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I have this quaint notion that the Constitution guarantees economic liberty by limiting the power of Washington. Needless to say, parental leave is not one of the enumerated powers in Article 1, Section 8.

Sadly, many people (include the Chief Justice of the Supreme Court) don’t share my view.

So let’s set aside that objection and focus on the policy implications of a new entitlement program.

I’ve already explained why the federal government shouldn’t have a policy on parental leave, but the topic isn’t going away so let’s look at the issue again.

The first thing to realize is that the fight over “parental leave” involves several competing options.

Here are the four alternatives.

  1. A “conservative” plan to allow new parents to finance time off by tapping into the bankrupt Social Security system.
  2. A plan from the left to make parental leave an entitlement financed by payroll taxes.
  3. A plan from the left to mandate that employers provide paid leave.
  4. The libertarian notion that it’s none of the government’s business.

Let’s address Option #1.

Writing for National Review, Alexandra DeSanctis argues for an expansion of government’s role.

Joni Ernst of Iowa and Mike Lee of Utah recently introduced the Child Rearing and Development Leave Empowerment (CRADLE) Act, the latest conservative effort to develop a paid-leave policy that enables parents to stay home with their newborns. …It would amend the Social Security Act to allow parents to take up to three months off from work by drawing on their retirement benefits early in exchange for delaying their benefits after retiring.

You can read my concerns about this approach in this column from last March, so I don’t want to reinvent the wheel.

But Ms. DeSanctis makes some new arguments that cry out for rebuttal.

Starting with the notion that we should be ashamed that we’re not copying Europe’s decrepit welfare states.

The United States is the only country in the Organization for Economic Cooperation and Development (OECD) — an intergovernmental economic alliance of 36 member countries — that doesn’t have a national paid-leave program.

Wow, I never expected to see this type of argument in National Review. William F. Buckley must be spinning in his grave.

Heck, I made that argument a punchline in my recent collection of anti-Bernie Sanders satire.

She also wants to water down the definition of conservatism so that it means whatever is convenient for certain politicians.

The conservative argument against the proposal is intriguing as a matter of principle, but it is worth noting that the Republican politicians offering these paid-family-leave bills in recent years are also some of the most conservative policymakers in the Senate. …This new proposal is an effort not to expand the government but to protect and cultivate family life, which ought to be the chief goal of any country that cares about its future. …as the Right grapples with populist arguments for greater government prioritization of the needs of working-class Americans negatively affected by globalization, conservatives should embrace efforts to incentivize family growth and offer parents more flexibility in caring for their newborns.

I’m also less than impressed by her argument that Congress should “cultivate family life.”

Indeed, it’s precisely because strong families are good that Washington shouldn’t be involved.

Which is why I prefer what Rachel Greszler wrote for the Heritage Foundation. Here are some excerpts.

…a new national entitlement…could expand as other federal entitlements have, potentially costing hundreds of billions of dollars per year. …the role for the federal government is to remain neutral with regard to parents’ decisions to stay home or work outside the home. The government can, however, make it easier and less costly for workers to take family leave by reducing marginal tax rates so that workers have larger paychecks, supporting, instead of impeding, flexible work arrangements between employees and employers, and cutting costly regulations so that businesses can afford to provide paid leave.

And I definitely like articles that make the principled case against more government.

For instance, here are excerpts from a column by Veronique de Rugy.

Even if we pretend that it doesn’t change the size of government because the increased spending in the beginning will perfectly offset a few decades later with delayed benefit payments and increases in revenue (i.e., parents delay retirement and hence continue to send taxes to Uncle Sam), the plan increases the scope of the government immediately. You can’t wish away the fact that it drags the government into an area where it played no role before.

And George Leef, writing for Forbes, has similar concerns.

