Paid family leave would benefit parents, babies, economy

ILEPI-UIUC study says businesses would gain stability, productivity

Paid maternity and paternity leave would benefit workers and new babies, of course, but a new study suggests it would also improve the state economy and business productivity. (Shutterstock)

Paid maternity and paternity leave would benefit workers and new babies, of course, but a new study suggests it would also improve the state economy and business productivity. (Shutterstock)

By Ted Cox

A new study suggests Illinois parents, children, and the economy would benefit from paid family leave, but businesses would gain as well in improved productivity with less employee turnover.

The Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois at Urbana-Champaign released the study, “The Impact of Paid Parental Leave in Illinois: A Labor Market Perspective,” on Monday. It projects that 12 weeks of paid maternity and paternity leave would provide obvious benefits to infants and new parents, with an estimated 220,000 working parents affected annually. It would also put an additional $1.4 billion a year into the pockets of those parents.

Congress passed the Family and Medical Leave Act under the Clinton administration in 1993, providing job security for up to 12 weeks for workers taking a leave of absence to care for family members, especially newborns. But the study points out that did not require employers to pay workers over those leaves of absence, adding, “The United States is one of just eight nations in the world that does not guarantee some form of paid parental leave for all workers — and the only developed nation with this distinction.”

The Guardian recently reported that a UNICEF study released last year found that the United States was the only developed nation not to demand any sort of paid maternity, paternity, or parental leave.

The study finds that, “while 65 percent of workers who used FMLA reported receiving some type of compensation, just 14 percent of U.S. employers currently offer paid family-leave programs.” Paid leave, it adds, is “concentrated amongst large employers like Amazon and UPS and within high-wage occupations like financial services and IT,” while “low-income workers disproportionately lack access to paid parental leave.”

While Congress has lagged on paid leave, eight states and the District of Columbia have enacted paid-parental-leave laws. The General Assembly has been considering a paid-leave bill for years, but House Bill 9, the Paid Maternity Leave Act, which would require larger businesses with at least 50 employees to provide six weeks of paid leave, was sidetracked into the Rules Committee last year shortly after being introduced.

The benefits of family leave to newborns are obvious.

“Prior research has found that paid parental leave is good for children and leads to lower rates of child mortality, higher rates of vaccination, reduced risk of childhood obesity and diabetes, and more regular health checkups,” said study co-author Jill Gigstad, an ILEPI researcher, in a news release accompanying the study.  “Equally important, it has also found that these laws increase gender pay equity, boost female labor force participation by up to 17 percent, and reduce the burdens of employee turnover, absenteeism, and lost productivity that are costing U.S. employers an estimated $57 billion per year.”

Paid leave for new fathers, meanwhile, “shortens leaves for mothers and lifts the salary potential of women,” according to the study. Women would also benefit over the long term as “paid parental leave increases weekly hours worked for mothers by up to 17 percent in the years after birth, boosting labor-force participation.”

“In recent decades, more and more employers have come to rely on women and mothers as a growing share of the labor force,” Gigstad said. “That’s why many of America’s largest employers and most in-demand occupations are recognizing that paid-parental-leave programs are vital to their labor-market competitiveness and their bottom lines.”

“In addition to helping employers compete for workers, paid parental leave would generate more income for individuals — disproportionately lower-income individuals — who are likely to spend that money in our local economy,” added study co-author and ILEPI Policy Director Frank Manzo IV.  “This boost to consumer spending would stimulate growth in communities across Illinois.”

The study suggests providing 12 weeks of paid leave to new fathers and mothers — and others who qualify for the temporary care of a family member — at two-thirds their average weekly pay, up to $1,000 a week. It estimates that would provide on average $550 a week for a parent on leave, putting $1.4 billion in the economy — money that is likely to be spent and not saved, as any new parent can attest.

A recent Pew Research Center poll found majority bipartisan support among both Republicans and Democrats, and that three-quarters of those in favor of paid leave believe employers should pay for it.

The study projects a major tradeoff, but a net gain as weighed by purely economic issues. Businesses might eliminate an estimated 8,700 positions statewide, but it would also create more than 9,000 jobs. The net gain would be about 500 jobs and a $28 million increase in worker earnings. According to the news release, “The study finds that the costs of an entirely employer-sponsored paid-parental-leave model would be offset by savings in employer turnover costs and increases in both workforce productivity and consumer spending.”

The states that currently call for paid leave, however, all fund it through employee deductions of up to 1.1 percent. The study posits: “Illinois could fully fund a state-administered paid leave program with a deduction as low as 0.5 percent,” which would produce an estimated $1.8 billion in revenue. Other proposals, including diverting 45 percent of new income from the proposed graduated income tax to the program, or instituting a 2 percent “millionaires’ tax” on income above $1 million, would not raise as much money and would likely face more opposition in the General Assembly.

“Paid parental leave could not only benefit children and working parents, but businesses and our economy as well,” concluded PMCR Director Robert Bruno, a UIUC professor and co-author of the study.  “While there are a number of potential funding mechanisms, the available data suggest that enacting a state-level paid-family-leave law would be both good politics and sound policy for state lawmakers to consider.”