Not many. A unusual woman like Michelle Duggar is an extreme case that makes the point obvious. What employer would consider hiring her with a 12-month maternity leave benefit, reasonably expecting that she will collect a salary without ever coming to work? More realistically, imagine a young, poor woman, the sort of person we would like to help, or at least not hurt. She is applying for a job, perhaps a job that does not come with the kind of benefits wealthier, more professional job hunters expect. The hiring manager may be willing to offer a job to the woman, knowing that she may take unpaid leave to have a baby. But if the company is required to pay her salary while she is on leave, that additional cost may be enough for them to look for a different employee, or else reduce the compensation of the job offer to offset this additional cost. That's is the kind of cost/benefit analysis I am looking for, rather than simply reading the label on the package that says "Helps Working Families" and assuming that is what the product delivers. Some working families will enjoy the benefit, that is good and easy to see. Some businesses will bear the costs of the benefit, that may be bad (or if not, they can offer the benefit without being forced). Are we certain at this point that the benefit is greater than the cost? Should we consider the many small businesses that are operated by working families? Companies go out of business all the time, will more fail because of this policy? It won't be easy to detect if it happens. How do we measure the balance? Does it make sense to assume that this change will cause "great improvement" on one side yet merely "possibly" "very small" harm on the other side? What about working families who can't have or don't want additional children, might they be harmed by having to accept a maternity benefit they won't use, instead of perhaps an education-related benefit or greater salary? Answering these questions requires evidence which is difficult to gather. I do not trust the "Helps Working Families" label to give me the whole story. We have left out another important cost that will be hard to detect after this policy goes into effect. If the business chooses to hire a man, or an older or wealthier woman, instead of the poor young woman in our example, believing that these people will be less likely to take advantage of a required maternity benefit, then the poor, young, and now unemployed woman is the one who bears the heaviest cost of this policy.How many women do you know...
Is it not worth greatly improving the lives of working families a good trade for POSSIBLY impacting the bottom line of businesses in a very small way?
It's not like we're forbidden from attaching conditions to the deal
Someone might argue that when two people make a voluntary agreement, it is not our business to attach conditions to the deal.
Actually, it's the working families who will bear the costs of the benefit as well. An employer is indifferent between paying $X in salary or $Y in salary plus $Z in benefits, where X = Y + Z. If this benefit is mandated, salaries and other benefits will simply fall until total compensation is roughly where it was before. Actually, since wages are sticky, what will probably happen is that pay rates won't fall, but rather stagnate or increase more slowly than they otherwise would have, until the pre- and post-mandate curves converge. The long run effect will be the same, though. Those who prefer the newly mandated benefit to the forgone salary & benefits - and who didn't already have paid parental leave, and are still employed after employers adjust to the mandate - will be net winners. Those who would prefer any other bundle of salary & benefits will be net losers. And of course there will be people at the margins who are only employable today because this mandate doesn't exist. Mandating an additional benefit will either drive the pay of these workers below minimum wage, or make it unprofitable to employ them, in either case costing them their jobs. In theory if that first group is large enough then the mandate could be a net benefit, but I don't think that's the way to bet. And even in that case it would still be the most vulnerable who bear the greatest costs.Some businesses will bear the costs of the benefit, that may be bad
It happens constantly, everywhere. People respond to new incentives and constraints by changing their behavior. Employers are not exempt from this basic human trait. When my costs change, my spending behavior changes. Just recently I discontinued one service I subscribe to that had gotten too expensive (home telephone), switched a second service to a different provider (cable TV/internet), and changed to a cheaper service level on a third (mobile phone). These savings are significant, but won't really make any appreciable difference in my lifestyle. If my income were lower I would be even more sensitive to changes in my costs. Several years ago I was the co-owner of a small business. It was my signature on our employees' paychecks. We offered a generous wage and had no problem attracting employees, even with offering essentially no benefits. We employed few enough people that we'd probably be exempt from most regulations and mandates, but if we were not then any new required benefit definitely would have affected our pay scale. We simply would not have been able to afford to continue to offer the same wage as well as an expensive new benefit. Well, rather, we could have afforded it by dipping into our own pockets to pay it, but that would not have been the highest-probability outcome. On the other end of the spectrum, I currently work for a fairly large employer. We have a negotiated contract, with exceedingly generous benefits. In