The notion that the government should help cover the costs of having a child springs naturally from the “progressive” mindset that government should be there to provide in case anyone needs (or merely prefers) assistance. It also dovetails with the liberal political mentality that many votes are to be won by giving people stuff. …But the big problem with this idea is not the dollars and cents one. Rather, it is the way it perpetuates and spreads the idea that the purpose of the federal government is to provide for our needs. …Kindly old Uncle Sam will be there to help when you need it. …This is the sort of thing Thomas Jefferson had in mind when he warned against ‘wasting the labors of the people under the pretense of taking care of them.’

What about other ways to address the issue?

Regarding Option #2 (an entitlement funded by payroll taxes), Vanessa Brown Calder’s article in National Review is must-reading on the issue.

…government-supported paid leave is costly. Paid-leave proposals such as the FAMILY Act would result in new payroll taxes on all current workers, whether or not they intend to use benefits. …realistic assumptions based on the national use of the federal unpaid FMLA program…suggest the FAMILY Act would result in costs of around $450 per year in taxes for the average worker. …the program is likely to expand, as similar programs have in other OECD countries. For example, the average length of paid maternity, parental, and home-care leave available to mothers in OECD-30 countries in 1970 was 17.2 weeks. In 2016 that number had tripled, to an average of 52.5 weeks, or over a year in benefits. Large expansions of programs are accompanied by large expansions in program costs. For example, Norway expanded leave from 18 to 35 weeks between 1987 and 1992, which nearly doubled the cost to taxpayers from $12,354 to $24,022 per eligible birth.

Imposing taxes to finance that much new spending isn’t very popular, even in left-wing states.

For instance, the New York Times reports that politicians in California want to impose a paid-leave mandate, but they are having a hard time figuring out how to make the numbers work.

The United States has long been the only industrialized country not to offer paid leave to new parents. Instead of waiting for the federal government, the incoming governor of California intends to change that… What’s unclear is how California would pay for it. The proposal, which the governor-elect, Gavin Newsom, is expected to include with his budget after he is sworn in on Monday, would be the most generous state policy in the nation, at a time when federal paid leave proposals have stalled. Yet it does not include a plan to finance it… California’s existing paid leave program is financed by a 1 percent payroll tax. Increasing that tax would require the approval of two-thirds of the Legislature, not assured despite Democratic control.

Interestingly, folks on the left are making the same argument that Ms. DeSanctis used in National Review.

“…we’re falling behind our economic competitors,” said Heather Boushey, the executive director of the Washington Center for Equitable Growth, who advised Hillary Clinton on economic issues during her 2016 presidential campaign.

I’ll merely add that “we’re falling behind” only in the race to impose more government.

We’re way ahead in the race for more prosperity.

I also found this passage to be laughable.

California has a history of fervent opposition to taxes. Democrats now have supermajorities in both the Senate and the House, but many of them have embraced fiscally conservative policies.

You almost have to assume that the reporter who wrote this piece never visited the state.

California has the nation’s most onerous state income tax. And it ranks very low in measures of fiscal policy.

Yes, there is a supermajority requirement to raise taxes, but politicians in Sacramento have been very successful in overcoming that barrier.

Let’s shift to Option #3 (mandating the employers provide leave).

Vanessa Brown Calder authored a comprehensive study on parental leave last year. She included a section on how this approach would harm female workers.

Economist Lawrence Summers studied the effects of mandating government benefits and concluded that women’s wages would be reduced to reflect the cost. Summers states that “if wages could freely adjust, these differences in expected costs would be offset by differences in wages.” If not, “there will be efficiency consequences as employers seek to hire workers with lower benefit costs.” …Economist Jonathan Gruber studied maternity-benefit mandates in Illinois, New York, and New Jersey, and his findings “consistently suggest” women’s wages were reduced to reflect the cost of benefits. The estimated reduction in wages was around 100 percent of the cost of benefits. Government-mandated leave has similar effects internationally. A study of 16 European countries over a period of around 20 years found that “parental leave is associated … with reductions in [women’s] relative wages at extended durations.” Other researchers have noted that “work-family policies … have also contributed to … lower wage-levels for women relative to men.”

