June 24 2014
Carrie L. Lukas
President Obama dreams of an American economy in which all workers have ample paid leave benefits, maximum flexibility, and, of course, receive more than a living wage. Yet in making his case for this vision, in this oped that appeared in the Huffington Post in conjunction with the White House “Summit on Working Families,” the President—perhaps unsurprisingly, given his Administration’s economic record—seems unfamiliar with the costs associated with greater benefits, the tradeoffs that workers and employers must consider when creating compensation packages, and the sad reality that the biggest problem facing many Americans today isn’t that their jobs pay too little or offer too few benefits, but that they cannot find enough work at all.
The official, national unemployment rate in May 2014 was 6.3 percent, which has been touted by the Administration as evidence that the economy is heading in the right direction. Yet when those who are employed part-time but who want full-time work and discouraged workers are included in the numbers, the unemployment rate jumps to 12.2 percent. Most Americans who hear from friends and neighbors about ongoing economic struggles will likely agree that number more accurately reflects the job situation today: There are still simply not enough positions for those who want jobs.
Indeed, lack of employment, not low wages, is the biggest factor creating poverty today. According to the U.S. Census, in 2012 (the most recent data available), just under one-in-ten working age adults living in poverty had full-time, year-round work, while two-thirds had no work at all. Proposals to raise the minimum wage or increase mandatory benefits will do nothing to help these Americans who lack employment, even worse would make it even less likely that they find work.
The nonpartisan Congressional Budget Office estimated that the President’s proposed minimum-wage hike to $10.10 per hour would result in 500,000 fewer jobs nationwide. The President should at least acknowledge that there are tradeoffs that come from increasing employment costs and the availability of positions, particularly for those with the fewest skills and experience. Already American teenagers who are seeking those vital first jobs, which provide value and experience far greater than just their paychecks, are suffering from unemployment rates well in to the double digits. That problem is particularly pronounced for minority youths: Nationwide, the unemployment rate in March 2014 for African-American teenagers was almost double the rate for whites, a jaw-dropping 38 percent. A higher-minimum wage will make this problem worse.
The President doesn’t just want to require companies to pay higher wages; he also wants more generous benefit packages. He laments that too many workers lack the ability to receive time off for a school play, can’t work from home when a child is sick, or take leave for a new baby or to care for a sick loved one. He writes, “the United States is the only developed country in the world without paid maternity leave.”
First, this is a gross mischaracterization of the American economy and work world. The United States lacks a law that requires employers to provide paid maternity leave, but that does not mean that paid maternity leave and other leave benefits are non-existent in America. In fact, most full-time workers have paid leave benefits and make use of those benefits following the birth of a child. The Census Bureau reports on the leave practices employed by working women after giving birth: 56 percent of full-time working women used paid leave following the birth, 42 percent used unpaid leave, 10 percent used disability leave, 19 percent quit their job, and nearly 5 percent reported being let go (this adds up to more than 100 percent because some women used more than one category of leave). Part-time workers were more likely to quit (37 percent reported quitting their jobs) and had less access to benefits: 20 percent used paid leave, 46 percent used unpaid leave, and just 2 percent had disability leave.
Certainly this data doesn’t live up to the vision of all workers enjoying generous leave packages, but it does indicate that most businesses recognize the need for time off and believe it makes good business sense to provide such benefits, even absent a legal requirement. The President himself provides examples of companies that are models of family-friendly workplaces, but he misses that this is evidence that the market can encourage advancement in that direction and that one-size-fits-all government programs may actually discourage such innovation and flexibility.
The President should keep in mind that not all workers have the same preferences for benefits over take-home pay, and different jobs lend themselves to different kinds of flexible work arrangements. Government mandates, however well intentioned, prevent employers and employees from finding mutually beneficial arrangements. And while the President suggests that women would be the greatest beneficiaries of more aggressive government mandates, women also end up paying a high price in terms of lost economic opportunity. Supporters of family leave mandates often point to Western Europe as a model, but American women are far more likely than their European peers to be breaking glass ceilings. Undoubtedly, one reason why is that European business leaders know that women in their childbearing years are likely to disappear for months, even years, at a time, and therefore don’t consider them for leadership positions. That’s hardly a culture encouraging women to “lean in.”
The best way to ensure that people have the benefits and resources they need is to create an environment in which there are plentiful jobs. That way employers must compete for workers, and workers can select compensation packages that make sense for them. Sadly, that’s not the situation that we have in America today, and the President’s prescription for more government mandates and higher employment costs would take us farther in the wrong direction.