A costly and unnecessary paid leave plan
Senate Democrats unveiled their paid family and medical leave bill this week, and the big question was: Why?
The reasons given — that it will be a job recruitment tool and a family benefit — were hardly enough to justify its cost.
The bill’s fiscal note predicts that the mandatory 0.5 percent tax would raise $156.6 million a year from private employers. That would make it New Hampshire’s sixth-largest tax, coming in right behind the real estate transfer tax. It would extract from the economy $50 million more per year than the interest and dividend tax does.
Two years’ worth of revenue from this tax would surpass the entire balance of the state’s employment security trust fund.
That is a hefty weight upon the economy for a tax that is entirely unnecessary.
This tax doesn’t have to exist because the program it would support doesn’t have to exist — even if one agrees that some type of paid leave insurance must be created.
Gov. Chris Sununu’s proposal shows that even if creating a paid family leave plan is a top priority, there is no need for it to take the forms of a mandate, a tax and an entitlement.
Gov. Sununu’s innovative proposal showed — before the Senate leadership released its plan — that state leaders can offer a paid leave program for employers that avoids high taxes and employer mandates.
Based on testimony given before the Senate Finance Committee on Tuesday, it remains unclear from a policy perspective why a tax-and-mandate approach was taken when less costly and intrusive options were available.
It is not as though a 12-week program, vs. the six weeks in Gov. Sununu’s proposal, is essential. California’s landmark paid leave program offers six weeks, and a 2015 study by the California Employment Development Department found that most people who take the leave don’t use all of it.
Supporters of the Senate version say it is necessary to attract workers to the state. Although research does show that many workers would prefer additional benefits rather than a raise, paid family leave is fairly low on the list of preferred benefits. In a 2017 Harvard Business Review survey, only 42 percent of employees said they would consider paid maternity/paternity leave when considering whether to take a higher paying job vs. a lower-paying job with better benefits. (The survey did not include an option for paid medical leave.)
The survey found that the four most attractive additional benefits were 1) better health, dental, and vision benefits, 2) more flexible hours, 3) more vacation time, and 4) work-from-home options.
This context is important because paid leave is just another form of employee compensation. Employers gauge employee preferences when deciding whether to offer higher pay or more generous benefits. A paid family leave mandate would deny both employers and employees the option of deciding whether other forms of additional compensation would make more sense for them.
For example, 80 percent of employees in the Harvard Business Review Survey reported that they’d consider foregoing higher pay if they could work from home, and 88 percent said they’d consider foregoing higher pay if they could have more flexible hours. But only 42 percent said the same of paid parental leave.
Flexible hours and work-from-home benefits could in many circumstances offer people much better long-term options than a mandated 12-week paid leave plan. And about twice as many people would prefer those two options to paid leave. There is no reason to believe that a paid leave plan is such a crucial form of compensation that it must be mandated by the state. Employees don’t think it is, so why should lawmakers?
If there are options for providing a good or service that don’t involve the use of force or coercion, and that good or service is not an absolutely essential one that only government can provide, then there is no justification for using force or coercion to provide it. Paid family leave is a nice benefit, but it fails the test of whether it should be imposed via government mandate.
