At a hearing on January 14, the D.C. City Council heard from a number of researchers who testified about the estimated cost of implementing the proposed Universal Paid Leave Act of 2015. By allowing up to 16 weeks of paid leave, D.C.'s proposal is very generous--by U.S. standards--and has attracted national attention. The researchers' cost estimates ranged from $281 million to upwards from $1 billion annually. Why such a large range? As is often the case with economic analysis, the devil is in the details, or more specifically, the assumptions.
The Institute for Women's Policy Research (IWPR) estimated the cost would be at the low end, $280.8 million, affordable enough to be covered by less than one percent of payroll. IWPR's testimony was based on an economic model that has been developed across 15 years and is the only estimate presented to the D.C. Council that relies on the best available data on who takes leave and for how long.
The higher estimates from the other researchers--who have expertise on taxes and regional business, not paid leave--fail to take age, gender, and income sufficiently into account. As a result, they assume that many more workers would take leave and would take substantially more leave under the DC program than they do now. These are not reasonable assumptions.
First, let's consider who will take leave through the public program. Almost every employee at some point in his or her work life experiences an extended own illnesses, the serious illness of a loved one, or the birth or adoption of a child, but typically not all in the same year and certainly not every year. In a single year, about 11 percent of District workers take some form of leave. Around two-thirds of leaves currently taken in DC are for one's own illness; one in four leaves are to care for other family members; and, perhaps surprisingly, the lowest share of leaves taken (13 percent) are maternity and bonding leaves. We estimate the number of these leaves will increase under the Council's program, but not drastically.
The proposed DC bill provides full wage replacement for workers earning less than $52,000 per year, and partial wage replacement for higher earners. Importantly, nearly half of DC workers have earnings over $52,000 and would receive less than full wage replacement; they may look to their employers, not the program, for the full wage replacement to which they have become accustomed.
Next, researchers must make a reasonable assumption for how long worker leaves will be under the new program. IWPR's model predicts a moderate increase in the length of leave--from 3 weeks to 4 weeks at the median--again, not a drastic increase. Half of workers taking leave would be expected to take 4 weeks or less.
While the proposed bill increases access to paid leave, especially to low-wage and part-time workers, job protection for taking leave would still not cover those employed by smaller establishments with fewer than 20 employees. Rhode Island, which recently implemented paid leave, found that over 40 percent of leave takers said they would not have used the program were it not for the job protection, indicating how highly workers value the right to return to their jobs.
There are many other reasons for workers not to take the full leaves for which they are eligible, including the reluctance to fall behind at work and the desire to advance in their career. Research on paid sick days has shown that, even when workers report that they have paid sick days, the typical worker misses only two days of work in a given year.
The final assumption to consider is crucial: what will men do when offered paid leave? Men are half of the city's potential leave-taking workforce. If men are offered greater access to paid leave, will they take it--and take the full amount--to bond with a new child or to care for a sick relative? In the first ten years of California's paid family leave program, men's proportion of leaves taken for family reasons climbed from 17 percent in 2005 to 30 percent in 2013. In Norway, where leave is nearly fully paid and taking leave is less stigmatized, only 21 percent of fathers took the maximum that was available to them in 2012.
Perhaps one of the most unrealistic assumptions made when estimating the costs of paid leave is that we live in a world where men are equally as likely as women to take leave for caregiving. By guaranteeing paid leave for all workers, we may get there one day.