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Marco Rubio’s Paid Family Leave Plan May Not Work

Paid family leave is having a moment. Democrats and now some Republicans, including presidential hopeful Marco Rubio, want to give more workers the opportunity to take time off to care for a new baby or an ailing relative, all while still collecting a paycheck. Yet conservatives face a conundrum: how to expand paid leave without raising taxes or stipulating new regulations. Rubio’s plan avoids doing so, but at a cost — policy experts say it might not expand paid family leave all that much.

Currently, the United States is an extreme international outlier on lack of paid family leave and is the only Organization for Economic Cooperation and Development country not to mandate paid maternity leave. The Family and Medical Leave Act, passed in 1993, gives employees up to 12 weeks of unpaid leave to care for a new child or a sick family member.1 Only 13 percent of workers at private companies get paid family leave as a benefit from their employer.

Rubio’s paid family leave plan has been touted as the first of its kind for a GOP presidential candidate, which makes it significant on its own. “The fact that you have a Republican presidential candidate talking about paid family leave is important. It says that there is a widespread recognition of its importance,” said Christopher Ruhm, an economist at the University of Virginia and an expert in the economic effects of paid family leave policies.

A majority (67 percent) of American adults support paid time off for workers after the birth of a child, according to an AP-GfK poll conducted last year. Although Democrats are most enthusiastic (with 82 percent in favor), majorities of both Republicans and independents support paid leave, too.

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A New York Times/CBS News poll released in June 2015 found similar bipartisan support: 88 percent of Democrats and 71 percent of Republicans favored “requiring employers to offer paid leave to parents of new children and employees caring for sick family members.”

“If you actually talk to voters, this is not a partisan issue — it polls extremely well across partisan lines,” said Sarah Jane Glynn, director of women’s economic policy at the Center for American Progress.

Of course, support for a policy in theory doesn’t equate to support for a specific proposal or piece of legislation, and policymakers disagree on how to expand paid family leave. Most Democrats have rallied behind the stalled FAMILY Act, sponsored by Sen. Kirsten Gillibrand and Rep. Rosa DeLauro. Under their plan, qualified workers would receive up to 12 weeks of paid leave to care for a new child or ailing family member. When on leave, employees would receive 66 percent of their wages, up to about $1,500 per week. They would fund this benefit through a 0.4 percentage point increase in payroll taxes (split evenly between employee and employer) and would set up a separate Social Security-like trust fund to manage it.

The left-leaning Center for American Progress estimates that the FAMILY Act would make 77 percent to 84 percent of all U.S. workers eligible for paid leave; however, the economic effects stemming from higher payroll taxes, both on businesses and employees, are uncertain.

Sanders and Clinton largely agree with the benefits offered in the FAMILY Act, but Clinton disagrees on how to fund them. Clinton, who has pledged not to raise taxes on middle-class households, prefers a tax on wealthier Americans, rather than a broad-based payroll tax increase.

Republicans have their own favored bill: The Strong Families Act, sponsored by Sens. Deb Fischer and Angus King. Rubio’s plan, which grants nonrefundable tax credits to employers that offer paid family leave, is largely modeled off it.

In a speech unveiling the plan in September at the Values Voter Summit, a gathering of social conservatives, Rubio was clear: his plan would not be a mandate on businesses. Instead, he proposes an employer tax incentive, or a subsidy to encourage businesses to offer paid leave to their employees. Specifically, his plan would give companies a 25 percent nonrefundable tax credit for offering four to 12 weeks of paid leave. In theory, offsetting the cost to businesses for paid leave would push more companies to offer it.

But that’s not how employer tax subsidies often work out. “As with all tax-credit programs, at the margin it probably won’t get most employers to change,” said economist Aparna Mathur, who is affiliated with the conservative-leaning American Enterprise Institute. She was skeptical that Rubio’s plan would compel companies not already doing so to offer paid leave. For many tax incentives, “most existing evidence indicates that companies would be doing it anyway,” she said, pointing to the research and development tax credit (which lets businesses deduct R&D investments from their tax bill) as an example. In other words, Rubio’s plan might just subsidize companies that already offer paid family leave. Still, Mathur said it was a “step in the right direction.”

The Rubio campaign declined to respond specifically to criticism of his plan’s effectiveness, but communications director Alex Conant said, “Marco is open to other proposals, so long as they do not raise taxes or create new mandates.”

Syracuse economist Sarah Hamersma studied the effect of two tax credits initiated in the 1990s to encourage businesses to hire disadvantaged workers: the Work Opportunity Tax Credit and Welfare-to-Work credit. Her research concluded that those tax incentives were “vastly underutilized” and ineffective at encouraging hiring in the targeted groups.

Although her work is frequently cited by critics of Rubio’s proposal, Hamersma sees the policies as apples and oranges. The employer subsidies she studied were trying to get firms to hire certain people, and the paid family leave credits would be “pushing for a more subtle behavioral change,” she said; that is, the credits would apply to workers a firm has already hired (and hence pose no “risk” to the firms using the credit). But because the plan offers only a 25 percent credit, “I’d be surprised if it made a huge difference” in increasing paid family leave coverage, she said.

Whether or not Rubio’s plan is effective at expanding paid family leave, both conservatives and progressives agree that paid family leave is becoming more popular among voters. “Up until this point, paid family leave has been a Democratic issue, but going forward it’ll be a bipartisan issue,” said W. Bradford Wilcox, a sociologist at the University of Virginia who is also affiliated with the American Enterprise Institute.

Rubio’s proposal is “not my favorite,” the Center for American Progress’s Glynn said, as it falls short of being comprehensive. “But that he’s talking about it at all reflects a real shift.”

Disclosure: The author is a new-ish dad who gratefully took a month of paternity leave.

Footnotes

  1. Only 60 percent of U.S. workers are covered by the FMLA. For an employee to be eligible for FMLA benefits, he must have worked for his employer for at least 12 months; he must have worked at least 1,250 hours in the past year; and the employer must have at least 50 employees.

Andrew Flowers wrote about economics and sports for FiveThirtyEight.

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