Academic journal article AEI Paper & Studies

Affordable and Targeted: How Paid Parental Leave in the US Could Work

Academic journal article AEI Paper & Studies

Affordable and Targeted: How Paid Parental Leave in the US Could Work

Article excerpt

Executive Summary

Paid parental leave, which refers to compensation for time off from work to care for a new child, can promote family well-being and support continued employment. Yet, too common are stories of parents who must return to work too quickly or lose their job entirely upon the birth of a new child because they lack paid leave. Work-related compensation of this type is typically left to the decision-making of private employers and their workers. But for a variety of reasons, the private market does not provide paid parental leave to all workers. According to US Census data, approximately 50 percent of workers have access to some level of paid leave for the birth or adoption of a new child, but wage earners in the bottom of the income distribution are the least likely to receive any paid time off. (1)

In this paper, we propose an affordable federal paid parental leave program, targeted to low-income families. By ensuring paid leave for the most vulnerable and the least likely to receive it through the private market, a government-supported paid leave program would increase access to paid time off from work to care for a newborn or newly adopted child. Income testing the program would ensure that government assistance is well targeted to those who need it the most, while not displacing what is already available in the private market.

This proposal follows up on the American Action Forum's proposed Earned Income Leave Benefit (EILB), a highly targeted program that would provide paid parental, family care, and medical leave to workers in low-income households. In this paper, we narrow our focus to paid parental leave for the birth or adoption of a new child and outline a proposal to provide paid leave to low-income and lower-middle-income working households. This proposal is intended to supplement what the private market already provides, as well as to offer job protection and paid leave to those who do not currently receive it.

Like the EILB, the total benefit would be based on household earnings. Only households with sufficient work histories and incomes below a certain threshold would be eligible. We expand the parameters so that a larger number of workers would be eligible for benefits, while remaining targeted on low-income and lower-middle-income households. This not only makes it better targeted than universal programs, but also ensures that it is cost-effective. Based on our estimates, the income-tested paid parental leave program we outline would have the following impacts:

* 57.1 million low- and middle-income workers, almost 40 percent of civilian employment, would gain access to 12 weeks of job-protected, paid parental leave;

* Each participating household would receive $343.34 per week on average;

* The federal government would spend approximately $4.3 billion annually on the program's benefits, assuming that each year 2 million covered workers would have a new child; and

* All benefits would go to workers in households under 325 percent of the federal poverty threshold (approximately $62,000 per year for a family of three).

No parents are immune from difficult decisions surrounding time off from work after the birth or adoption of a child. These difficulties are compounded for low- and lower-middle-income households who are not only the least prepared to handle income loss, but also the least likely to receive pay while they take time off to care for their child. First-time parents, particularly low-income mothers, often find no other option than to quit their jobs to care for newborn children, even though work is their most effective path to self-sufficiency. An income-tested paid parental leave program would effectively target these workers so they can raise healthy children and remain attached to the labor force.


Recently, considerable interest in paid parental leave has emerged in the United States. …

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