Study finds law would help low-wage workers the most–boosting incomes and labor force participation without jeopardizing job creation or economic growth
La Grange, IL: If Illinois were to guarantee paid parental leave for all public and private sector workers, more than 220,000 working parents would see their incomes rise by a total of $1.4 billion per year and labor force participation could rise, according to a new study by the Illinois Economic Policy Institute (ILEPI) and the Project for Middle Class Renewal (PMCR) at the University of Illinois at Urbana-Champaign.
While 1993’s Family and Medical Leave Act (FMLA) provides 12 weeks of job protection for workers caring for new children or family members, the United States is one of just eight nations in the world that does not guarantee some form of paid parental leave for all workers— and the only developed nation with this distinction.
“Prior research has found that paid parental leave is good for children and leads to lower rates of child mortality, higher rates of vaccination, reduced risk of childhood obesity and diabetes, and more regular health check-ups,” said study co-author and ILEPI Researcher Jill Gigstad. “Equally important, it has also found that these laws increase gender pay equity, boost female labor force participation by up to 17%, and reduce the burdens of employee turnover, absenteeism, and lost productivity that are costing U.S. employers an estimated $57 billion per year.”
While some U.S. employers offer paid family leave, the study notes that access is concentrated amongst large employers like Amazon and UPS and within high-wage occupations like financial services and IT. A total of eight states and the District of Columbia have enacted state-level paid parental leave laws, extending guaranteed paid leave benefits to just 14% of the nation’s workforce.
“In recent decades, more and more employers have come to rely on women and mothers as a growing share of the labor force,” Gigstad added. “That’s why many of America’s largest employers and most in-demand occupations are recognizing that paid parental leave programs are vital to their labor market competitiveness and their bottom lines.”
Using recent birth statistics and labor market demographic and wage trends, ILEPI and PMCR researchers estimate that an Illinois paid parental leave law guaranteeing twelve (12) weeks of benefits capped at $1,000 per week could directly impact more than 220,000 working mothers and fathers over 20 years of age, lifting incomes by as much as $1.4 billion per year.
“In addition to helping employers compete for workers, paid parental leave would generate more income for individuals– disproportionately lower-income individuals— who are likely to spend that money in our local economy,” added study co-author and ILEPI Policy Director Frank Manzo IV. “This boost to consumer spending would stimulate growth in communities across Illinois.”
A recent poll by Pew Research showed that paid family leave for mothers and fathers enjoys majority support amongst both Republicans and Democrats. Three-quarters of those who support the policy believe that employers should cover the cost of programs.
Each of the states that currently offers paid parental leave funds its program through an employee payroll deduction. While some states deduct as much as 1.1% of employee wages, ILEPI notes that Illinois could fully fund a state-administered paid leave program with a deduction as low as 0.5%.
Other financing options described in the study include dedicating 45% of new revenue from the state’s proposed progressive income tax, assessing an annual 2% surtax on net income over $1 million, or an entirely employer-sponsored model.
Using industry-standard IMPLAN economic modeling, the study finds that the costs of an entirely employer-sponsored paid parental leave model would be offset by savings in employer turnover costs and increases in both workforce productivity and consumer spending.
“Paid parental leave could not only benefit children and working parents, but businesses and our economy as well,” concluded PMCR Director and University of Illinois Professor Dr. Robert Bruno. “While there are a number of potential funding mechanisms, the available data suggests that enacting a state-level paid family leave law would be both good politics and sound policy for state lawmakers to consider.”
The Illinois Economic Policy Institute (ILEPI) is a nonprofit organization which uses advanced statistics and the latest forecasting models to promote thoughtful economic growth for businesses and working families in Illinois and the United States.
The Project for Middle Class Renewal at the University of Illinois investigates the working conditions of workers in today’s economy with research, analysis and education in order to develop and propose public policies that will reduce poverty, prevent discrimination, create more stable forms of employment, and promote middle-class jobs.