response to recent major U.S. legislation, we have lately been required to start paying a portion of the cost of an important benefit that used to be entirely employer-paid. This is functionally identical to a pay cut. The percentages in our negotiated annual pay increase schedule have also been reduced in the latest contract. Wages are sticky, but there are common, obvious workarounds. Sure, that's why I pointed that out. If wages are already stagnant, then they will remain so longer than they otherwise would have, or the increase in unemployment will be worse; probably both. Direct salary is unlikely to fall for current employees (at least those who remain employed after the mandate), but there will be downward pressure on their total compensation until it is back in equilibrium. New hires will face lower salaries, though. And some who would have been new hires will not be offered a job at all. The world is not static. People change their behavior in response to incentives. I think actually this is true in general, at least for businesses that are not on the margin, and for policies that only affect input prices. Government regulation, at least in this sphere, is functionally indistinguishable from natural disaster. Harsh winter in Florida, orange prices go up. Dairy Price Support Program passes, Domino's uses a little less cheese on their pizzas. Some misguided labor regulation is put in place, compensation is re-arranged, and fewer people are employed. Marginal businesses - those which their owners now consider just worth keeping open - will find the cost of re-organizing to comply with the mandate pushes them across the line to unprofitability, and close, sending their profit level to 0 (along with the salaries of their employees). Other businesses will bear these re-org costs, some of them being pushed, in their turn, to the margin, but the far greater moiety of ongoing burden will fall on employees.That's a sort of Ricardian equivalence story you're painting which generally doesn't happen in reality.
What if we're in an environment where wages are already stagnant - you think workers are going to accept a pay cut to compensate to the new benefit? Fat chance, wages are called "sticky" for a reason.
I mean otherwise you would say that no government policy could impact the profits of corporations, as they'd just rearrange the costs and prices of their inputs and outputs to maintain a target profit level. This is obviously not true in general.
Good thing it's not your call. You'd cause a fair amount of misery. And of course it's only minor friction-type costs that are borne by the business. The major costs are borne by the employees. Do you also want them to go out of the business of selling their labor if they "can't handle" the additional expense? The economy doesn't work for anyone, nor anyone for it; it's simply a by-product of the sum of transactions between individuals. This is both untrue and irrelevant. For one example, a heavy snowfall that damages fruit orchards may create benefits for fans of winter sports such as skiing, etc. But more importantly, it's the net effects that matter, not whether there is a mix of positive and negative. Again, both untrue and irrelevant. Government regulation is intended to get politicians elected [mild hyperbole, please don't feel obligated to refute]. And even if we stipulate that all regulation is drafted and passed with only pure and benevolent intent, it's still results that matter. Intentions don't create jobs. No one cares about intentions. ...and yet you are certain that your proposed mandate will be a net positive. Are you sure you want to assert both that the situation is too chaotic to know what will happen, and that you are confident enough in the outcome to impose your proposal on an entire country? Ahh, the good old gotcha-as-argument. Been a while since I've seen that one. Fair enough, I gave you the opening. For "back in equilibrium" read "back to the level it would have reached [non-statically!] in the absence of the mandate." Oh good, I was hoping someone would have this data. Please post your sources. But please keep in mind that what I am talking about is not catastrophe, but rather net negative effects, maybe large, maybe small. I think it's rather easy to demonstrate that we won't face total societal collapse by mandating paid parental leave. Demonstrating that the net effects will be positive is much harder. For one thing, you can't do a controlled experiment, comparing the effects on a society with the mandate to those on an identical society without it. And comparisons between different countries, with vs. without, will almost certainly have too many variables to control for effectively. I've given examples from my real-world experience that support my analysis. I don't think you can make a serious argument - based on either theory or data - that employees bear no costs when new labor regulations are imposed. I think that a case can be made that the positive effects outweigh the negative, but so far I haven't seen it. Based on your posts so far I am not sure which of these is your position: --It's so obvious that the net effects will be positive that no support for the proposition is necessary --It's impossible to know what will happen because the system is just so chaotic [but we should forge boldly ahead anyway!] -- All costs will be borne by employers, and if your employer is unable to stay profitable under the new mandate and closes, then you deserve to lose your job. Couldn't have been a very good job anyway, with no paid parental leave. Maybe the studies you have will help clarify.If a business can't handle the added expense of maternity leave, I would venture that that business is not socially useful enough to stay open.
