Paid Leave and Daycare: Luxuries of the Wealthy

Originally published in The Minskys by Lara Merling

The U.S. trails the rest of the world in benefits available to families. Currently, the only industrialized country that does not guarantee paid maternity leave for new mothers is the United States. While other countries offer generous paid parental leave and some form of childcare subsidies, the U.S. does not. This lack of policies to support working families widens economic inequality and limits opportunities of children not born in wealthy households.

Deficit hawks often use their concern for future generations as a basis to argue in favor of cutting entitlement programs such as Social Security. Instead of talking about cutting entitlements, the story should be about expanding them with programs that will actually help children, such as providing paid family leave for parents and addressing the rising costs of childcare. If our children are so important to deficit hawks, then why do they oppose policies that would actually have a positive impact on their future?

Various studies have pointed out the positive impact of paid parental leave on both the child and family’s health. Some of the known benefits are lower child mortality, lower rates of post-natal depression in mothers, and a greater likelihood that mothers will return to work. Particularly interesting is a study that points to higher educational attainments and incomes for children whose mothers had taken maternity leave.

In the United States, the Family Medical Leave Act (FMLA) offers 12 weeks of job-protected unpaid leave to eligible employees. To qualify for unpaid leave under the FMLA, an employee needs to have been working for over 12 months for a company that hires at least 50 people. While this might be a start, it leaves about half of the workers uncovered. Even for those who are covered by the FMLA, they must afford giving up their paychecks for those 12 weeks. The act does little to help those who are left out, or cannot afford to renounce their paychecks. This adds pressure on people at the lower end of the income distribution that might be pushed below the poverty line if forced to give up their incomes.

California, New Jersey, and Rhode Island are the only three states that offer paid family leave by building onto existing disabilities programs. These states labeled pregnancy as a “temporary disability,” which offered a path to receiving a wage replacement for up to 6 weeks. An extensive study from the Center for Economic and Policy Research found that introducing the policy had a positive, or not noticeable effect on 89 percent of the businesses surveyed. However, these policies are very modest compared to the rest of the world, with countries sometimes offering more than 50 weeks of paid leave.

Despite the lack of a federal mandate, some employers voluntarily provide paid family leave. While prestigious companies boast generous leave policies, they are usually only available to highly skilled and highly paid workers. The BLS estimates that about 13 percent of all workers in the US have access to paid family leave. However, there are very large discrepancies between types of workers. Twenty-five percent of those working in the management, business, and financial sector benefit from paid family leave, compared to only 7 percent of those working in the service industry.

The above figure shows the striking differences in access to paid leave by wage level. Top-earners are more than 4 times likelier than those at the lower end to be offered paid family leave by their employer. The data illustrate how mandating paid leave would help those who need it the most and are least likely to afford taking unpaid leave.

Another issue that disproportionately affects lower income families is the cost of childcare. The Economic Policy Institute found that minimum wage workers would have to spend most of their income on childcare. Another shocking finding is that in 33 states the cost of infant care exceeds average tuition at a public 4-year university. While conversations about college affordability and the debt some students have to incur to cover the costs are common, the issue of daycare affordability is discussed much less. The quality of daycare affects the future outcomes for children, putting those whose parents cannot afford high quality childcare at a clear disadvantage.

It is fairly common practice in many other countries for the government to subsidize childcare. The generous leave policies, along with childcare subsidies seem to be working for other countries that are catching up with the US in terms of female labor force participation. Surprisingly enough, at some point in its history the US had a government funded universal childcare program. During World War II, the Lanham Act provided funds to enable women to participate more actively in the labor market. Despite the positive impact the program had, it was abandoned once the war ended and the men who returned took back their jobs. If such a program was possible then, it is most certainly possible now, when a high percentage of women are in the labor market.

With childcare costs outpacing overall inflation, while wages not at the top of the distribution have been stagnating, the burden of raising children falls disproportionately on families that are not wealthy. Paid leave and affordable daycare would help children grow up to their full potential. By lowering financial strain on the parents and improving outcomes for the children, these policies would also tackle the growing income inequality. Instead of focusing on reducing the deficit, which would actually hurt future generations, the U.S should expand entitlements to children to show it is really concerned with their future.