Economy & Business

Don’t Force Employers to Provide Paid Parental Leave

(Photo: Andrey Popov/Dreamstime)
No one has more to lose from Trump’s plan than young working women.

Despite emerging as the loudest Democratic voice in the president’s ear, Ivanka Trump cannot seem to escape bitter criticism from the left. Last week, the Huffington Post branded Trump’s latest iteration of the president’s paid-parental-leave plan “a cruel joke,” while the estimable political reporters at Teen Vogue and Cosmopolitan have repeatedly slammed the First Daughter as “an insult to working women.”

As it turns out, they are right, albeit not for the reasons they think, for the younger, leftist Trump is proposing a terrible plan for young women who work.

The full details of the president’s plan, for which Ivanka publicly takes credit, remain unclear. But between what Ivanka has publicized in interviews and just two paragraphs in Trump’s 2018 proposed budget plan, we know that the plan will not exclude fathers (as a Trump campaign plan would have) and will require states to cover six weeks of paid leave using their unemployment insurance (UI) programs as a “base.” It will allegedly be “fully paid-for” by other reforms to these programs.

On its face, Trump’s plan will likely manifest itself as something resembling California’s state law. Current law uses revenue from payroll taxes to pay select workers a portion of their salaries during leave (the amount varies by income bracket). For example, workers making minimum wage receive 70 percent of their salaries during their leave, while higher earners get less.

States will have “broad latitude to design and finance the program,” per the budget plan. But the way unemployment insurance currently works is that employers have to pay higher taxes if more of their employees draw unemployment. If states apply this same principle to paid leave, Trump’s plan will create a perverse incentive to hire employees the least likely to use it.

This burden would fall the heaviest on young, working women. Increased regulations that make the potential cost of an employee higher than that of her job-market competitors almost always increase unemployment. Thus, any potential employee who employers think would be more likely to use paid leave would have a lower chance of getting hired. The Census Bureau finds that 18 percent of infants live only with their mothers, while just 3 percent live only with their fathers. This statistical discrepancy, combined with widespread American social beliefs that still encourage women to fulfill the majority of familial caregiving responsibilities, will render women a riskier bet for employers if Trump’s plan comes to fruition.

When companies, especially small businesses that employ half of the working population and often have extremely narrow profit margins, have to gamble on whether their UI taxes will be hiked because an employee took leave, they will likely pick the safest economic option. And because employers cannot legally ask women whether they plan on having children in the near future, paid parental leave can harm even young women who plan on delaying or forgoing motherhood for their careers’ sake.

Furthermore, Trump’s plan would likely follow the trajectory that nearly every major social program in modern American history has followed: expansion.

For a local example, last year San Francisco built on California’s law, requiring the city’s businesses to pay whatever portion of their workers’ salary the state law didn’t fund. (I.e.., since the state pays 70 percent of a minimum-wage worker’s earnings during leave, a private firm would need to pay the residual 30 percent.) An employer mandate like this would rig employment odds even further against women.

Trump’s plan will likely follow the trajectory that nearly every major social program in modern American history has followed: expansion.

While politicians, now on both sides, embrace the emotional appeal of this issue, economists regardless of political slant have maintained a consensus for decades. In 1989, Lawrence Summers of Harvard, the World Bank, and the Clinton and Obama administrations wrote: “Requiring employers to pay for employee leaves shifts their demand curve downwards. . . . Guaranteeing the benefit to employees shifts their supply curve downward by an amount equal to the value of the benefit. A new equilibrium level of employment and wages is reached, with lower wages and employment.” We would witness this effect to a moderate degree under the UI-based plan and to a massive one if, or when, paid leave expands to an employer mandate.

David R. Henderson of the conservative Hoover Institute concurs with Obamacare architect Jonathan Gruber’s assertion that “100 percent” of the economic burden of paid-parental-leave mandates on employers falls on young working women. Paid parental leave funded by a tax increase would produce more of a deadweight loss rather than a shifted burden, but this assumes that the government is willing and able to commit billions of dollars annually to a responsibility that has been relegated to private employers quite often in practice.

Americans saw this routine play out following the passage of the Americans with Disabilities Act of 1990. While the ADA outlined some overdue and useful provisions for increasing the accessibility of public facilities, it also vastly broadened the definition of “disability,” required greater and often unnecessary workplace modifications, and increased the legal risks of hiring an employee with a disability.

Between 1989 and 2000, the employment rate of men aged 16–64 with disabilities declined by more than a fifth, while the employment rate of men without disabilities held steady. For women, employment growth stalled among those with disabilities but continued for those without.

At many large corporations, employers have already begun to institute their own comprehensive paid-leave plans. Large, thriving firms such as Facebook and Bank of America, which invest heavily in their employees’ human capital, provide generous paid-leave plans and become more competitive in the job market as a result.

But what works for some companies should not be imposed on all. Smaller or more volatile businesses that may be subject to paid parental leave often cannot incur the same costs, nor should the federal government force them to. While it may be politically expedient to ignore basic economic facts and findings, paid parental leave defies theory and evidence and fails to provide actual benefits for young women. For every mother whom Trump’s policy gifts with a free lunch, it will handicap plenty of young women in more tenuous and vital stages in their careers.

So stop invoking feminism, Ivanka, when the economics simply do not add up, and actually let women work.

READ MORE:

Better Jobs, Opportunities for the Poor

The Middle Class Myth

On the Gender Gap, but Not the One You’re Thinking

— Tiana Lowe is an editorial intern at National Review.

Tiana LoweTiana Lowe is a senior pursuing her B.S. in economics and mathematics at the University of Southern California and a former editorial intern at National Review.

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