Again, the economy should work for us, not the other way around.
No, because natural disaster has only negative effects.
Government regulation is intended to have on balance positive effects,
or something else will change - it's not obvious at all
You talk about compensation going "back in equilibrium" - what is this equilibrium? Won't it change? The world isn't static, right?
Also, we have decades of data from other countries that have done this and it doesn't look like what you're talking about actually happens for maternity leave. So there's that, too.
...and often makes them worse. In any case, you were claiming that regulation is different from disaster because intentions. This is indeed irrelevant. Only effects matter I'd be more inclined to be persuaded that it is unlikely if you offered analysis and evidence, instead of just talking about it. Handwaving to the effect that "we just don't know what will happen", followed up by "I'm pretty sure what what will happen" is not terribly convincing. Indeed. My examples were in support of my contention that employees bear most, if not all, of the burden of labor regulations such as the one we are discussing. Let's see how your sources do at refuting it. Thanks. This paper does zero analysis of positive effects. It simply tabulates the policies of various countries, and then offers the bald assertion "All members of society have a profound interest in the health and well-being of young children and the parents who take care of them", a declaration with which essentially no one will disagree. It does offer strong support for my position, however. From the section "Financing Structure": "Most of the countries studied here finance paid leave benefits through payroll taxes – with the overall taxation rates, and the relative shares contributed by employers and employees, varying across countries. ... The key point here is that these benefits are funded through social insurance schemes; in general, individual employers are not asked to pay the replaced wages of their own workers during periods of paid leave." So employees do bear the costs of this mandate, as I've been saying. In fact, it looks like I've been optimistic - employees not only risk increased unemployment and having to forgo other benefits they might prefer, as I'd thought. It turns out that they do pay for the benefit directly through payroll deductions - essentially pay cuts! Fat chance, indeed! Who would have guessed that government is even better than the market at finding solutions to sticky wages? Why bother working around them when you can just impose lower pay by legislative fiat? So in this instance the plural of anecdote really was data. Only in this one case, though - I don't think we can generalize the result. As to the question of the sign of the total effects, this study does not provide any evidence of positive effects beyond pure assertion, but does indicate that there are costs (the payroll taxes that fund it), although it does not quantify them. If the other sources you've found say more or less the same thing, then I think my work here is done. But your second source does provide better support for your position: Thanks. This paper analyzes the California Paid Family Leave Program. The program appears to be completely government run and funded, and does not provide job protection, so it seems there is essentially no mandate on employers. Once again, the benefit is funded via a payroll tax. I think that this firmly establishes that it's workers, not employers, who bear the burden of the costs associated with the policy (whether or not these costs outweigh the benefits). The "Key Findings: Workers" section is padded with some fluff, but here are some real benefits it mentions: --"Use of PFL greatly increased the level of wage replacement during family leaves for respondents in low-quality jobs" --"Among workers in low-quality jobs ... 97 percent of those who used PFL were satisfied with the length of their leave, compared to 73 percent of those who did not use PFL" --"Among workers in low-quality jobs who used PFL for bonding leaves, 91 percent reported a positive effect on their ability to care for the new child, compared with 71 percent of those who did not use PFL" Great. These are real benefits for lower-income workers. They're a little vague, though. Was the wage replacement greater than the wage depletion from the payroll tax? How much of a positive effect did the additional leave create, and what quantifiable improvements in the development of the children are attributable to this effect? Also, while improvement, on some measures, from ~70% to > 90% is significant, and a good thing, a satisfaction level of 70+% in the absence of the program is hardly indicative of an enormous problem requiring government intervention. Once again, though, the study makes no effort to identify any negatives associated with the policy. I would find this paper more persuasive if it considered questions such as: --Were there any effects on employment in the time period following implementation? --Are there other benefits that workers might prefer to PFL that could be provided for the same cost? --If offered the chance to opt out of the tax and forgo the benefit, how many employees would take that option? --How many workers took advantage of the policy but were then unable to return to their job? --How many people were required to pay the tax, but were unable to enjoy the benefit (older, infertile, etc.)? What was their satisfaction level with the policy?
