October 23 2007
Download the complete Policy Brief below.
Last week, Senator Hillary Clinton (D-NY) presented a plan for expanding family and medical leave. Specifically, she proposed changing the current Family and Medical Leave Act (FMLA) so that it applies to businesses with more than 25 workers (instead of the current requirement of at least 50 workers). She would also use federal dollars to encourage states to provide paid family leave.
Everyone understands the challenge of balancing the demands of work and family life, and that there are situations when individuals need time off from their jobs. While it is tempting to address this legitimate need through government action, there are significant costs to doing so.
In the years that FMLA has been in force, many businesses have struggled to make sense of the regulations and have had to bear increased financial and administrative burdens to comply with this law. Small businesses will likely experience greater disruptions if FMLA is expanded to apply to them since they are less likely to be able to shift work from those taking leave to their co-workers. These companies are also more financially vulnerable than large companies so will be more affected by the additional financial burden associated with FMLA.
Mandating benefits has costs for employers and ultimately for employees. An increasing portion of employee compensation is consumed by benefits, which means workers have less take-home pay. Rising costs of employment also discourage employers from offering new jobs and encourages outsourcing.
There are other ways for policymakers to help individuals sustain themselves during times of leave. First, the federal government ought to stop penalizing savings. Currently, the government discourages individuals from taking the responsible action of setting aside income that can be drawn upon during a period when they cannot work. Policymakers could also explore programs that encourage savings specifically to provide for paid leave. Policymakers have already created tax-advantaged savings vehicles for retirement, health expenses, and education costs, so they could create a similar initiative to deal with situations that require leave.
The primary goals of any government action should be to encourage individuals to provide for themselves and to avoid creating costly mandates that will be a drag on the economy and reduce job opportunities for Americans.
Family and Medical Leave Act with Allison Kasic and Carrie Lukas