited the debate over paid leave when he pledged to make paid family leave a top priority and used his executive power to give six weeks of paid sick leave to federal employees after the birth or adoption of a child.
Currently, only 11 percent of American workers get paid family leave through their employers or state programs, according to the Bureau of Labor Statistics. Three states— California, New Jersey, and Rhode Island —offer guaranteed paid leave; the programs are funded by employees’ payroll deductions.
Because California’s Paid Family Leave program is 10 years old and New Jersey’s program was instituted in 2009, there is a body of research about the financial impact of paid family leave. (Rhode Island’s program is just one year old.)
Here are three things to know about the cost of paid leave programs in these states.
1. Paid leave programs — financed by payroll deductions — cost individual employees less than $1 a week.
In New Jersey, family leave is financed 100 percent by worker payroll deductions. Each worker contributes 0.09 percent of the taxable wage base, which is the first $32,000 in covered wages earned. The maximum yearly deduction per employee is $29 in 2015, according to New Jersey’s Department of Labor and Workforce Development.
Eligible employees can take up to six weeks paid leave and receive weekly benefit rates that are two-thirds of their average weekly wages, up to $595. More than 160,000 leave claims have been filed since the program started in 2009.
Eligible California workers receive up to six weeks of leave with wage replacement at approximately 55 percent of their average weekly earnings, up to $1,067 per week in 2013 and an average weekly benefit of $526. The program has paid 1.8 million claims and authorized $4.6 billion in benefit payments, according to the California Employment Development Department. Each employee pays an average $30 a year into the paid leave fund.
2. Having state-mandated, paid family leave hasn’t hurt most employers’ bottom lines.
The fear that giving employees paid leave would create turmoil hasn’t materialized in California. In a survey of California business owners that was conducted by the Center for Economic and Policy Research senior economist Eileen Appelbaum and Ruth Milkman, a City University of New York sociologist, the vast majority said the program has had a positive or no negative effect on profitability and performance (91 percent), productivity (89 percent), turnover (93 percent) and employee morale (99 percent).
In New Jersey, a 2012 Rutgers University survey of 260 businesses found that most employers hadn’t had any employees who had taken advantage of the leave. But of those that did, 69 percent reported that paid leave had no effect or a positive effect on their businesses.
In fact, political and business opposition to paid leave has quieted in California and New Jersey since the programs have been up and running. The New Jersey Chamber of Commerce, which opposed paid family leave before it was enacted, has turned its attention to opposing paid sick leave legislation making its way through the state legislature. Michael Egenton, the chamber’s senior vice president of government relations, said the business lobbying group remains opposed to any government mandate of an arrangement “usually negotiated between an employer and employee.” But he also said there is no current campaign against the family leave program.
3. Lots of workers eligible for paid leave do not take it.
California’s program allows workers to take paid leave for all kinds of family care, including seriously ill relatives. But approximately 90 percent of the total claims filed have been by new parents, according to a 10-year anniversary report by California’s Employment Development Department.
A poll of registered voters in California three years ago found that only 45 percent knew about the paid leave program, and low-wage workers were the least aware. Egenton suggested that many employees may be hesitant to use paid family leave because the job market remains competitive.
Meanwhile, to help other states enact similar paid leave programs, President Obama has proposed a $50 million State Paid Leave Fund to offer competitive grants to help states cover start-up costs for more employee-funded leave programs.
Interesting side note: Paid family leave claims filed by men are growing and have increased more than 400 percent since the California program began. That suggests paid leave may not be just a “mom’s” issue – but is of interest to fathers, too.
Dory Devlin is a freelance writer and editor who covers workplace, work-life, tech, and entrepreneurship issues.