President Joe Biden has proposed a national, comprehensive parental, medical, and family leave program as one component of his American Families Plan (AFP). Although the proposal faces stiff political headwinds, it could lead the US to join other developed nations in offering government-backed and guaranteed paid leave during some of life’s most important junctures: the birth or adoption of a child, or to attend to one’s own serious illness or the illness of a family member.
The pandemic dramatically underscored the need for and benefits of paid leave, and public support for paid leave is growing and increasingly bipartisan. Mounting evidence from research on state paid leave programs also trends positive. The question is whether political and public support will outlive the pandemic, especially among Republicans who embraced emergency paid leave measures over the past year.
The key elements of Biden’s proposal, as well as a similar plan introduced in the House Ways and Means Committee, are discussed below. But some legislative history provides critical context amid the numerous COVID-19 relief bills since March 2020 and the Biden administration’s sweeping, complex, and potentially nation-changing new proposals.
The Sausage Factory
First, the AFP is the $1.8 trillion White House proposal that’s also focused on expanding childcare, tuition-free pre-school, and community college; health insurance; teacher training; and financial support to families with kids. The administration casts the AFP as the “human infrastructure” companion to its $2.3 trillion physical (roads, bridges, tunnels, rail) and technology infrastructure proposal, dubbed the American Jobs Plan and released on March 31. (The administration and Republicans in Congress are deep in negotiations on the infrastructure/jobs plan now; its more realistic final cost may be around $900 billion to $1 trillion.)
Neither of those proposals should be confused with the $1.9 trillion American Rescue Plan, which Biden signed into law in mid-March. The Rescue plan is widely assumed to be the final of four pandemic emergency response laws enacted over the past year. It provides additional financial relief to families as well as hundreds of billions of dollars for public health, schools, coronavirus testing, and vaccine distribution.
The trajectory of paid leave over the past year has its own complexity. It was the core element of the initial pandemic emergency legislation—the Families First Coronavirus Response Act (FFCRA), enacted with bipartisan support in March 2020. A broader relief bill, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, followed and was signed into law on March 27, 2020. It also contained paid leave measures.
Together, FFCRA and CARES created the first-ever national mandate on employers to offer workers paid leave—up to 50 days. Government reimbursement to employers, via tax credits, was set at two-thirds of wages or salary, up to $200 per day and a maximum of $10,000 per worker.
The two laws left significant gaps in paid leave, however, and the benefit was time limited. As detailed in this Health Affairs blog post from April 2020, large companies (500 or more workers) were exempted, and firms with fewer than 50 employees could opt out entirely. Most apparently did, and paid leave advocates allege that the Trump administration did little to promote the program among employers.
The Families First law also exempted doctors, nurses, and emergency responders, under the rationale that they were essential on the COVID-19 battlefront. As well, the laws limited paid leave to parents of children at home due to daycare or school closures. Thus, if you or a family member got COVID-19, any time off work beyond 10 guaranteed (and subsidized) paid sick days was not covered. Millions had to use vacation days or took unpaid leave.
The exemptions encompassed about 82 million (53 percent) of the nation’s 155 million workers. Thus, about 73 million workers had access to the benefit. The Department of Treasury has not released data on how many used the benefit.
The FFCRA employer mandate expired on December 31, 2020, despite a significant push by Democratic lawmakers and worker’s rights groups to extend it through March 31 of this year. The Democrat-controlled House approved an extension in a November 2020 bill that also eliminated the FFCRA restrictions and exemptions—opening the benefit up to essentially all US workers.
Republicans in the Senate blocked that legislation. Instead, a December 2020 pandemic relief law let the mandate lapse but preserved the tax credits. That made the program voluntary for employers, albeit with the incentive of the tax credits.
Biden’s initial draft of the American Rescue Plan in January 2021 reinstated the paid leave mandate and eliminated the FFCRA exemptions. But Democrat lawmakers did not adopt those measures in March to prevent the Rescue bill from running afoul of Senate rules that would have required 60 votes to enact it. The law passed 50–49 with no Republicans votes.
