The FAMILY Act is smart politics, but bad for business

On Sep. 18, Sen. Kirsten Gillibrand (D-N.Y.) condemned America’s lack of mandatory paid leave for women. “Pakistan and Afghanistan [which] don’t even educate their girls have more paid leave than America,” she declared. In both those “progressive” nations, female employees are entitled to 12 weeks of paid maternity leave at 100 percent wages; at least, they are entitled to it “on paper.” In America, the Family and Medical Leave Act of 1993 provides 12 weeks of unpaid family leave to workers at businesses with 50 or more employees. A few states have adopted mandatory paid leave policies.

{mosads}Gillibrand is the Senate’s main cheerleader for the Family and Medical Insurance Leave Act (FAMILY Act). Both the Senate bill (S. 1810) and the identical House one (H.R. 3712) were introduced on Dec. 12, 2013. Both were referred to committee, where they remain.

The FAMILY Act seeks to create a national insurance program for paid family medical leave. The program would be an independent trust fund under the Social Security Administration (SSA), which would collect money and administer benefits. Each employer and employee would pay into the fund an amount that is 0.2 percent of the latter’s wages. Qualifying employees would be entitled to a family and medical leave payment for a period lasting one year, during which no more than 60 days could be taken. The payment would equal 66 percent of a person’s usual monthly wage, up to a maximum of $4,000/month, and would be indexed for inflation.

As with ObamaCare, what could go wrong?

The proposed act imposes costs that could sink marginal businesses, especially smaller ones. All employers would be required to pay into the fund, regardless of their size. All workers, including part-time ones, would be included. And, yet, many workers became part-time because businesses could not afford to pay the ObamaCare coverage mandated for full-time ones. Many seasonal workers would also be covered, even if they are unemployed. Businesses with thin profits, like family farms, may be unable to absorb that cost and uncertainty. The act will become an engine of unemployment.

Women, the young and the inexperienced will be harmed most. Women are the primary caregivers in most situations. This means it will be more expensive to hire them than men because they are more likely to take paid leaves that require paid replacements. The young and inexperienced often accept less pay or benefits in order to get a work background. The more expensive these workers become, the less reason businesses have to prefer them over experienced applicants.

The FAMILY Act is also punitive against specific people. Businessmen who now provide paid leave would still be required to pay the SSA. The self-employed would be stripped of choice about participating or self-insuring. Taxes are likely to increase since the “employer” side of the fee for public workers would come from tax funds.

The opportunity for abuse is incredible. In a February 2014 FAQ, an enthusiastic National Partnership for Women and Families (NPWF) explained reassuringly, “the fraud and abuse prevention measures … are similar to those for Social Security.” But, as Fox News reported on Oct. 8, 2013, “A two-year investigation by the Senate Permanent Subcommittee on Investigations has found widespread fraud in the Social Security Administration’s Disability Program.” Moreover, the next line of the NPWF FAQ presents the wrist-tap to be used against abusers. “If a person is caught lying to receive benefits, they will be banned from the program for one year.”

Finally, as Gillibrand seems fond of saying, for an employee who makes the median annual wage of $32,196, the cost will be $1.24 a week — “similar to the expense of a cup of coffee.” But the deficit-addicted federal government always understates costs; it always overspends on programs, and usually dramatically so. Assurances of coffee-money costs and “revenue neutral” spending are as likely to be true of the FAMILY Act as it is of other programs. Not at all.

The language of the act is gender neutral. The press statements and events promoting it are not, because Democrats know women are key to their political existence.

Gillibrand’s histrionic statement came during a Washington event on women’s economic security that was also attended by three senior Democratic women: House Minority Leader Nancy Pelosi (Calif.); Sen. Patty Murray (Wash.); and putative residential candidate and former Secretary of State Hillary Clinton. The alleged economic inequality of women will form the core of any Democratic presidential campaign, but especially that of Hillary. It is a smart strategy, quite apart from whether the FAMILY Act can pass.

McElroy is a research fellow at the Independent Institute.