Ensuring Paid Family
Leave Pays Off
BY
Shanna Pearson-Merkowitz, Ph.D.
University of Rhode Island
Rachel-Lyn Longo, Student Researcher
University of Rhode Island
2015
The project was developed as part of
The Collaborative’s initiative to engage
undergraduate students in research for
state leaders.
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COMPETITIVENESS
2015
REGIONAL COMPETITIVENESS
WILL EXPANDING MEDICAID HELP THE ECONOMY?
50 Park Row West, Suite 100
Providence, RI 02903
www.collaborativeri.org
Amber Caulkins
Program Director
amber@collaborativeri.org
401.588.1792
The College & University Research Collaborative (The Collaborative)
is a statewide public/private partnership of Rhode Island’s 11 colleges
and universities that connects public policy and academic research. The
Collaborative’s mission is to increase the use of non-partisan academic
research in policy development and to provide an evidence-based
foundation for government decision-making. The Collaborative turns
research into action by sharing research with policymakers, community
leaders, partner organizations, and the citizens of Rhode Island.
CURRENT RESEARCH PROJECTS
WORKFORCE
The Economic Benefits of a Flexible Workplace
by Barbara Silver, Ph.D., University of Rhode Island
The Knowledge, Skills, and Abilities Needed for Growing Occupations in Rhode Island
by Matthew Bodah, Ph.D., University of Rhode Island
Preparing Rhode Island’s Workforce for the Jobs of the Future
by Elzotbek Rustambekov, Ph.D., Bryant University
Shanna Pearson-Merkowitz, Ph.D.,
is an Associate Professor of Political
Science at the University of Rhode
Island. She received her Ph.D. in
2009 from the University of Maryland, College Park. Her research
focuses on public policy, inequality,
and political geography. Professor
Pearson-Merkowitz’s research has
appeared in some of the top political
science journals including the Journal of Politics and the American Journal of Political Science.
Rachel-Lyn Longo is a recent graduate of the University of Rhode Island and holds a B.A. in Political Science and Psychology. In the spring of
2014, she studied Paid Family Leave
Policies in Rhode Island during a Senior Seminar with Professor Shanna
Pearson-Merkowitz. Rachel-Lyn is
interested in familial health and wellbeing, which has sparked a curiosity
for further research on PFL following
the completion of this project.
Rhode Island Unemployment: Is There Labor Market Mismatch?
by Neil Mehrotra, Ph.D., Brown University
INFRASTRUCTURE
Improving Infrastructure through Public Private Partnerships
by Amine Ghanem, Ph.D., Roger Williams University
Millennials on the Move: Attracting Young Workers through Better Transportation
by Jonathan Harris, M.I.D., Johnson & Wales University
The Road to Better Bridges: Strategies for Maintaining Infrastructure
by Nicole Martino, Ph.D., Roger Williams University
REGIONAL COMPETITIVENESS
Choosing a Health Exchange for Rhode Island
by Jessica Mulligan, Ph.D., Providence College
The Economic Impact of Expanding Medicaid
by Liam Malloy, Ph.D., University of Rhode Island; Shanna Pearson-Merkowitz, Ph.D., University of
Rhode Island
Ensuring Paid Family Leave Pays Off
by Shanna Pearson-Merkowitz, Ph.D., University of Rhode Island
Rachel-Lyn Longo, Student Researcher, University of Rhode Island
Strategies for a Competitive Rhode Island
by Suchandra Basu, Ph.D., Rhode Island College; Ramesh Mohan, Ph.D., Bryant University; Joseph
Roberts, Ph.D., Roger Williams University
MANUFACTURING
Rhode Island’s Maker-Related Assets
by Dawn Edmondson, M.S., New England Institute of Technology; Susan Gorelick, Ph.D., New England
Institute of Technology; Beth Mosher, MFA, Rhode Island School of Design
WILL EXPANDING MEDICAID HELP THE ECONOMY?
