Last week, 203 business-school faculty members from 88 institutions across the US wrote an open letter to members of Congress stating, “It is time to ensure that the entire United States workforce has access to paid family and medical leave.” The signatories urge our legislators to consider the Family and Medical Leave Insurance Act (FAMILY Act) as one solution. This bill, which I wrote about here when it was first introduced, would use a payroll tax of two-tenths of one percent to fund a “social insurance” system that would allow all workers to take up to 12 partially paid weeks off work to deal with a serious health condition or care for a seriously ill family member or new child.

As the business-school professors note, the FAMILY Act builds on the lessons of California, New Jersey, and Rhode Island, which have all created insurance arrangements for paid family leave. They write:

California’s program, in place for more than a decade, is the most studied. In California, workers have filed approximately 1.7 million leave claims since the state implemented its family leave insurance program in 2004.16 California families have experienced positive economic and health effects. Parents who use the California paid family leave program are much more likely than those who do not to report that leave has a positive effect on their ability to care for their new children and arrange child care. Newborns whose mothers take at least 12 weeks of paid leave are more likely to be breastfed, receive medical checkups and get critical immunizations. A recent review of international literature concludes that there are benefits for maternal health when fathers take paid leave, including a reduction in maternal illness and depression and an increase in well-being. In California, the number of fathers filing leave claims increased by more than 400 percent between 2005 and 2013, as the state’s program became better established and known.

Experiences of businesses in California and New Jersey also show positive impacts and lay bare the claims of business opponents. The vast majority of California employers report seeing a positive impact on employee productivity, profitability and performance, or no effect. Even the Society for Human Resource Management, one of the chief opponents of paid family leave in California, issued a report finding that the law had created “relatively few” new burdens for employers and that employers’ concerns about the program “have so far not been realized.” Similarly, in a report prepared on behalf of the New Jersey Business and Industry Association, both small and large businesses said they had adjusted easily to the state’s family leave insurance law and experienced no effects on business profitability, performance or employee productivity. Another survey of New Jersey employers found that most employers did not experience negative effects on profitability or increased paperwork, and no employers were aware of a single instance of the program being abused.

And it’s not just that the existing paid family leave programs aren’t hurting business. Paid leave can actually improve businesses’ bottom lines, the letter explains:

Experiences at companies like Google and Ernst & Young show clear relationships between paid leave and retention. The accounting firm KPMG estimates that businesses worldwide could save up to $19 billion annually in recruiting and training costs by offering 16 weeks of fully paid maternity leave. Higher retention rates mean saved separation costs, unemployment insurance savings, lower temporary staffing costs, fewer costs associated with searching for and interviewing new workers, and training costs for new workers. Higher retention rates also reduce the indirect costs that can arise from lost productivity leading up to and after employee separations, diminished output as new workers ramp up, reduced morale and lost institutional knowledge. Paid leave reduces employee turnover and workers who cover for employees on leave get a chance to take on new responsibilities and further their development.

The letter conveys a sense of urgency about the need to correct a status quo that is unworkable for individuals and the economy as a whole. In a Harvard Business Review piece about the letter, lead signatory Stew Friedman of the Wharton School writes:

The effects ripple throughout our communities. Businesses suffer when employees have low morale and reduced productivity due to changes at home, such as having a baby or a sick loved one to care for. And I see the impact in the classroom, when students express concern that workplace challenges will thwart their family and career ambitions. In a longitudinal study of Wharton’s graduating classes of 1992 and 2012, we found the percentage of those planning to have or adopt children fell from 79 to 42% over two decades. This baby bust was driven in part by fears of not having sufficient support to make life as a parent work.

For many years, advocates for public health, women, and families have been calling for paid sick, medical, and family leave. Many business leaders have shared in this call (some of them at last year’s White House Summit on Working Families), but I don’t recall having seen such a high-profile call from business schools. Their letter makes it clear that there’s an economic, as well as a public-health, case for expanding paid medical and family leave to all US workers.

Comments

  1. #1 See Noevo
    September 21, 2015

    I’m the kind of radical who thinks companies should freely compete for employees, partly through their compensation/benefits packages.

    I’m the kind of radical who thinks the government should NOT dictate those compensation/benefits packages.

    I’m curious how employees and their children ever survived maternal illness and depression and decreased well-being prior to 1993.

    And I’m curious about that KPMG study:
    “The accounting firm KPMG estimates that businesses worldwide could save up to $19 billion annually in recruiting and training costs by offering 16 weeks of fully paid maternity leave.
    Higher retention rates mean saved separation costs…”

    Tenure or guaranteed employment/paycheck security would also save separation costs. Who wouldn’t like that, in a fantasy world?

    “unemployment insurance savings…”
    See above.

    “lower temporary staffing costs…”
    This is a little puzzling. If every new mom and dad in the company takes four months paid maternity leave, how would temporary staffing costs NOT go up?

    “fewer costs associated with searching for and interviewing new workers, and training costs for new workers…”
    See above.

    That most academics are left-leaning is well known, with the softer the department, the left-er the leaning (e.g. Social sciences/evolutionary science: far left; Engineering/physical sciences: less left/often right).

    But now, obviously, the left is growing even in grad schools of business.