Democrats are back in Washington this week to review their $ 3.5 trillion reconciliation bill in days, including a sweeping government foray into American work and family life. With the stakes so high, we’ll be spending the next few days telling you more about these vast new programs.
Start with the new right to paid vacation. The Ways and Means Committee bill directs the Treasury Department to implement a payment program of up to 12 weeks leave for all workers, including the self-employed. It is not a maternity benefit, but a comprehensive program for both sexes to care for new children or a sick parent “by blood or affinity”. Benefits are expected to replace about two-thirds of wages on average.
A White House fact sheet laments that “nearly four out of five private sector workers do not have access to paid leave”. But this Bureau of Labor Statistics factoid does not count paid time off, disability insurance, or other benefits. A 2017 Pew Research survey found that about two-thirds of workers who took family or medical leave in the previous two years received at least some compensation. Some 55% of companies reported offering paid maternity leave in a 2020 Society for Human Resource Management survey.
Democrats say their bill will ensure everyone is covered, especially low-income workers. But workers who live paycheck to paycheck can’t afford to take time off for a partial wage replacement, even the 85% of the first $ 290 in weekly wages promised by Democrats. Senate reconciliation rules are unlikely to allow Democrats to extend job protection to workers who take time off, making low-income employees even less likely to enroll.
The dirty secret is that government leave programs end up helping middle-income people who can live on part-pay. A 2013 analysis in California, which offers a state benefit, found that less than 4% of claimants earned less than $ 12,000; over 20% won north of $ 84,000. Based on the Ways and Means Bill’s formula, a new parent earning $ 200,000 per year could be eligible for more than $ 1,000 per week for 12 weeks each year. It doesn’t matter if that person is married to another six-figure employee, who can also claim the leave.
More surprisingly, Democrats want the government to take charge of the benefits offered in the private economy. The Treasury can reimburse employers who provide full paid holidays up to 90% of average costs. Thus, taxpayers will subsidize the leave of management consultants, accountants and other well-paid professionals.
This is all the more regrettable as employers have rushed to extend paid holidays, including for hourly workers. Paid time off can reduce turnover and companies are encouraged to offer it. No company will launch a private program if this bill passes. Some may refer workers to the federal program and then top up their wages. States that have implemented their own programs (New Jersey, for example) may also be reimbursed and will surely use payroll taxes they have collected to fund other expenses.
By the way, it will be a compliance and administrative nightmare. The Treasury will only have two years to put the program in place, with a salary audit and an appeals process. Small businesses are offered grants to “help cover the costs associated with replacing an employee” on leave, throwing money at the labor market disruption Democrats know they are creating.
All of this adds up to a huge new unfunded right, even before the inevitable expansions. An earlier version, the Family Act, would have cost more than $ 540 billion over a decade, according to the Congressional Budget Office. This bill at least had the honesty to propose a new 0.4% payroll tax, even if it still did not cover all costs. Democrats are now peddling the fiction that workers will never pay for this irrevocable right.
In the next few days you will hear that the United States is the only developed country that does not offer paid time off. What will not be mentioned: These policies have not kept their promises such as increasing birth rates or reducing career income gaps between men and women. Or that they are financed by high taxes on middle incomes and value-added taxes that hit the poor.
The promoters also claim that the program will make workers more attached to the workforce. Yet the bill does not even state that workers must be currently employed receive benefits; they only need a history of de minimis wages. Democrats in committee rejected a GOP amendment to demand more work history.
No one wants to force low-income women back to work two weeks after giving birth, and many voters will assume Democrats are just widening the social safety net. But Americans will pay for this right for decades to come, as Democrats take on even more fundamental responsibility in the private economy and make the middle class even more dependent on government.
Copyright © 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8
Published in the print edition of September 21, 2021.