Ensuring Paid Family Leave Pays Off
SHANNA PEARSON-MERKOWITZ, PH.D., UNIVERSITY OF RHODE ISLAND
RACHEL-LYN LONGO, STUDENT RESEARCHER, UNIVERSITY OF RHODE ISLAND
FIG. 1 MATERNITY/PATERNITY LEAVE GUARANTEED BY LAW
300
Maternity Leave
Paternity Leave
250
Days
200
150
100
50
0
Vietnam
USA
UK
Spain
Singapore New Zealand
Mexico
Jamaica
Ireland
Iran
India
France
Congo
China
Chad
Canada
Bangladesh
Source: Addati, Cassirer, & Gilchrist (2014) 1
The U.S. is one of the only developed nations that doesn’t
guarantee workers paid leave to care for a newborn child or a sick
family member. 182 out of 185 countries around the world provide
some form of paid maternity leave, and 70 countries also offer paid
paternity leave, while the U.S. guarantees neither.1 As a result, just
12% of American workers have access to paid family leave through
their job.2 For the rest, taking time off to care for a sick family member
or bond with a new child can result in financial hardship, workplace
penalties, or even the loss of a job.
President Obama recently launched a campaign to expand access to
family leave for workers across the country.(a) But a handful of states,
including Rhode Island, are already leading the way with their own
programs. Paid family leave, known in Rhode Island as Temporary
Caregiver Insurance (TCI), ensures people have the capacity to take
(a) President Obama is
expanding paid parental leave
for federal workers and asking
Congress for $2 billion to help
states create paid family leave
programs. He is also pushing
for the passage of the Healthy
Families Act, which would
allow all workers to earn paid
sick and family leave time.
time off work to care for their family by providing partial replacement
for lost wages and, in Rhode Island, guaranteeing their jobs will be
available when they return.
The Collaborative | March 2015
2
ENSURING PAID FAMILY LEAVE PAYS OFF
California was the first state in the U.S. to implement state-sponsored
paid family leave in 2002, followed by New Jersey in 2008 and Rhode
Island in 2013.(b) How is paid family leave (PFL) working in Rhode Island
and other early adopter states, and how might it be improved? Our
research evaluates evidence about the effectiveness of state-sponsored
paid family leave programs. While studies indicate that PFL has
health and financial benefits for families as well as potential economic
benefits for states, the data suggest that some workers benefit more
than others. Adjusting how benefits are calculated could make PFL
more accessible to the low-income families who need it the most and
who are most likely to go on public assistance - and thus cost the state
tax dollars - without it.
PAID FAMILY LEAVE PAYS OFF
(b) In 2007, Hawaii also
implemented a program to
encourage family leave, but
it is controlled and funded by
employers and participation
is optional.
(c) The major federal law
governing family leave, the
Family and Medical Leave
Act (FMLA), was passed by
Congress in 1993. The Act enables qualified workers to take
unpaid, job-protected leave
for up to 12 weeks. However,
in addition to the fact that it
only provides for job protection, not wage replacement,
the wording of the Act has
made it inapplicable to many
workers. According to one
report, only 59% of the workforce qualifies for FMLA.3
(d) Access to paid family leave
varies significantly depending
on income level. Only 5% of
workers with wages in the
bottom 25% have access
to PFL, compared to 20% of
workers with wages in the
top 25%.2
3
For the 88% of American workers who don’t have
access to paid family leave,(c) taking time off to
care for a family member can mean losing their
job or facing workplace discipline or sanctions.4
Even for workers who are permitted to take time
off, the leave is almost always unpaid.(d) Losing
a job or taking unpaid leave from work has both
immediate and long-term economic consequences for families. In the short run, households must
survive on a drastically diminished budget, a particular problem for those who are barely in the
black to begin with. Even if a worker eventually
finds a new job, research shows that spells of unemployment significantly decrease future wages.5
Given these challenges, government-sponsored
PFL can be a tool to foster security both for families and for the economy as a whole.
