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Like many, I have personal experience with the challenges and hardships of caring for family members. I see why a proposed bill that would provide up to 12 weeks of paid family leave for employees at 66 percent of the employee’s salary is popular, and I may even support this type of legislation. But we should be honest about the true cost of this program. Far too often new government programs are started based solely on the emotional appeal of the program’s benefits and the direct and indirect costs are ignored.
To many, it sounds so good.
The pending paid family leave legislation is a perfect example of how to grow government. First, you have a very attractive new government benefit. Who wouldn’t want a paid 12-week period after a child is born or to care for a sick parent? Second, the bill provides that each employee will “pay” for the new benefit. This is important because once the employee has “paid” for the benefit, she has ownership. Of course, we have examples, such as Social Security and Medicare, that show the amount paid in by the employee is not enough to cover the benefit. If this new program is implemented it will be here to stay.
According to the bill sponsor, the average employee would pay $96 a year and the employer would pay another $96 a year. Will this be enough to cover the cost of the program? No one knows. The fiscal note attached to this bill estimates that the contributions by the employees and employers would be $60 million and goes on to state that “given that this would be a new program, with no history or experience, we cannot quantify an appropriate level of contributions or estimate the amount of benefits that would be issued.”
We do not know whether the tax, I mean contribution, to the program will be enough to cover the benefits provided, but we do know that the true cost will be much higher.
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When an employee takes a 12-week paid leave, the employer will need to temporarily replace that employee. In most cases the replacement employee will need to be in place before the employee’s leave begins to get up to speed. The payroll costs of the employer will increase and who will pay for that? Many assume the employer can simply reach into their bucket of cash to pay for it. But, in the real world this increased cost will only be paid by increased prices or cutting other expenses, such as payroll.
In my experience, every new government program or mandate has unintended consequences. A recent example is the push to increase the minimum wage, which has led to fewer jobs available as employers were forced to cut staff or move to automation. That is why I have always been cautious about starting any new programs.
Through the words of the great President Ronald Reagan: No government ever voluntarily reduces itself in size. Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we'll ever see on this earth!