This data is especially noteworthy since there is additional evidence that women get hurt when government intervenes on their behalf.

To conclude, let’s look at how her research supports Option #4 (no interference from Washington).

Here are her main findings.

…ample data show that the private market provides paid leave at rates about 30 to 50 percentage points higher than proponents claim. Private paid leave provision has grown three- or fourfold over 50 years and continues to grow. This trend indicates industry is responsive to employee demands. …Government intervention is also unlikely to correct gender or labor-market inequality in ways proponents desire. For example, families may respond to the policy by increasing women’s household work contributions relative to men’s. Redistributive effects of government intervention are likely to harm workers.

This chart shows how markets are naturally responsive when government doesn’t intervene.

And this chart from her study shows that women do better in the United States than in other nations.

In other words, benign neglect is the policy that produces the best outcomes.

Sadly, this is one of the many issues where the Trump Administration is on the wrong side.

The bottom line is that Option #4 is the only choice that is good for freedom, good for women, and good for the economy.

Option #1 is not as bad as Options #2 and #3, but it is still a step in the wrong direction (as I noted last year, supporters “are proposing to do the wrong thing in the best possible way”).

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During the 2016 presidential campaign, I was very critical of Donald Trump’s proposal to expand the entitlement state with a new program for paid parental leave, just as I was very critical of a similar proposal from Hillary Clinton.

Neither candidate offered much detail, but it was reckless and irresponsible for both of them to propose any sort of new tax-and-transfer scheme when the country already faces a long-run crisis because of entitlement programs.

And that looming entitlement crisis explains why I also criticized a paid-leave proposal developed by AEI and the Urban Institute.

But not all parental leave proposals involve a net increase in the fiscal burden of government. Senator Marco Rubio and Congresswoman Ann Wagner have put forth a plan that would allow new parents to finance time off with newborns with money from Social Security, so long as they are willing to accept lower retirement benefits in the future.

The Wall Street Journal is skeptical of this kind of initiative.

Republicans should consider the consequences before signing up for a major expansion of the entitlement state. …Mr. Rubio…claims his benefit doesn’t expand government or create a new entitlement. But what is expanding government if not taking a benefit financed by private industry and administering it through a government program? Paid leave by definition entitles Americans to a de novo benefit… Mr. Rubio says leave will pay for itself by delaying retirement benefits… Does anyone believe those retirement benefits won’t be restored eventually, at least for the non-affluent? …The biggest illusion is that this proposal is a shrewd political move that will steal an issue from Democrats. In the real world they will see Mr. Rubio and raise. The National Partnership for Women & Families called the Rubio plan “reckless, irresponsible and ill-conceived” for making parents choose between kids and retirement. They want both. Once Social Security is open for family leave, Democrats will want to use it for college tuition, and why not a home downpayment?

Ramesh Ponnuru counters the WSJ, arguing in his Bloomberg column that the Rubio/Wagner plan merely creates budget-neutral flexibility.

Senator Marco Rubio of Florida and Representative Ann Wagner of Missouri…have introduced legislation to let parents finance leave by either delaying taking Social Security benefits when they retire or getting slightly reduced benefits. …The proposal doesn’t raise federal spending over the long run, but only moves benefits forward in time from a person’s retirement to her working years. …the proposal is better seen as a way of adding flexibility into an existing entitlement than of creating one. …Because Democrats will demand more generous leave policies, the Journal warns that the Rubio-Wagner proposal will backfire politically. But the bill is an attempt to satisfy a demand among voters for help with family leave. It’s not creating that demand. Republicans can choose whether to counter Democratic policies with nothing, or with an idea that gives families a new option at no net long-term cost to taxpayers. The political choice should be easy.

Ramesh makes several good points. There is a big difference between what Rubio and Wagner are proposing and the plans that involve new taxes and additional spending.

