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America is one of very few nations that lack a national paid leave program. The Build Back Better Act passed by the U.S House of Representatives attempted to remedy this by instituting a uniform paid leave policy for those working in the private sector. This would have been the most significant expansion of the scope of paid leave since the Family and Medical Leave Act (FMLA) was enacted in 1993. However, paid leave has always been a hotly debated topic with both sides of the argument expressing valid concerns. This time too, the paid leave provisions of the Build Back Better Act has divided people across and within Party lines. After slicing down the initial proposal heavily, the Democrats completely excluded paid leave from the Act for a lack of sufficient consensus. 

     1. The Paid Leave Provision in the Build Back Better Act

Paid leave was an important part of President Biden’s agenda when he was voted into office. As a section of the $1.75 trillion Build Back Better package, the proposal initially envisioned twelve weeks of paid leave per year. In an attempt to secure higher support for the provision, the paid leave was reduced to four weeks that allowed a worker to take time off to care for a new-born or even a sick family member. This provision brought 18.5 million workers under its ambit, which was a large expansion of paid leave. The provision even provided reimbursement for organizations that granted paid leave to their employees at a standard that met or exceeded the federal standard, restored the employee to their original position after the duration of the leave ensured group health insurance coverage, made the process of utilizing paid leave easy for an employee, and allowed the possibility of an appeal in the event of denial of leave. Paid leave was to be administered under the social security program and would feature equitable funding initiatives through tax measures aimed at the wealthy. 

     2. How Does Build Back Better Compare to the FMLA?

The FMLA was a seminal piece of legislation that provided particular employees with up to 12 weeks of unpaid leave a year to care for new-born children or sick immediate family members with a guarantee of job safety upon return. While the legislation aimed at helping with work-life balance, the law would only apply to companies with more than fifty workers, public agencies, and public and private schools. The paid leave provisions under the Build Back Better Act expanded the scope of the FMLA to include a wider variety of employees while ensuring compensation for the time off. Additionally, the new provision made taking time off to take care of extended family permissible. Unlike the FMLA, which required a minimum 1250 hours of work to qualify for paid leave, the Build Back Better Act has no such requirement. 

     3. In Support of the Act

Paid leave, in general, is associated with better familial, infant and maternal health. It boosts labor supply and productivity in the economy by encouraging market re-entry. Studies also show that providing paid leave reduces the number of people dependent on state welfare measures.  From a human rights angle, being able to take care of your family is a basic human right that needs to be upheld. At the height of the pandemic, a mere 28% of working Americans had the option to apply for paid leave. Of  such workers, almost 95% came from poor families that could not take time off from work to recover from the virus in the fear that they would lose their jobs. In such an environment, it was no surprise that the concept of paid leave received massive support. 

Women of color were disproportionately affected during the pandemic because they tend to work in the lowest paid jobs without access to leave and other FMLA protections. Women of color also comprise most of the part-time work force because of an inability to find full-time jobs. As a result of the FMLA’s minimum work requirement, minorities faced unequal treatment. The Build Back Better Act would have been a welcome reprieve from their economic insecurity because it allowed part-time employees to afford to take care of their children and their families. 

As schools began using remoting learning tools and sick children raised tremendous concerns, truckloads of women left the workforce. Care work has traditionally – and even today – been relegated to women, and continuing care work during the pandemic dropped women’s participation in the economy. The Act, through its indiscriminate paid time off policy, alleviates the burden of managing a family while working. 

It also makes good economic sense to provide for paid leave in a country that has an acute labor shortage. Paid leave helps close the gender gap in workforce participation, and eases the disparity between women with and without children. Democrats supporting paid leave hoped it could help control the sky high levels of inflation through increasing productivity. In fact, one study found that introducing paid leave provisions akin to the ones in Germany and Canada would add 5 million women to the workforce, adding an additional $500 billion of labor to the national economy.