I don't think you've demonstrated net positive effect. One source you provided makes no mention of any beneficial effects beyond simply asserting that mandating more leave is better, but does indicate that there are costs in the form of the payroll deductions used to fund it. The other does provide meaningful data relating to the actual benefits due to the policy, but makes no attempt to investigate any negative impact it may have, beyond again mentioning that the cost comes directly out of employees' pockets. It's not good enough to do studies, such as the two you cited, that only look for benefits and then proudly declare that they found no costs. When considering whether to implement a major national policy, it is important to investigate its downsides as assiduously as its benefits. More so, in fact, since the benefits are easily seen, whereas the costs are easy to obscure or handwave away.No, while government is on balance corrupt and focused on its own propagation most regulation is written to solve a problem. It's not irrelevant because it often does solve said problems.
Well I just talked about macro effects which means that is unlikely
The plural of anecdote is not data, though. It doesn't matter what your real world experience is - actual mass data is more important.
Limited evidence from the US points toward the same conclusion, see here.
We have decades of evidence from many other countries pointing toward the positive effects of parental leave on both children and gender equity, and no evidence of any net negative economic effects
The fact that net positive impact doesn't exclude some losers doesn't bother me
If that were the case, a high rate of turnover would make the poor, young, female applicant even less attractive. People look after their own interests, and it’s only natural to expect that an employee would not quit a job just before qualifying for paid family leave, rather she would quit after receiving the benefit. So the responsible hiring manager would estimate the probability of the applicant contributing no value for some time, while getting paid, and then not returning. Clearly this adds costs for the business. Your confident assurances of “possible” and “very small” negative effects for the business were not very convincing, but the citations you provided were much more helpful. Now I see that I was mistaken, the employer will likely be completely insulated from the costs of this benefit, since it is typically funded directly from employee salary via payroll tax. Mr. Condor has taken the trouble to examine the paper you mentioned about California’s Paid Family Leave, and he suggests that we do a cost/benefit analysis. The paper indicates that California’s benefit plan is “funded entirely by an employee payroll tax” of 1.2%. The benefit is 55% of the employee’s usual weekly earnings, for up to six weeks, when they take time off from work to bond with a new child. The plan also provides for paid leave to care for a seriously ill family member, up to twelve weeks. The employer can require that up to two of these weeks come from earned vacation time before paid family leave kicks in, but I will ignore this. Let’s assume employees always take the maximum benefit allowed. California says 87% of recent claims were for newborn bonding, and the other 13% for sick family member care (189,317 and 26,496). You mentioned that the average woman has 2.1 children. So that’s 2.1 × 6 weeks, about 13 weeks for newborn bonding. Bump it up to 17 weeks to include sick family member care. The benefit is 55% of the employee’s usual salary, so the lifetime expected benefit for a typical California worker is about 9 weeks’ worth of salary (17 × 0.55). That’s the benefit, what is the cost? The payroll tax is 1.2%, so we can calculate how long the employee will work before contributing 9 weeks’ worth of salary, reaching the break-even point. It takes 9 weeks ÷ 0.012 = 750 weeks, less than 15 years. A typical California employee who works 15 years breaks even on paid family leave, and every year worked beyond 15 represents a net loss. If an employee has a 30-year career, which does not seem at all unlikely, she will pay twice as much as she receives in benefits. [UPDATE: it's not that bad] Condor asks what seems to me an important question: “If offered the chance to opt out of the tax and forgo the benefit, how many employees would take that option?” Unfortunately, employees are not offered this choice. But if they knew how badly they were being screwed by this rip-off wrapped in a humanatarian “Helps Working Families” label I think most of them would opt out. This analysis is an estimate, and I would appreciate being made aware of any errors in my numbers. We should also consider features of the real world that will skew the numbers away from my estimate: • Nobody has 2.1 kids, the real number will be higher or lower. I assume these will balance out, and using the average number of kids gives us the best estimate. • Some of the average 2.1 children arrive as multiple births (1 in 30 infants born in the U.S. in 2009 was a twin). This reduces the benefit. • Employees who don’t have kids or sick family members do not qualify. This reduces the benefit. • Employees may choose not to take the leave even when they qualify (e.g. spouses who reckon that giving up 45% of their salary would be a hardship). This reduces the benefit. • Employees do not have to take the full six or twelve weeks of leave. Employers can require that earned vacation time be used first. This reduces the benefit. • I calculate the benefit in “weeks of salary.” Employees will tend to take the benefit when they are younger and their salary is lower. But they will pay the tax throughout their career, including the typical peak earning years that come later. This reduces the benefit. So where does all that money taken from employees go? I wonder. Do you still support this idea? b_b, you didn’t indicate how badly I distorted your position; I am curious to know what you think as well.[The woman with 19 children is] an extreme case and that employers don’t need to really worry about this problem.