And he even cites the example of a provision in the Social Security system, involving early benefits for disabled widows, that hasn’t resulted in a net increase in the burden of government.

So what’s not to like about the plan?

Plenty. At least according to John Cogan of the Hoover Institution, who has a column warning that it is very unrealistic to hope that politicians won’t expand an entitlement program.

Mr. Rubio’s well-intentioned plan begins by promising a small, carefully targeted benefit and assuring us that it won’t add to the long-run public debt. But history demonstrates that is how costly entitlement programs begin. …New programs initially target benefits to a group of individuals deemed particularly worthy at the time. Eventually the excluded come forth to assert that they are no less worthy of aid and pressure lawmakers to relax eligibility rules. …The broadening of eligibility rules brings yet another group of claimants closer to the boundaries of eligibility, and the pressure to relax qualifying rules begins all over again. The process…repeats itself until the entitlement program reaches a point where its original noble goals are no longer recognizable. …Medicaid and food-stamp programs followed a similar path. These programs were originally limited to providing health and nutrition assistance, respectively, mainly to supplement welfare cash assistance. Both programs now extend aid to large segments of the population who are not on cash welfare and in some cases above the poverty line. Medicaid assists 25% of the nonelderly population. Food stamps pay a major part of the grocery bills for 14% of the nonelderly population. …For more than 200 years, no entitlement program has been immune from the expansionary pressures…and there is no earthly reason to think Mr. Rubio’s plan will prove the exception.

Here’s my two cents on the topic (the same points I made when addressing this issue earlier in the year).

  1. From a big-picture philosophical perspective, I don’t think the federal government should have any role in family life. Child care certainly is not one of the enumerated powers in Article 1, Section 8, of the Constitution. Proponents of intervention routinely argue that the United States is the only advanced nation without such a program, but I view that as a feature, not a bug. We’re also the only advanced nation without a value-added tax. Does that mean we should join other countries and commit fiscal suicide with that onerous levy?
  2. Another objection is that there is a very significant risk that a small program eventually become will become much larger. …once the principle is established that Uncle Sam is playing a role, what will stop future politicians from expanding the short-run goodies and eliminating the long-run savings? It’s worth remembering that the original income tax in 1913 had a top rate of 7 percent and it only applied to 1/2 of 1 percent of the population. How long did that last?
  3. Finally, I still haven’t given up on the fantasy of replacing the bankrupt tax-and-transfer Social Security system with a system of personal retirement accounts. Funded systems based on real savings work very well in jurisdictions such as AustraliaChileSwitzerlandHong Kong, and the Netherlands, but achieving this reform in the United States will be a huge challenge. And I fear that battle will become even harder if we turn Social Security into a piggy bank for other social goals. For what it’s worth, this is also why I oppose plans to integrate the payroll tax with the income tax.

My goal today is not to savage Sen. Rubio and Rep. Wagner for their proposal. For all intents and purposes, they are proposing to do the wrong thing in the best possible way.

If it’s a choice between their plan and some as-yet-undeveloped Trump-Pelosi tax and transfer scheme, the nation obviously will be better off with the Rubio-Wagner approach.

But hopefully we won’t be forced to choose between unpalatable and awful.

P.S. This debate reminds me of the tax reform debate in 2016. Only instead of doing the wrong thing in the best possible way, Senators Rand Paul and Ted Cruz had tax plans that did the right thing in the most risky way.

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Back in 2015, I wrote some columns about policy differences with folks who normally would be considered allies.

  • In Part I, I defended the flat tax, which had been criticized by Reihan Salam
  • In Part II, I explained why I thought a comprehensive fiscal package from the American Enterprise Institute was too timid.
  • In Part III, I disagreed with Jerry Taylor’s argument for a carbon tax.

Now it’s time for another friendly spat.

A handful of right-of-center groups and individuals have decided to embrace a new entitlement for paid parental leave.

Such as the Independent Women’s Forum.