The American Rescue Plan did, however, broaden paid leave in two ways. One, it expanded the qualifying reasons for extended leave to include a diagnosis of COVID-19 for oneself or a family member. Second, it created an emergency paid leave program for all two million federal workers. That measure provides up to 600 hours, or 15 weeks, of paid medical or family leave for workers with COVID-19, those who need to quarantine, and those who need to care for kids or family members stuck at home or needing to quarantine. The benefit expires September 30, 2021. The federal Office of Personal Management issued guidance on the emergency benefit on April 29.
Worth noting is that federal workers gained up to 12 weeks of paid parental leave in October 2020, the effective date of a law passed in December 2019 with overwhelming bipartisan support.
What’s Now On The Table
Biden’s American Families Plan proposes to phase in, over 10 years, 12 weeks of paid leave for: parents, including same-gender couples, caring for a newborn, adopted or foster child; workers addressing their own or a loved one’s serious illness; workers dealing with the effects of a family member’s military deployment or service-related injury; survivors of domestic violence or sexual assault; and workers grieving the loss of a loved one.
The program would provide most workers—including the self-employed, part-time, and contract workers—a minimum of two-thirds of weekly wages or salary, up to $4,000 a month. Lower-wage workers would get up to 80 percent of pay. The benefit would be government funded and coordinated with existing state and employer-provided paid leave. (Twenty percent of private-sector workers currently have access to paid leave. The federal program would be a baseline that employers and states could choose to add to.)
The White House estimates the program would cost $225 billion over 10 years.
The House Ways and Means Committee plan, put forth by that committee’s chairman Richard Neal (D-Mass.), would also provide 12 weeks of paid leave for the same full scope of medical, family, and parental reasons—to essentially all workers including those working part time and the self-employed. One big difference: The Neal plan, still in “discussion draft” form, would begin providing full benefits in 2023, with no phase-in. The committee has not released a cost estimate.
Chairman Neal’s proposal is one element of a larger House bill—the Building an Economy for Families Act—which covers much the same ground as the American Families Plan.
Both Biden’s and Neal’s proposals are also consistent with a paid leave bill reintroduced in the Senate in February—the Family and Medical Insurance Leave Act (FAMILY Act). That bill would also mandate 12 weeks of leave for a comprehensive set of reasons, with two-thirds of income replaced up to a capped amount.
In turn, the FAMILY Act is based on existing broad-based paid leave benefits in nine states and the District of Columbia. Programs in six states (California, New Jersey, Rhode Island, New York, Washington, Massachusetts) and D.C., are up and running. Three states—Connecticut, Oregon, and Colorado—enacted paid leave recently with the benefits flowing to citizens in 2022, 2023, and 2024, respectively.
All three federal proposals—Biden’s, Neal’s, and the FAMILY Act—build on the Family and Medical Leave Act (FMLA). Enacted in 1993, FMLA mandates that employers provide up to 12 weeks of job-protected unpaid leave for certain qualifying events. While FMLA is considered a highly successful law, its limits are a perennial irritant to progressives. Among them: It only applies to companies with 50 or more employees and, to qualify, a worker must have worked at least 12 months for a minimum 1,250 hours.
Paying For It
One critical difference between the Biden and Neal proposals and the FAMILY Act—and the state programs on which its based—is how the benefits would be funded.
The states pay for their programs through payroll taxes, either on employees or split between employer and worker (details here). As such, paid leave is a social insurance program in the states that have it, funded by all workers and/or their employers with benefits taken by those who need them. (Taxes fund paid leave in most EU countries as well.)
The FAMILY Act would likewise be funded by a payroll tax—0.2 percent each on employer and employee for a total 0.4 percent. That’s two cents per $10 in wages or about $2.00 per week for a typical US worker, according to the National Partnership for Women and Families. The Congressional Budget Office (CBO) estimated in February 2020 that the FAMILY Act would cost $547 billion over 10 years. The CBO also estimated that the proposed 0.4 percent tax would fall $228 billion short in covering costs of the program.