That’s true, employers don’t have to worry much about extreme cases, but the point is that employers will take into consideration the leave they reasonably anticipate an employee will use when hiring. I had assumed that having to pay salary while an employee took parental leave would be an additional cost that an employer would be wise to factor in.If a business can't handle the added expense of maternity leave, I would venture that that business is not socially useful enough to stay open.
This statement is so incredible it makes me wonder if you are taking the discussion seriously. Do you really believe that a hospital or bookstore or barbershop is not socially useful simply because it is struggling financially?
Additional research has revealed more data that has reduced my confidence in the hypothesis that California's Paid Family Leave program has more costs than benefits to the average worker, and increased my confidence in the hypothesis that the program has more costs than benefits for poor workers. The paper discussed gave the rate of mandatory employee contributions as 1.2%. This rate is adjusted yearly and in 2014 the rate is 1%. More importantly, this contribution funds the State Disability Insurance program, which in addition to providing the Paid Family Leave benefit, also provides short-term disability income replacement. I haven't found a clear breakdown of the budget which would allow me to update my financial analysis with more accurate numbers, but it appears that the situation is not as bleak as I depicted it. It is unfortunate that California workers are obligated to trust the state to manage the money that the state takes from their paychecks, when it is so difficult for a typical person like me to even determine how the money is spent. Additional findings: As usual, benefits are easy to see, while costs are obscured. An advocacy page depicts a sympathetic mom who received benefits. But it also has a request to divert some of the $2.2 billion sitting in the SDI fund to promotion because "According to 2011 survey data, less than half of respondents (42.7%) had heard of the [Paid Family Leave] program." California is very good about collecting; compliance with the tax is almost universal. But the success rate at getting the benefits out to working families is not so great. We should be suspicious of a program likely to transfer wealth from poorer to wealthier households. But wealthier households are more likely to know about PFL, and be able to jump through the bureaucratic hoops needed to collect. The survey showed that only a quarter (25.4%) of "low-income groups" know that PFL exists. Most employees apply for benefits online. Information about the "digital divide" shows the pattern you would expect with respect to internet access and factors like household income, homeownership, disability, and education. One can also apply for benefits on paper, with a dismal form. It's not hard to find evidence of even technically savvy people struggling with the process. The Employment Development Department has a 1.5-star rating on Yelp. If 73% of low-quality job workers are already satisfied with the length of their leave and choose not to apply for the benefits they paid for (and about one in six of those who use PFL do not receive their benefits), is it reasonable to believe that this program is doing enough good to justify the cost?
Here, we find common ground. There are many government programs purported to help the poor that are really just rent seeking money grabs by the wealthy. Section 8, for example, is one of these programs (the fact that it pays literal rent is coincidence, but it's illustrative). It serves to drive up prices for poor renters, while simultaneously encouraging apathy on the part of the landlord (he's getting his money no matter how much he disregards his tenants) and the renter (why would you care about a security deposit you're not paying?). I think there's an argument to be made that any substitute for cash that is labeled for a specific purpose (food stamps, for example) are much riper for abuse that actual cash payments. Cash payment allow for choice making on the part of the consumer, and thus offers them the ability to let business owners compete for their money. It's distasteful to many people to think what "those people" could do with "our money", but in a state where welfare seems like a necessity to many (and paid family leave is certainly a type of welfare), I prefer direct cash payments to earmarked dollars. As soon as this dollar is guaranteed to go to that good, lobbyists and politicians have a much greater chance to insert corruption into the system.We should be suspicious of a program likely to transfer wealth from poorer to wealthier households.
