Welfare State Paper 1 Paid Family Leave copy

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S R Larson Paid Family Leave Wyoming Prosperity Figure 4 Gender Wage Gap (grey, percent, left); Generosity Index (green, right) 40 38 36 34 32 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2 0 0.475 0.450 0.425 0.400 0.375 0.350 0.325 0.300 0.275 0.250 0.225 0.200 0.175 0.150 0.125 0.100 0.075 0.050 0.025 0.000 Sources: OECD Family Policy Database, tables PF 2.1A (Generosity Index raw data) and the OECD Gender Wage Gap database. Once again, there is no correlation between the generosity of paid-leave programs and the ability of mothers to stay on the labor market. Taken together, the academic literature and the experiences from Canada and California fail to establish any positive effects from paid family leave on maternal employment or gender equality in earnings. This review of European data is equally inconclusive. The absence of conclusive evidence should be a legislative deterrent to paid-leave programs: it would be irresponsible to create a major entitlement program the effects of which are at best indeterminate. unchanged over sustained periods of time. Therefore, the Index should not change much over time, making it reasonably comparable to Gender Wage Gap data from the previous year. 22
S R Larson Paid Family Leave Wyoming Prosperity Paid family leave: not for America Even if there are no detectible advantages to paid family leave programs, an argument could be made for a program based on fiscal considerations. The metaphorical sales pitch for the EILB program over the FAMILY Act is that the former would be less fiscally burdensome; by implication, once it is created it would prevent the creation of a costlier program. In fact, in his August 15, 2016 introduction of the EILB, Ben Gitis specifically points out that the EILB is “much less costly than the FAMILY Act”. A similar fiscal argument seems to be built into President Trump’s paid-leave proposal. In his introduction of the White House’s FY2018 budget on May 23, 2017, Office of Management and Budget director Mick Mulvaney suggested that the cost of a federal paid-leave program would be offset by reductions in the cost of the unemployment-benefit program. 22 He did, however, not specify whether the offset would be complete or only partial. Fiscal impact: uncertain at best Given the federal government’s serious deficit problems, it is important to ask whether it is at all possible to create a federal paid family leave program without aggravating the deficit problem. This question has two parts, one immediately related to the fiscal mechanics of a paid-leave program; the other part is related to more broadly defined goals for paid-leave programs, such as the suggestion that they can be helpful to women in maintaining their ties to the labor market through maternity and parental leave. In other words: is it possible that a paid family leave program can be merited on, e.g., genderrelated grounds even if its fiscal impact is not for the better? The fiscal examination of an entitlement program inevitably takes place in the context of America’s recent fiscal experience with entitlement programs. Since President Johnson declared his War on Poverty in 1964 and created or expanded several entitlement programs, the federal government has run budget deficits almost uninterruptedly. After a surplus in 1969, the federal budget has only been in balance for four years (1998-2001). 23 This suggests a causal link between ambitious entitlement policies and a persistent deficit. President Trump’s budget does not give away many details on how his paid family leave program would be organized. It is therefore difficult to do any qualified estimates of its budgetary impact. The program-specific numbers in the budget are: • Provision of benefits; Table S-6, p. 35; • Cost-reduction estimates in the current unemployment program; these estimates result from the provision of “re-employment services” related to eligibility assessments; Table S-6, p. 35; • An estimate of future receipts, ostensibly from a dedicated payroll tax; Table S-6, p. 39; • Contributions to the budget deficit; Table S-2, p. 26. 22 Please see: https://www.whitehouse.gov/featured-videos/video/2017/05/23/briefing-officemanagement-and-budget-director-mick-mulvaney 23 Office of Management and Budget, Historic Table 1.1: Summary of Receipts, Outlays, and Surpluses or Deficits. Available at http://omb.whitehouse.gov 23
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