How to Do Paid Leave

Both Hillary Clinton and Bernie Sanders favor providing paid family leave. Sanders has endorsed Kirsten Gillibrand's FAMILY Act as his preferred instrument for doing so. Under the FAMILY Act, a 0.2% payroll tax would be levied and qualifying individuals would receive 66% of prior earnings (up to a point) for 12 weeks of time off. Clinton has provided an outline of her plan, which is the same thing as the FAMILY Act except, instead of a 0.2% payroll tax, there is a general assurance that taxes would be raised on the rich.

Problems with the FAMILY Act's Benefit Structure

Before getting into the tax question (which is where the two differ), it's useful to note that the FAMILY Act is not that great on the benefit side of things for the following reasons.

First, the FAMILY Act only pays out to people who have a sufficiently long record of earnings that they would be eligible for SSDI. This means that people who have children before accumulating an adequate earnings record would get nothing. So a non-trivial number of young parents especially will get nothing. This can be remedied by providing a minimum benefit level to those without a sufficient earnings record.

Second, the flat 66% earnings replacement rate is silly. The much better DC paid leave proposal has a 100% earnings replacement rate for the first $1,000 of average weekly earnings and a 50% replacement rate for the next $4,000 of average weekly earnings. This kind of "progressive" replacement rate is much better. Low-earners will have a difficult time trying to make it on 66% of their (already low) earnings right at the time that they have a big new expense (i.e. a baby). All paid leave proposals should at least have a 100% replacement rate up to some earnings level in order to ensure that low-earners can comfortably use the benefit.

Third, 12 weeks is not very much. The much better DC paid leave proposal is 16 weeks. This is a minor point as extending the amount of weeks in the future shouldn't be that hard (one hopes).

How to Fund

As I mentioned above, Sanders wants to fund paid leave with a 0.2% payoll tax and Clinton wants to fund it by increasing taxes on the top. Paid leave is a fairly cheap program and so either one is really fine. As I wrote earlier this month, for the US to get up to a respectable tax level, it will need to eventually raise taxes on the middle class. But in the short term, the US can grow the tax level at least somewhat by drawing only from the top.

Clinton has faced some heat for departing from the payroll tax model. In Slate, Bryce Covert provided the following objections:

  1. Using the income tax code instead of payroll taxes makes the program more vulnerable to fiscal policy changes.
  2. Using payroll taxes will cause the benefit to be seen more like Social Security and Medicare. These programs are less vulnerable as they "carry far less stigma because they are seen as something earned. People work and pay in, which makes them feel comfortable drawing on a benefit when the time comes." Using income taxes, however, will cause the benefit to seem like something one group funds another, playing into maker/taker rhetoric.
  3. Only taxing the wealthy "plays into the idea that paid family leave is a niche benefit, not something that benefits us all and that we should all shoulder." The problem here seems to be that it wrongly devalues paid leave in the public imagination.

Points (1) and (3) are well taken. But I have issues with point (2) that I want to hash out here.

Covert is correct to say that people seem to feel much more comfortable with our old-age welfare programs (Social Security and Medicare) than they are with most other welfare progams. She is also correct to say that this is, at least in part, because we tell them (and they feel like) they "paid for" the benefit through their taxes. But it doesn't follow from this that you should feed this faulty good-welfare/bad-welfare mentality. If anything, paid leave is a great opportunity to break that mentality up.

For starters, paid leave is crucially unlike old-age welfare in that it mainly happens in the early stages of working life.

It's easy (though a lie) to sell old-age welfare as stuff you paid into and are getting back, as it happens after your entire working career is over. But it's patently ridiculous to suggest that you "earned" 12 weeks worth of paid time off by contributing a measely 0.2% for a few years early in your career. The vast majority of what you contribute into the paid leave pot will come after you have already used it. In that sense, it is more like education (which is not funded with payroll taxes) than it is like old-age welfare.

Even if the "earned it through contribution" argument made sense for paid leave, it would still be bad to play into that in order to tag it as one of the "good" welfare benefits. The explicit goal of such tagging is to distinguish it from the "bad" welfare benefits, which is to say benefits received by low earners. Further entrenching that divide just further entrenches the humiliation and ostracism that our society (unjustly and incorrectly) heaps upon low earners. The main purpose of the "earned it through contribution" lie has always been to distinguish the welfare of the middle and upper class from the welfare of the lower class.

Instead of using the "earned benefit" rhetoric (which is both nonsensical and nefarious), we should describe paid leave in a totally honest way. You really are "mooching" when you are on paid leave. You are depending on the rest of the workforce to keep the economy humming and to produce enough for you and your family when you are out of the workforce taking care of a newborn. There is nothing wrong with that. That's what solidarity is all about: we produce for you when you need leave; you produce for us when we need leave.

I trust that universal public paid leave, once it's implemented, will be an incredibly popular benefit no matter how you fund it. It's just a nice thing to have and people will recognize it as such. Given its inevitable popularity, the left should use it as an opportunity to nudge people away from anti-welfare sentiment. Treating it as an "earned benefit" to specifically distinguish it from "bad welfare" does exactly the opposite: it reinforces anti-welfare sentiment by encouraging a mass delusion about what paid leave actually is.