I still don't know if you support or oppose California's PFL program; most of your comments seem to be vaguely positive. Neither of us are experts on the program, but if you know that it exists you have better understanding than the average Californian worker who pays for it! Suppose we did not have Section 8 housing. Suppose someone introduced legislation that included this language: Would you support it? It would appear to be consistent with this position statement: I support subsidized housing, because I think part of the social contract is that we (civilized people) ensure that decent housing is available to persons of low income. How could a program with the primary objective of improving housing for the poor do anything but that?The primary objective of this title is the development of viable urban communities, by providing decent housing and a suitable living environment and expanding economic opportunities, principally for persons of low and moderate income.
Then you understand my position exactly as well as I do :) As far as welfare goes, I think that earmarking monies is not a very good idea. I don't need to tell you of all people that if the government says that they will pay up to $800/mo for rent for low income people, then $800 is going to be the price, no matter how squalid the conditions. Cash solves that problem. I'm more of the mind that I support human dignity, and I think part of the social contract is that we treat each other with humanity. Practically speaking, direct payments to vendors on behalf of poor people seems to cause harm in a lot of ways. As your other post points out, it's often difficult to disentangle costs and benefits.I still don't know if you support or oppose California's PFL program; most of your comments seem to be vaguely positive.
Ha! This could be true of so many taxes. I wish to god I could opt out of most the portion of my taxes that go to DoD, for example. Unfortunately, we can't pick and choose where our collective money goes once it's taken from us, can we? (Well, actually we can if we have a very specific ideology, it seems. But for the rest of us who are in it together, I guess we're stuck.) Again, I think the important thing is empiricism, as is the case in all economic analyses. We need to look at the economic impact in other countries that have paid leave laws in place to see what impact they have (both economic impacts as well as social impacts). I don't have the time right now to do a lot of reading on the subject, but my guess is that it's not as simple as credits and debits on the paycheck (although I did enjoy reading your analysis; thank you for taking the time to pull all those numbers). To clarify, my position is essentially that I support paid family leave, because I think part of the social contract is that we (civilized people) support children. It's the same reason I'm happy to pay property taxes to build and maintain schools, parks and museums, even though I don't have kids. If I looked strictly at the amount I pay in property tax vs. the amount I run on the track at the high school behind my house, I'm probably not getting a good deal. The social aspect is more important collectively. This isn't to say that I approve of waste; no one does. It's a tough calculus, but in this day and age where two working parents is the norm, I think it's important to think of what might benefit society in the changing landscape of the last half century. If my taxes have to subsidize maternity leave, I won't cry about it. But perhaps there could be a lifetime cap, or a mandated gap between usages, as there is with other types of welfare. Just spitballin'. I don't know.Unfortunately, employees are not offered this choice. But if they knew how badly they were being screwed by this rip-off wrapped in a humanatarian “Helps Working Families” label I think most of them would opt out.
Your position clearly includes the assumption that paid family leave supports children. That assumption is the very matter under debate here. Do you have evidence for your belief that paid family leave supports children, that it is a net benefit? You mentioned that your cursory searches were inconclusive. As a champion of empiricism, are you not bothered by the thought of harboring a belief (held, in fact, before the inconclusive research) that is not supported by evidence? Is this belief simply an article of faith for you? I don't doubt that having one or two parents home with a newborn will be good for the family. In any plausible alternative to PFL, this will still happen — employers do not expect mothers to deliver babies during lunch hour and then get back to work. (Or if they do, nothing in the California plan prevents this from continuing.) Perhaps the PFL plan results in parents staying home with newborns longer when they can collect 55% of their salary compared to when it was unpaid. That would be good, but I would like to see evidence that this actually happens. The paper which appears to support PFL actually has some damning evidence. It reveals that 31% of "low-quality job" workers (who presumably get more benefit from PFL than high-quality job workers) receive half their salary during family leave without even participating in the plan. And among those who participate, only 84% actually receive the 55% salary they were promised. As kzcondor pointed out, 73% of the low-quality job workers who didn't use the plan were satisfied with the length of their leave, and the plan made no difference in satisfaction for the others. The main disincentive, absent a PFL plan, for taking more unpaid time off to bond with a baby is the loss of income. So the main justification for PFL is financial: that it is paid family leave. If a typical career is 40 years, my calculations show that the worker will face a significant net financial loss, more than double the money contributed. Does taking money from parents support children?I support paid family leave, because I think part of the social contract is that we (civilized people) support children.