     4. The Argument Against the Act

The divide over the paid leave provision was along party lines, with Republicans unanimously opposing it. Instead, they suggested an incentive system for employers that provided paid leave rather than making it mandatory. The lack of popularity among Republicans meant that the Democratic Party would have had to have a majority consensus to pass any paid leave provision. However, the provision has also faced opposition from within the Democratic party. 

The provision for paid leave was included as part of a climate change and social safety net bill. The problem is that the Build Back Better Act is part of a “budget reconciliation plan.” This status allows it to get around the filibuster but limits what can be included. Senator Joe Manchin, an important Democratic swing vote, opposed the legislation on procedural and substantive grounds. He believed introducing a paid leave provision as a part of the reconciliation process – which merely requires a simple majority in both houses of Congress – would be unfair. This meant that an important legislation that has social ramifications and has been hotly debated for many years could be passed without a single vote from the GOP because the Democrats have 50 votes in the Senate. 

Additionally, the sheer cost of the plan garnered a lot of criticism. The Democrats intend for the provision to be funded by a corporate tax that would tax wealthy businesses and individuals differently. The idea that people who have contributed to society in terms of creating jobs and economic progress be targeted to pay a higher tax has created unrest. Senator Joe Manchin also said that expanding funding to cover paid leave disregards the already existing social security programs that require the additional funding. 

There has been conversation about potential misuse of the paid leave provisions by people who do not really require it. Senator Manchin echoed this concern while detracting support for the Act. However, evidence shows that this is extremely rare. A study conducted by the Center for Economic and Policy Research in New Jersey reported that there was not a single case of employee misuse across organizations that provided paid leave. Bolstering the paperwork while applying for paid leave and requiring physician verification of the medical condition made paid leave provisions hard to abuse. 

There are businesses that feel that mandating paid leave could cost them profits. However, making paid leave a policy helps small businesses that want to provide paid leave but cannot afford to do so. In an incentive system, where paid leave is provided by businesses based on their choice, small businesses are left in the lurch because of a lack of funding for the program. When the cost of paid leave is borne by the government, small businesses can offer paid leave to attract and retain employees. This helps them compete in the war for talent by levelling the playing field. Paid leave is also known to help improve retention rates at work and reduce the cost of replacement of the employee, which is often twice the salary of the employer. This makes paid leave provisions lucrative for practically all business owners in the long run.  

      5. A Way Out

The paid leave provision, no matter the dissent, is very popular among voters. Polls show that 69% of voters support the paid leave provision in the wake of the COVID-19 pandemic. Nevertheless, compromise is key when it comes to passing important legislation. There has been a proposal to increase paid leave to 12 weeks, but to restrict it to new parents only. Restricting it would lower the federal cost to levels below the current 4 weeks assured to all workers. However, restricting it to new parents could mean that miscarriages and stillbirths would be pushed outside the scope of coverage. 

Proponents of the provision also suggest a “means testing” mechanism that could reduce the cost of the provision. Providing 12 weeks of paid leave to workers with an income below 325% of the federal poverty level would substantially minimize costs. In the long term, for a sustainable paid leave policy, the funding mechanism could include an employer-government-employee pro rata contribution scheme so that the financial contributions are more balanced. This would entail a majority of federal funding for paid leave with small contributions from employees and employers.  A social insurance model such as this would take into consideration the effects of payroll deduction on the employee and an employer’s ability to sustain such a contribution. This ensures a more comprehensive and inclusive policy. Washington state adopted a similar model which has gained quite the momentum.

We have come a long way- from debating whether paid leave is a necessity to determining the practical realities of how a paid leave provision should be structured. A compromise in the Build Back Better discussion would be the very first step to achieving a more comprehensive, lasting scheme for paid time off. While there is a cost associated with the provision, doing nothing would more drastically detriment the economy.

 

Suggested Citation: Aaditi Pradeep, Is Build Back Better’s Paid Leave Provision Really a No-Brainer?, Cornell J.L. & Pub. Pol’y, The Issue Spotter, (Mar. 1, 2022), http://jlpp.org/blogzine/is-build-back-betters-paid-leave-provision-really-a-no-brainer/.