September 10 2009
Healthy Families Act Won't Lead to a Healthy Economy
Carrie L. Lukas
Health care has dominated policy-related press. It makes sense: the President and the Democratic Party are proposing a massive reorganization of our healthcare sector, and a government expansion that would cost taxpayers hundreds of billions-and potentially trillions-of dollars. If would-be reformers succeed in creating a new government-run health insurance program, private health care would likely slowly disappear, and the United States will have taken a giant leap toward European-style socialism. Such change deserves great attention and deliberation. Yet government-run medicine isn't the proposal being debated today that would move us closer to a European-style economy. The public should also pay close attention to proposed new workplace mandates, such as the Healthy Families Act, which recently received its first hearing in a subcommittee on Capitol Hill.
The Health Families Act would require covered employers to offer seven days of paid sick leave to employees (part-time employees would be eligible on a pro-rated basis). The law would apply to employers with fifteen employees or more, and employees would be able to take this paid leave for a personal medical condition (including related to mental health), the diagnosis of a condition, or for that of a family member or someone with whom the employee has the "equivalent of a family relationship."
Proponents of the bill would applaud this measure as necessary to protect all of the workers who today don't have paid sick leave and face hardship when they or one of their family members become ill. They'd likely point out that this proposal is much more modest than what's standard on the Continent, where generous paid leave packages are the norm.
And certainly, some would benefit from this legislation. Even though most employers offer paid leave, there are millions without this type of benefit. Those who are economically more vulnerable-those with lower incomes and part-time jobs-are less likely than others to have access to paid leave, and, therefore, are most likely to benefit from this new mandate.
Yet this bill has real costs too, and ironically it is those same economically-vulnerable individuals who will also bear the brunt of the provision's costs. Businesses must consider the entire costs associated with that employee. That includes the taxes they pay related to that employee, overhead costs, and the total costs of benefits. As benefit costs go up, employers will have to compensate elsewhere. Because lower-income and part-time workers currently are less likely to have this type of leave, it's their employment costs that will go up as a result of this mandate.
Employers will find ways to compensate. They may reduce those employees' take-home pay or seek ways to cut jobs. For example, some businesses may combine part-time jobs or seek to replace low-wage workers with more productive high-wage workers. Others may look to outsource jobs entirely. That's bad news for the millions of unemployed workers who seek jobs today, and also for the many women who crave part-time opportunities that allow them to better balance their desire for work and time with children.
Businesses would also face new administrative costs as a result of a new paid sick leave mandate. Small business, which are less likely to offer paid benefits and have less human resource capacity, will be particularly affect by the challenge of administering the new benefit, particularly policing something as vague as leave taken for someone who's the "equivalent" of a family member. That's another reason for businesses to look for ways to have fewer staff, and therefore few headaches, in-house.
These are factors that tend to be shortchanged in public policy debates. The media is particularly prone to one-side analysis: on an issue like family leave, producers showcase sympathetic workers who have struggled without paid leave and will benefit from the new government mandate. There's no interview with the equally sympathetic, but harder to identify, would-be worker who has been priced out of the workforce because of government mandates.
The public needs to consider all the consequences of legislation, whether it's a bill to create new employment mandates or to increase government's control of our health care system. Once people are aware of both sides of the equation, they will likely come to realize that the benefits are not worth the costs.