How paid leave for government workers will pay off

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When the bipartisan defense spending bill is signed into law this week, the U.S. will become the last rich country on earth to provide federally mandated paid family leave. While it only affects about 2 million government workers, this is a welcome, long-overdue step. And the real work is just beginning.

For nearly three decades, the Family and Medical Leave Act has given certain employees 12 weeks of unpaid leave for birth or adoption, or addressing serious medical needs. Even this minimal baseline was tough to establish: The legislation was vetoed twice before getting passed by President Bill Clinton in 1993. Detractors feared it would raise taxes and hurt businesses.

It makes sense that some bosses would bristle at the idea of shelling out paychecks to absent workers. But a growing body of research indicates that offering family leave doesn’t actually hurt the bottom line, and may even pay off in the long run. Just look at how things have played out in California. It’s one of a handful of states, including New Jersey and Rhode Island, that opted to offer its own paid family-leave program in the absence of a federal standard. More than 90% of companies surveyed in a 2011 study of California businesses reported “no noticeable effect” or a “positive effect” on profitability and performance as a result of the state law.

While paying for temporary coverage and medical benefits can add up, recruitment is also expensive. Replacing an employee who leaves can cost a business about 20% of that worker’s salary, according to the Center for American Progress. The probability a first-time mother quits her job after giving birth is less than 3% if she has paid leave, compared with 34% if she doesn’t. When Google Inc. increased its leave policy to 18 weeks from 12, for example, the number of mothers who quit fell by 50%. Several other studies also show that paid leave makes new mothers more likely to stay in the workforce.

In passing this legislation, the government has set a bright red line for businesses to meet and surpass; just 18% of private-sector employees had access to paid family leave in 2019, according to the Bureau of Labor Statistics.

But there’s more to be done. The bill offers 12 weeks, which is low for a wealthy nation like the U.S. A majority of countries give mothers 14 weeks or more.

Some companies already offer generous policies. Netflix Inc.’s may be the most unusual among them: “Our parental leave policy is: ‘take care of your baby and yourself,’” according to the company’s website, without specifying a limit. Parents tend to take four to eight months, it says. Etsy Inc. and Spotify Technologies SA offer as much as six months, while Goldman Sachs Group Inc. announced in November that all parents can take 20 weeks of paid leave, regardless of gender or caregiver status. Benefits are even improving for hourly workers: Walmart Inc. announced last year that it would offer 10 weeks of paid maternity leave and six weeks of parental leave to full-time employees once they’ve put in 12 months at the company.

The idea of paid leave is overwhelmingly popular: 82% of Americans support it for women and 69% for men, according to the Pew Research Center. Thanks in part to Ivanka Trump, there’s even some bipartisan consensus in Washington.

When you consider the staggering cost of infant care in the U.S., it’s easy to see why. In my home state of New Jersey, for example, families spend an average of $12,988 a year hiring caretakers for their newborns, the Economic Policy Institute found. That’s just hundreds of dollars shy of in-state tuition for a four-year public college, and would eat up 62% of the annual income for a minimum-wage worker.

Generous parental leaves from banks and tech giants can help relieve this burden for those lucky enough to be employed there, but most Americans aren’t working on Sand Hill Road or Wall Street. And well over 100 million people don’t work for Uncle Sam, either. That's why the next logical step would be to expand the federal policy to the millions of employees it doesn’t include.

Bloomberg News