The Corner

Politics & Policy

Never Let a Crisis Go to Waste

A man wears a mask to prevent exposure to the coronavirus while walking past the New York Stock Exchange in New York City, March 17, 2020. (Lucas Jackson/Reuters)

Most people agree that those who are sick should not go to work, both for their own welfare and to avoid spreading COVID-19 to others. One implication of this is that we must find a way to extend sick leave temporarily to workers who do not already have this benefit, but without imposing too much of a burden on their employers, who are likely already hurting right now.

Unfortunately, the one paid-leave proposal going through Congress at the moment doesn’t quite fit that description. The bill, called the Family First Coronavirus Response Act, passed the House last night without much resistance, as legislators are eager to do something, anything. It will likely face very little pushback in the Senate, especially since it has received the president’s endorsement. Below are some of the bill’s most problematic aspects.

First, the bill mandates both paid sick- and family-leave benefits for companies with fewer than 500 employees (some exemptions apply). While it only applies to coronavirus-related sick leaves taken during the next twelve months, I am concerned that once the crisis passes, Republicans may face intense pressure to make this change permanent. Democrats have long wanted to get this done. This could be their chance. Don Boudreaux and I explained here why this would be a mistake.

Second, the bill doesn’t just target the benefits to workers who don’t currently have sick leave or those who are actually sick. As it stands right now, it requires that companies with fewer than 500 employees extend two weeks of paid-sick leave at 100 percent of employees’ pay to all workers affected by “the pandemic, including those who are in quarantine, caring for family members with COVID-19, and those who have children whose schools or day-care centers have closed.” One can argue that this makes it easier for employees to take leave without having to get a doctor’s note. But let’s not pretend this is simply a “sick leave” provision.

The bill adds to those two weeks of sick leave another ten weeks of paid leave at two-thirds of employee pay for workers caring for children whose school or day-care has been shut down. This may make life easier for some employees, but at a dire cost to their employers.  Ten weeks of leave, on top of the other two weeks, means that employers could have to face significant and prolonged absences of their employees, making it harder for firms to meet their customers’ demands and to generate the revenues necessary to remain in operation.

But it could have been worse, as the Wall Street Journal explains:

In the original version, all the workers who received paid sick time would be eligible for another 10 weeks of paid leave at two-thirds pay, in what would have represented a major expansion of the Family and Medical Leave Act, the 1993 law that provides 12 weeks of unpaid leave to workers at larger companies.

On top of these problems is the fact that the payments from the federal government to companies will take the form of delayed tax credits. These delays in payments are likely to be a significant burden on companies, especially small businesses and franchises. Think about it this way: Employers could have to pay their absent employees for up to twelve weeks, only to get a tax credit months down the road. Not great.

And the cost of all of this, assuming that it really ends in 2020, is $104 billion according to the Joint Committee on Taxation. I assume we are financing all of this by adding on to our existing debt. It goes without saying that we would have been in a much better position to handle this extra spending — and everything else that Congress has in mind — had Uncle Sam practiced some fiscal austerity in the past.

As the bill stands now, it would empower the Department of Labor in this way: 

The Secretary of Labor is given the authority to issue regulations for good cause to: (1) exclude certain health care providers and emergency responders from the definition of eligible employee; and, (2) exempt employers with fewer than 50 employees from the requirements of Division C if such requirements would jeopardize the viability of the business as a going concern.

That’s good for small employers, franchises, and health-care employers. But how does that work? If it is on a case-by-case basis, the result could be a nightmare for those attempting to get exemptions. Also, what does it mean for sick employees?

This bill is now heading to the Senate, where it could be made worse, especially if senators extend the leave provision further, as the president suggested yesterday.

The spread of the coronavirus is a serious problem. But this crisis shouldn’t serve as an excuse to implement poorly designed policies such as this one. In fact, the more severe the crisis, the more caution is required, because the stakes are higher. Congress doesn’t seem to care, as they seem eager to support everything from bailouts to sending $1,000 checks to everyone without exception to a large paid-leave provision.

Incidentally, a few weeks ago, Jared Bernstein and his co-author suggested the very limited, targeted, and temporary provision of paid leave through states’ unemployment insurance programs. They wrote:

Employers would continue to pay workers who are prevented from working by the virus, through direct deposits or paychecks in the mail. They would report this to their state UI system, which would reimburse them through tax credits or direct payments and would in turn be reimbursed by the federal government. . .

This program would need to be strictly time limited — it is not intended to be permanent.

Though no policy is a free lunch, such temporary and targeted assistance seems like a better and less risky response during these panicked times than mandates and tax credits delayed for weeks on end.


Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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