…the United States is the only industrialized nation that does not mandate or subsidize at least some form of paid parental leave. …there is a way for the federal government to provide paid parental leave to every worker in the United States at no additional cost: offer new parents the opportunity to collect early Social Security benefits after the arrival of their child in exchange for their agreeing to defer the collection of their Social Security retirement benefits. …New parents deserve this choice.

Along with the American Enterprise Institute (cooperating with the left-leaning Urban Institute).

…public interest in creating a federal paid family leave policy has grown. …we came up with a compromise proposal… Its key elements are benefits available to both mothers and fathers, a wage-replacement rate of 70 percent up to a cap of $600 per week for eight weeks, and job protection for those who take leave. It would be financed in part by a payroll tax on employees and in part by savings in other parts of the budget. …we felt an obligation…this was better than doing nothing when the US is the only developed nation without a national paid leave policy.

And Ramesh Ponnuru of National Review.

The more I’ve followed the debate, the more I’ve supported the idea. …there are certain similarities between the personal-account and paid-leave ideas that ought to reduce conservative skepticism of the latter. …there’s a mental block that’s keeping the paid-leave objectors from seeing how much these debates have in common.

Kristin Shapiro of IWF and Andrew Biggs of AEI elaborated on a version of this idea in a column for the Wall Street Journal.

The U.S. is the only industrialized nation without a law guaranteeing workers paid parental leave. The idea has broad public support, but how to pay for it? One idea is to mandate that employers fund it, but economists find employers offset the cost by reducing wages for female employees. …Our proposal is simple: Offer new parents the opportunity to collect early Social Security benefits for a period—say, 12 weeks—after the arrival of their child. To offset the cost, parents would agree to delay collecting Social Security retirement benefits… We estimate that to make the Social Security program financially whole, a parent who claimed 12 weeks of benefits would need to delay claiming retirement benefits by only around six weeks. …This idea should be considered as Congress turns to entitlement reform. It’s a fiscally responsible opportunity to help parents and children.

All of this sounds nice, but there are several reasons why I’m very skeptical.

But let’s first distinguish between a very bad idea and a somewhat bad idea. The AEI-Urban scheme for a payroll-tax-funded paid leave program is the very bad idea. The United States already has a baked-in-the-cake entitlement crisis, so the last thing we need is the creation of another tax-and-transfer program.

So I’ll focus instead on the IWF-designed plan to enable parents to get payments from Social Security when they have a new child.

I have three objections.

  1. From a big-picture philosophical perspective, I don’t think the federal government should have any role in family life. Child care certainly is not one of the enumerated powers in Article 1, Section 8, of the Constitution. Proponents of intervention routinely argue that the United States is the only advanced nation without such a program, but I view that as a feature, not a bug. We’re also the only advanced nation without a value-added tax. Does that mean we should join other countries and commit fiscal suicide with that onerous levy?
  2. Another objection is that there is a very significant risk that a small program eventually become will become much larger. I haven’t crunched the numbers, but I assume the plan proposed by Shapiro and Biggs is neutral. In other words, the short-run spending for parental leave is offset by future reductions in retirement benefits. But once the principle is established that Uncle Sam is playing a role, what will stop future politicians from expanding the short-run goodies and eliminating the long-run savings? It’s worth remembering that the original income tax in 1913 had a top rate of 7 percent and it only applied to 1/2 of 1 percent of the population. How long did that last?
  3. Finally, I still haven’t given up on the fantasy of replacing the bankrupt tax-and-transfer Social Security system with a system of personal retirement accounts. Funded systems based on real savings work very well in jurisdictions such as Australia, Chile, Switzerland, Hong Kong, and the Netherlands, but achieving this reform in the United States will be a huge challenge. And I fear that battle will become even harder if we turn Social Security into a piggy bank for other social goals. For what it’s worth, this is also why I oppose plans to integrate the payroll tax with the income tax.

