Financing Child Care in the United States - Ewing Marion Kauffman ...

PUBLIC–PRIVATE PARTNERSHIPS EMPLOYER AND PUBLIC SECTOR PARTNERSHIPS
POPULATION SERVED
Employed women who become unable to work as a result
of pregnancy, and who were covered by a TDI plan, may
file for TDI benefits.
STRATEGIC CONSIDERATIONS
• The benefits available under TDI, though very limited,
can be an important source of support for unemployed
mothers with low to moderate incomes. When
combined with accumulated vacation and sick leave,
TDI benefits can help a mother to stay home with her
newborn child for several months.
• Partial wage replacement under TDI is an inexpensive
way to support parental leave, and one that allows the
cost to be shared by employers and employees. It
helps to keep many low–income women off welfare
and has not caused a significant economic strain on
employers. Although the New Jersey TDI claims load
has increased, the fund has remained solvent due in
part to the fact that the taxable wage base is adjusted
each year with increases in the average weekly wage.
Interest income on the fund also contributes to its
solvency.
• The cost of TDI benefits is considerably less than the
cost of subsidizing infant care for low— and moderate—
income families.
• Small–scale employers are particularly benefited by the
New Jersey approach to TDI. In 1952, 72 percent of
employees and 36 percent of covered employers were
covered under private plans. Over time, however,
smaller employers found that it didn’t pay to have a
private plan, and some private insurers found it was not
profitable enough to compete with the state. More and
more employers enrolled in the state plan. By 1994,
only 21 percent of covered workers and 3 percent of
covered employers used private plans. In 1998, 19
percent of employees and 3 percent of employers
were covered under private plans.
• There are real limitations to what TDI can do. TDI is
currently limited to a pregnancy–related “disability” that
is corroborated by a physician. It may not be used to
care for a newborn or an adopted child, and cannot be
used by a father or other family member (since by
definition, they did not become “disabled” by the
pregnancy). The New Jersey Legislature, however, is
currently considering legislation that would extend TDI
coverage. A 1577 is a pure TDI plan that would provide
replacement income for family members who must
leave employment temporarily to care for a newborn or
newly adopted child, or a seriously ill family member.
An alternative measure, A 2037, would provide TDI
coverage for a family disability and Unemployment
Insurance for birth and adoption.
OTHER SITES WITH SIMILAR STRATEGIES
At least five states in addition to New Jersey have
temporary disability insurance programs: Rhode Island
(funded by employee tax); California (funded by employee
contributions); New York (funded by employer tax or joint
employer/employee contributions); Puerto Rico (funded
by employers and employees), and Hawaii (funded by an
employer and employee tax). Additionally, more than half
of all workers in the United States receive TDI benefits
from their employer through private insurance plans.
CONTACTS
Gregory L. Williams
Senior Research Associate
New Jersey State Legislature
Office of Legislative Services, Central Staff
State House Annex, CN–068
Trenton, NJ 08625
Phone (609) 984 0445
Fax (609) 777 2998
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