In contrast, Biden proposes funding his paid leave program with general tax revenues—specifically through tax increases on upper-income families and corporations. The House Ways and Means Committee has not yet specified how it would fund paid leave but the presumption is it, too, would be funded through general tax revenues.
The reason for the shift: Republicans and employer trade/lobby groups are less likely to oppose general revenue funding compared with a payroll tax increase. As one paid leave advocate put it to me: “The payroll tax is out.”
The administration is known to want to pass the American Families Plan with bipartisan support. But many Democrats in Congress now think that’s a fool’s errand, and that ultimately the bill will only get passed in the Senate through a process known as budget reconciliation (with Democrat votes only and at most a few moderate Republican votes).
Indeed, in the past week Democrats in Congress have begun to pursue a multi-path approach. One path would pursue a scaled down bipartisan deal on infrastructure for passage this summer. The other path would prepare a large-scale (as much as $6 trillion) reconciliation bill that contains almost all of the elements of the Americans Jobs Plan and American Families Plan, including paid leave. The challenge: Every Senate Democrat would have to be on board and that’s far from certain. According to media reports, the situation is highly fluid.
Key elements of the paid leave benefit could be at stake if budget reconciliation is the ultimate path.. Because of the rules surrounding that process, lawmakers may not be able to mandate that employers give workers their jobs back after a period of paid leave. Such job protection is mandated now for unpaid leave under the FMLA. Thus, a perverse situation could arise in which workers who take unpaid leave would be guaranteed their job back, but workers who take paid leave would not.
A Politico article on this is informative and quotes Sen. Patty Murray (D-Wash), chairperson of the Senate Health, Education, Labor and Pensions Committee, saying she is exploring ways to assure that job protection is a part of any paid leave benefit even if passed through budget reconciliation.
The Political Fight
Debate over the AFP has just begun. It’s already fraught and intense. Republican lawmakers have aligned against the spending level Biden and Democrats propose. But they are also building a message campaign that casts the bill, including paid leave, as “lefty social engineering” and “chock full of unaffordable new entitlement programs.”
Republicans preferred approach to paid leave has been tax credits to employers. That pay-for structure and the pandemic emergency garnered their support for passage of FFCRA and CARES. (Pre-pandemic, a pilot program from 2018 into 2020, initiated by Republicans, gave employers a tax credit of 12.5 percent to 25.0 percent of costs for workers taking up to 12 weeks of paid leave. That program garnered little uptake and was eclipsed by FFCRA in 2020.)
For their part, Democrats argue vigorously that the lack of universal paid leave in the US exacerbates racial, gender, access-to-health care, and income-based inequalities. Existing research supports that assertion. Democrats also cite the economic “externality” costs from the lack of universal paid leave, which mostly impact low-income families. Namely, families lose an estimated $22.5 billion per year in lost wages when they must take unpaid leave or have to quit a job to care for a new baby or sick family member. Another study found that people who leave work temporarily to care for an aging parent lose an average $300,000 in income and retirement savings.
Advocates for paid leave say a voluntary, tax-credit approach will never achieve the universal—and fair-for-all—program that’s needed, and that other developed nations provide.
Even so, a compromise approach can’t yet be ruled out for the US, though how it would be structured is hard to envision. Biden’s plan to phase-in paid leave over a decade is arguably already a significant concession to budget realities and clearly aimed at taking the edge off Republican opposition.
Four progressive groups are leading the fight for paid leave: Paid Leave for All, a diverse coalition; the National Partnership for Women and Families; the New America Foundation’s Better Life Lab; and the Center for Budget and Policy Priorities. All provide resources. A new report from the Brookings Institution’s Hamilton Project is also useful and proposes a legislative approach.
Designed with care—with lessons learned from the states—paid leave is not a budget buster. And while it would be a new entitlement program, the risk of escalating costs over time—a major worry for conservatives—seem low. As the US economy emerges from the pandemic, paid leave looks to be one core element of an enhanced financial safety net that a large majority of Americans now embrace.