A 401(k) for Parental Leave?
In his new book All In, CNN's Josh Levs covers a lot of ground. He wants absentee parents to reconnect with their kids; he wants pop culture to stop depicting dads as doofuses; he even spends pages telling parents to find time for relaxation, sex, and exercise. But most importantly, Levs gives a thorough treatment of his signature issue: He's a leading figure in the debate over parental leave, having fought his company over its discriminatory policy when it comes to leave for biological dads. (Biological moms, adoptive parents, and same-sex domestic partners of adoptive parents were all treated better.)
Levs discusses a range of policy options for giving parents paid leave, and he's especially excited about his idea to let parents save money in tax-free, 401(k)-style accounts to fund it. But unfortunately, no plan for paid leave makes as much sense as just giving parents the money and letting them do what they want with it, whether that's leave or something else entirely. And 401(k)s for parental leave are especially problematic.
Let's start with the status quo. Under the Family and Medical Leave Act, which covers about 60 percent of workers — small businesses and those who've worked for an employer less than a year are excluded — a male or female caregiver can take up to twelve weeks off, unpaid. Very few fathers do this. In addition, more than half of employers offer some paid maternity leave, while just 14 percent offer any paternity leave. Another option couples have is to use vacation days when a child is born; roughly nine in ten full-time workers get paid vacation.
Meanwhile, there remain stark disparities in parents' division of labor, even long after the child is born. As Levs heroically demonstrates, when paid work and chores are combined, there is no disparity in the overall burden: Dads work 54 hours to moms' 53. Yet despite massive changes over the past several decades, moms' hours are more weighted toward child care, while dads' hours are more weighted toward paid work, and this begins in the weeks after childbirth.
We can debate how much of a problem this is. "Millions of stay-at-home moms want to get back to work and advance their careers," Levs writes, while many dads would like to spend more time with their kids. This is no doubt true; Pew has found, for example, that more than half of nonworking moms would like to work. But more than half of full-time working moms would like to work less or not at all, too. And looking at married moms irrespective of their current working situations, fewer than one-quarter want to work full-time; a little more than half want to work part-time, with a little less than a quarter wanting to stay home. So it's far from clear that families in general want to shift the child-care burden toward men and the paid-work burden in the opposite direction.
Nonetheless, both moms and dads are important for kids, laws and workplace policies should treat men and women equitably, and couples should decide for themselves what arrangement works best. So it's worth considering how we could change our approach to parental leave. The issue comes down to a series of three questions, and each potential answer comes with tradeoffs:
1. How much extra time should moms get?
The tradeoff here is straightforward: If moms get a lot more time than dads, we are deliberately promoting a gender-imbalanced workload when it comes to child care. But childbirth hurts, a lot, and there is a physical recovery time that moms, unlike dads, can't avoid. It's only fair that leave policies reflect this to some degree.
2. Should leave be paid?
The problem with unpaid leave is that the poor can't afford to take it — and everyone has an incentive not to. But there are problems with paid leave as well.
First of all, if it's required by the government, it interferes with the bargaining process between employers and employees. Some parents are very dedicated to their jobs, or have arrangements in which extra time off isn't as valuable — maybe a spouse is taking leave and has help from family members, or the employee works from home and thus can still help out with the baby. If paid leave is required, employers are limited in how much they can reward these workers for putting in extra time.
The other major difficulty is that it favors parents over non-parents: Employee A gets more paid time off than Employee B simply because Employee A chose to have a child. Many across the political spectrum (including yours truly) are okay with sending more resources parents' way, as seen in the debates over child tax credits and mandatory insurance coverage of maternity care. Conservatives like supporting families and rewarding fertility, while liberals like the poverty-relief aspect of helping parents out.
But others think it's unfair for those who limit their fertility to pay for those who don't. Levs tries to counter this argument by pointing out that paid leave can be used to take care of sick family members too, but that doesn't quite work: If the scales are tipped, you need to tilt them back in the opposite direction, not just add more weight in a neutral manner.
3. If it's paid, who pays for it?
This is another tricky one. We can keep the expense off the government's books by mandating that employers or insurance plans take on the cost, but this gives employers an incentive to avoid hiring parents-to-be and/or takes a bite out of employees' paychecks for higher insurance premiums, depending on how exactly everything is set up.
Another approach is to give paid leave through the government at the expense of taxpayers. This can be a sensible solution, but such programs involve tax hikes, and they typically pay rich parents more than poor ones. A California program Levs mentions is funded with a 1 percent payroll tax on employees, and replaces 55 percent of wages up to a generous maximum; a proposed federal law would allegedly be much more efficient, replacing two-thirds of income with a 0.4 percent payroll tax split between employees and employers.
As a more politically palatable alternative, Levs proposes a workaround that would supposedly cut taxes: A "401(k) type of program" through which workers could save money tax-free and use it to pay two-thirds of their salary when they take parental leave. This may have a superficial appeal, but it's problematic for two reasons.
First, like all "tax expenditures," it's not really a tax cut. It's a scheme in which government spending is recast as letting people keep their own money. The trick is that they're not actually keeping the money; they're spending it the way the government wants (on parental leave) and then being partially reimbursed when they file their taxes. We're supposed to think that knocking money off someone's tax bill — if and only if they take parental leave — is radically different from sending them a check in the same amount and on the same condition. To be fair, the whole point of this proposal is to make the idea of paid leave politically feasible, and it very well might work (people are suckers for shell games like this), but that's really not an excuse.
Second, and worse, is that this would almost entirely exclude the poor and working class and overwhelmingly benefit the rich. Many Americans (43 percent, though this includes the elderly) don't pay federal income taxes, so they have nothing to deduct from. Even among those who do pay income taxes, the richest pay much higher rates and thus benefit more from deductions. Someone in the 25 percent tax bracket would need to deposit just $400 to get that $100 subsidy come tax time; someone in the 10 percent bracket would need to chip in $1,000. The rich also have more money left over after their routine expenses, and thus have more money to save. The timing of childbirth would exacerbate these problems: Younger parents tend to be poorer and less educated, in addition to (as Levs concedes) having less time to save before the baby arrives.
The 401(k) comparison is telling. As Elliot Schreur of the New America Foundation documented last year, 401(k)s and other federal retirement subsidies benefit the rich much more than they benefit the middle class, and hardly help the poor at all.
A way to avoid all this is by expanding the child tax credit and making it fully refundable: Give all parents, rich and poor, a specific amount of money for each child and let them choose what to do with it. To help new parents specifically, you could give bigger credits in the earlier years of a child's life, allow parents to get the money as soon as the child is born instead of waiting for tax time, and maybe expand the Family and Medical Leave Act to apply to more of the workforce.
If parents use the money to take leave from their jobs, great. If they'd rather keep working and put the money toward something else, who's the government to second-guess them?
Robert VerBruggen is editor of RealClearPolicy. Twitter: @RAVerBruggen