Now let’s see what others have to say about a new entitlement for parental leave.

Veronique de Rugy of Mercatus explains for National Review why Ramesh’s support for a new federal entitlement is the wrong approach.

…we don’t currently have a national parental-leave entitlement. Yes, the plan he’s talking about isn’t as bad as what Hillary would propose, but it still assumes that the federal government should be playing a role in this. Let’s not pretend otherwise. It relies on the government-run Social Security system, and it increases spending for a good while. That’s regress, not progress. And we also need to be realistic. Once the door has been opened, the Left will radically expand the scheme in ways that none of us like. And, to be honest, I can already hear future conservatives demanding that the program be expanded because parents who have to retire a few months later because they use paid leaves pay “a retirement penalty” compared to non-parents. …my point of reference for judging this plan is economic freedom and smaller government involvement. If you prefer more pro-family benefits even at the risk of growing the government, then we won’t agree.

Writing for Reason, Shikha Dalmia also is a skeptic.

…this is a flawed proposal that’ll do more harm than good, including to its intended beneficiaries. …The scheme will incentivize more workers to take off and for longer periods of time. This will be especially disruptive for small businesses and start-ups that operate on a shoestring budget and can’t spread the responsibilities of the absent workers across a large workforce. They will inevitably shy away from hiring young women of childbearing age. This will diminish these women’s job options. …Furthermore, it isn’t like Social Security has a ton of spare cash lying around to dole out to people other than retirees. The program used to generate surpluses when its worker-to-retiree ratio was high. But this ratio has dropped from 42 workers to one retiree in 1945 to less than four workers per retiree now. And even though payroll taxes have gone up from 2 percent at the program’s inception to 12.6 percent now, the system is still taking in less money than it is paying out in benefits, because of all the retiring baby boomers. …It is also beyond naïve to think that once the government is allowed to dip into Social Security to pay for family leave at childbirth, it’ll simply stop there. Why shouldn’t families taking care of old and sick parents get a similar deal? Liberals are already floating proposals to use Social Security for student loan forgiveness. The possibilities are endless.

The Wall Street Journal opined against the idea last month.

…some in the ostensible party of limited government think this is the perfect time to add a new entitlement for paid family leave. …this would shift the burden of providing the benefit from the private economy to government. Academic evidence shows that family leave keeps employees in their jobs and can make them happier or more productive, which is one reason many companies pay for it. But why pay when the government offers 12 weeks? …This “crowd out” effect is a hallmark of all entitlements… Also strap yourselves in for the politics. Social Security started as a 2% payroll tax to support the elderly poor, but the tax is now 12.4% and the program is still severely under-funded.

The WSJ shares my concerns about a small program morphing into a huge entitlement.

No politician is going to deny leave to a pregnant 22-year-old merely because she hasn’t paid much into Social Security. Watch the social right demand a comparable cash benefit for stay-at-home moms, and also dads, or caring for an elderly dependent. And wait until you meet the focus group known as Congressional Democrats, who are already dismissing the proposal as unfair for forcing women to choose between children and retirement. Democrats will quickly wipe out the deferral period so everyone is entitled to leave now and get the same retirement benefits later. And once Republicans open Social Security for family leave, the door will open for other social goals. Why not college tuition? …every entitlement since Revolutionary War pensions has skied down this slope of inexorable expansion. Disability started as limited insurance but now sends checks to roughly nine million people. Medicaid was intended to cover the vulnerable and disabled but today dozens of states cover childless working-age adults above the poverty line.

If you want more information, I had two columns last year (here and here) explaining why federally mandated parental leave is a bad idea.

To put the issue in context, we should be asking whether it makes sense for the government to make employees more expensive to employers. And since this proponents will probably sell this new entitlement as being good for new mothers, it’s worth pointing out that even a columnist for the New York Times admitted that women actually get hurt by such policies.

Remember, if someone says the answer is more government, they’ve asked a very silly question.

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