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February 13 2018

Can a ‘conservative’ approach lead to agreement on social insurance for family and medical leave?

American Enterprise Institute
featuring Kristin A. Shapiro

It’s no secret that the United States is unique in the way leave benefits are provided to workers. Unlike most European countries, the US largely lets employers and employees handle decisions around when workers receive paid time off from work. In many ways, this gives American employers and employees more flexibility to design compensation packages that are mutually beneficial.

But even in the US, government programs exist to protect employees from lost income due to joblessness. Existing social insurance programs cover retirement, long-term disability, and short-term periods of unemployment. The upside of these programs are that they help workers avoid poverty when it is necessary to be away from work. They also spread the risk associated with covering periods of joblessness across employers and employees.

This raises the question: Why not cover other forms of time away from work, such as to care for a new child, an ill family member, or for one’s own medical issues?

As has already been covered in this blog series, these forms of leave are currently job protected under the Family and Medical Leave Act, meaning that workers can take unpaid leave for up to twelve weeks without the threat of losing their jobs. But in the absence of a national social insurance program, the decision around whether pay is received is largely left to the employer, with the exception of a few state programs.

A new proposal from Kristin Shapiro of the Independent Women’s Forum offers another approach, one that is being described as a conservative approach to paid leave. Without increasing payroll contributions, the proposal calls for worker flexibility in deciding when they can use their social security benefits, whether it be for retirement or parental leave. According to the proposal:

The proposed program would be structured to be self-financing. In return for receiving parental benefits, new parents would agree to defer their collection of Social Security benefits upon retirement for the period of time necessary to offset the cost of their parental benefits. Participation in the program would be strictly voluntary; new parents who do not need parental benefits or who do not wish to defer their retirement benefits would not be required to participate.

Using the social security retirement system for paid parental leave is intriguing for a number of reasons, including that it gives workers flexibility to decide when they value paid time off, whether it be in retirement or when they welcome a new child. The same approach could be used to cover one’s own medical leave or time away from work to care for a family member.

Most importantly, the proposal is a recognition that a national social insurance program is necessary to provide paid leave to American workers. In this way, it is conceptually similar to other proposals, such as ours from the AEI-Brookings Paid Leave Working Group. And by maintaining benefit levels but allowing flexibility in when they are used, it might appeal to policymakers who oppose raising taxes to cover more paid leave.

One obvious risk is that if workers use up too many weeks of paid leave for reasons other than retirement, they may not be eligible to retire when they feel they are ready. But perhaps that is a choice that should be left to individual workers. Timing and financing issues also remain a concern, since it would move the insolvency date for social security forward (although by how much is unclear), therefore requiring tax increases or benefit adjustments sooner than expected.

Nonetheless, it should be viewed as an opening for lawmakers who want to provide paid family and medical leave to American workers. Getting both sides to agree that a social insurance program is needed is a major step forward.

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Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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