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.