Rhetoric vs. Reality: Paid Family and Medical Leave - Proposed Business Tax Credits and Pregnancy 401(K)s Fall Short for Working Families

by Sunny Frothingham; Sarah Jane Glynn

Aug 11, 2016

Access to comprehensive paid family and medical leave strengthens all American families because everyone potentially needs to take off from work at some point to recover from an illness, care for a family member, or welcome a new child. But the United States is the world's only advanced economy that does not guarantee some form of paid leave for workers. The result is that only 12 percent of private-sector workers in the United States have paid family and medical leave. In most American families, all the parents in the home are employed, meaning there is no full-time stay-at-home caregiver, and the majority of American families rely on a female breadwinner or co-breadwinner. Paid family and medical leave policies are already working across the United States, as cities, states, and individual employers embrace them. But without a national solution, millions of workers and their families are left out.

Paid family and medical leave is critical for the economic security of working families, and any viable proposal needs to be sufficiently robust to address the needs of working families. Unfortunately, some current proposals—such as business tax credits to incentivize paid leave and 401(k)-type accounts for families to save for their own parental leave—claim that they would help working families but do little to expand access to paid leave. Tax credits for businesses—including those proposed by the Strong Families Act, which was introduced by Sens. Deb Fischer (R-NE) and Angus King (I-ME)—are a common conservative alternative to comprehensive paid family and medical leave. These proposals, however, would be voluntary and fail to guarantee any additional access to paid leave for working families. Moreover, past experiences with business tax credits have shown that they are unlikely to significantly compel employers to change their policies.

Under another conservative alternative, workers would save up to fund their own paid family and medical leave for qualifying events, such as the birth of a child or a family illness, through "Personal Care Accounts." Workers could personally save up to the equivalent of 12 weeks of paid leave tax-free with contributions capped at $5,000 per year. Also known as a pregnancy 401(k), this proposal falls far short of what working families need. Workers who are able to save significantly are usually higher-wage earners—many of whom already have access to paid leave. In addition, since parents generally have their first child early in their working lives when they are earning the least—the average age at which a woman has her first child is 26—many families would have little opportunity to contribute meaningfully to a plan before needing to draw on it.

In 2014, the Center for American Progress and the National Partnership for Women & Families outlined the key features necessary in a national family and medical leave program. A comprehensive paid family and medical leave program must be available to all workers; cover serious family and medical needs; be affordable and cost effective; be inclusive of diverse families; and be accessible to workers without adverse employment consequences. Two potential options, including a social insurance model and a business-government partnership, would fit the criteria laid out by CAP and the National Partnership and expand paid family and medical leave broadly to ensure that every working family has a fair shot at economic prosperity. A legislative vehicle for the social insurance model can be found in the Family and Medical Insurance Leave, or FAMILY, Act—introduced by Sen. Kirsten Gillibrand (D-NY) and Rep. Rosa DeLauro (D-CT), along with 150 co-sponsors.

In order to parse which proposals would best suit the needs of working families and the U.S. economy at large, as well as to dispel misconceptions about paid family and medical leave, this issue brief examines the most frequent myths about paid family and medical leave.

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