Let states lead on paid family leave — with federal support 

Despite overwhelming bipartisan support for policies that help parents and caregivers balance work and family life, the 117th Congress ended with yet another stalemate on paid family leave. This continued gridlock is, in part, a result of too many advocates continuing to push for federal policies that simply cannot gain the support of congressional majorities. If a comprehensive approach is untenable, we should explore other avenues to family leave with a higher likelihood of success. Supporting family leave at the state level could be the ideal compromise.   

Today, most working-class families lack access to any sort of paid leave that would allow them to take time off to bond with a newborn child or provide acute care for an elderly parent. Federal support for action at the state level is a pragmatic approach to providing families with the help they need. 

In fact, some states are already stepping up in the face of federal inaction. Since 2002, 11 states have passed comprehensive paid leave programs, and another five states are expected to introduce programs within the next two years. America’s “laboratories of democracy” are delivering the family policies voters want and need. But without federal support, there are limits to this approach. If we want to keep the momentum going among states, Congress must step in and support these efforts.

Building a paid family leave program from scratch is no easy task. It’s not surprising that early adopting states are those with the administrative and fiscal capacity to handle the costs of collecting contributions, handling claims, and paying benefits. The first four states could all build it into their existing Temporary Disability Insurance (TDI) programs.

Adopting states are also relatively wealthier, making it easier to cover the cost of administration. Conversely, the associated administrative costs may deter less wealthy states from building their own family leave programs. A recent report commissioned by the Department of Labor estimated administrative costs make up four to six percent of benefit spending. That is in addition to the cost of setting up a whole new administrative apparatus for states that do not already have TDI. Proposals for paid family leave in Maine, for example, were estimated to have startup costs of $40 million with another $20-$40 million in annual administrative costs.

In 2017, the Trump administration attempted to address these challenges with a proposal to mandate the addition of parental leave to existing state unemployment insurance (UI) programs. The proposal would have reduced startup costs and provided federal support for administrative costs. Two decades earlier, the Clinton administration floated a similar “baby UI” proposal. Both cases were promising ideas that were botched in execution: where Trump made the mistake of using unfunded mandates, Clinton’s use of an executive order led to inevitable backlash from Congress. 

Despite their shortcomings, these failed attempts contain the seeds for Congress to craft a workable bipartisan compromise on paid family leave. However, as I discuss in a new report, three major reforms will be necessary. 

First, Congress should allow — but not mandate — states to add paid family leave to UI programs. States should continue to take the lead while the federal government plays a supporting role. Second, Congress should broaden the federal unemployment tax wage base (the main source of revenue for administrative funding) which has shrunk over time and will need to grow to support new program administration. Lastly, reforms must eliminate onerous “experience rating” provisions that force states to punish employers with higher payroll taxes when their employees receive benefits. States should be free to adopt flat employer- or employee-side payroll taxes as they see fit to fund both programs. 

Together, these reforms would give states the resources to craft paid family leave programs that work for families, workers, and businesses. A purely federal approach — as demonstrated time and again — is unfeasible. Rather than tabling the issue (and ignoring the urgent unmet needs of so many American families), Congress should start considering alternatives to a purely federal program by supporting family leave at the state level.

Joshua McCabe is a senior family economic security analyst at the Niskanen Center