Welfare State Paper 1 Paid Family Leave copy

S R Larson Paid Family Leave Wyoming Prosperity
The last item suggests a persistent deficit over the budget’s ten-year outlook. The annual deficit
forecast is $1-2 billion, which is insignificant compared to annual deficits of approximately $600
billion. However, compared to the expected benefits, averaging $1.85 billion per year, the
addition to deficit is noteworthy. In particular, it raises the question what would happen if the
paid-leave program, once created, was expanded by Congress.
This question is not strictly hypothetical. The numbers provided by the President’s budget
suggest that there is room for program expansion. According to the budget (p. 20), the proposed
program delivers on Trump’s campaign promise
with a fully paid-for proposal to provide six weeks of maid family leave to new mothers
and fathers, including adoptive parents, so all families can afford to take time to recover
from childbirth and bond with a new child without worrying about paying their bills.
If this paragraph is taken literally, the program is supposed to be open to parents of all newborn
and adopted children. This clearly implies significant expansion of the program in the future. The
budget suggests an average benefits cost of $1.85 billion per year. When divided among four
million children – the average annual number of live births in the United States – the average
paid-leave benefit a parent can collect will be $439, or $73 per week over the six-week eligibility
period.
According to the Bureau of Labor Statistics, in 2016 private-sector employees earned, on
average, $881.55 per week; under the assumptions above, the president’s program would replace
8.3 percent of average private-sector income.
It is unreasonable to expect that anyone would use a paid-leave program at such a low
replacement rate. To increase income replacement without increasing total benefits costs as
stipulated in the budget, the paid-leave program would have to come with significant access
restrictions. To replace 40 percent of average private-sector earnings, the program could only be
open to parents of 875,000 newborns (not counting adoptions); at a replacement rate of 60
percent, access would be restricted to the parents of 583,000 newborns.
Since there are no eligibility restrictions to the program, other than parents welcoming a new
child to their family, the very small size of the program seems to indicate significant expansion
over time. Therefore, the fact that the President’s budget predicts a permanent deficit in the
program already at this small size, is a matter of major concern for the future.
Concerns over the fiscal price of Trump’s paid-leave program reinforced by recent budget
forecasts. The Congressional Budget Office, e.g., predicts yet another decade of unending, even
increasing deficits. 24 So does the president’s budget for FY2018.
Of even more fiscal concern is the fact that Europe’s welfare states, which include longestablished
paid family leave programs, have suffered from persistent deficit problems and
unending economic stagnation for at least the past 25-30 years. 25 In fact, the deficit problems in
Europe are steadily getting worse. 26
While it is an open question exactly how deeply responsible the welfare state is for these
problems, the very fact that both the United States and Europe suffer from serious deficit
problems is reason enough to carefully examine the fiscal impact of a paid-leave program in the
United States.
24 See: https://www.cbo.gov/publication/52370
25 Larson, S: Industrial Poverty: Yesterday Sweden, Today Europe, Tomorrow America; Gower
Publishing, Aldershot, UK 2014.
26 Mitchell, D: Europe Is Facing a Fiscal Meltdown; Foundation for Economic Education, Sept. 19,
2016. Available at: https://fee.org/articles/europe-is-facing-a-fiscal-meltdown/
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