Research demonstrates that paid family leave pays
off for workers and their families. After taking
PFL, California families overwhelmingly report
experiencing better economic, social, and physical
health than those with a new child or sick family
member who did not take PFL.6 Receiving care
The Collaborative | March 2015
from family members has been shown to drastically improve health outcomes and recovery from
illness, especially among children and the elderly.7
Mothers who take paid leave to care for a newborn breastfeed for twice as long, a behavior that
has been connected with improved childhood
health.6
Paid family leave also improves economic outcomes. A Rutgers University study reports that
women who take paid leave after the birth of a
child are 93% more likely to have a job nine to
twelve months later and 54% more likely to report higher wages one year after giving birth than
women who could not take leave.8 For the state,
that means more workers paying taxes and contributing to the economy, and fewer people on
social welfare programs.(e) New mothers who are
able to take PFL are 39% less likely to go on public assistance and 40% less likely to receive food
stamps after the birth of their child, compared to
mothers who cannot take leave.8
In Rhode Island, objection to the passage of paid
family leave legislation came primarily from the
ENSURING PAID FAMILY LEAVE PAYS OFF
FIG. 3 ACCESS TO FAMILY LEAVE BENEFITS BY
FIG. 4 OUTCOMES FOR WOMEN WHO TAKE
INCOME BRACKET, 2013
PAID MATERNITY LEAVE
93%
54%
39%
40%
Highest 25%
Second 25%
Third 25%
Lowest 25%
Percentage of Workers with Access to Benefits
PAID
UNPAID
Source: Bureau of Labor Statistics, National Compensation
Survey2
more likely to have a job
9 to 12 months after birth
more likely to report higher
wages one year after birth
less likely to go on public
assistance after birth
less likely to receive food
stamps after birth
Source: Rutgers University Center for Women and Work8
business community.10 However, research on PFL
in California6 and New Jersey11 suggests that employers have generally been happy with the effect
of the program. The vast majority of businesses in
California reported no negative impact – and in
some cases a positive impact – on “productivity,
profitability, or performance.”6 Some employers
in New Jersey witnessed improved worker morale.
Some businesses applaud PFL as a cost-saving
measure because it reduces employee turnover,
thus saving employers from hiring and training
replacement workers.11
STATES LEAD ON MAKING PAID FAMILY
LEAVE A REALITY
The paid family leave programs in Rhode Island,
California, and New Jersey provide between four
and six weeks of income replacement at up to
two-thirds of a worker’s normal wages.(f)
While all three states provide replacement for lost wages, Rhode Island
(f)
is the only one that provides job protection, requiring that an employee
be restored to the same position, status, and benefits after taking PFL.
(e) In California and New
Jersey, one of the fastestgrowing segments of the
population using PFL is
people who are caring for
an elderly family member.9
Rhode Island has a slightly
larger elderly population than
the U.S. as a whole, so an
increasing number of older
workers may use PFL to care
for their parents and elderly
relatives. PFL may help keep
these people in the workforce
longer: According to the
Employee Benefit Research
Institute, one in four retirees
reports that they left the
workforce early to care for
a spouse, parent, or other
family member.
FIG. 5 PAID FAMILY LEAVE PROGRAMS IN THE UNITED STATES, 2015
STATE
Passed
Passed in
in 2002
2002
Passed
Passed in
in 2002
2008
Passed
Passed in
in 2002
2013
ALLOWED LEAVE
MAX WEEKLY WAGE
REPLACEMENT LEVEL
Weeks
Weeks
Weeks
Weeks
Weeks
Weeks
Source: CA Employment Development Dept., NJ Dept. of Labor
& Workforce Development, RI Dept. of Labor & Training.12
MAX WEEKLY BENEFIT
FUNDING MECHANISM
(FOR PFL + TDI COMBINED)*
Employee payroll tax of up to 0.9%
on taxable income up to $104,378
Employee payroll tax of 0.34% on
taxable income up to $32,000
Employee payroll tax of 1.2% of the
first $64,200 in taxable income
*Note: New Jersey has separate payroll taxes for TDI (0.25%) and PFL (0.09%). They are added together
here for comparison purposes. Rhode Island and California have a single tax that funds both programs.
The Collaborative | March 2015
4
ENSURING PAID FAMILY LEAVE PAYS OFF
(g) Rhode Island has had
a Temporary Disability
Insurance (TDI) program
since 1942. It expanded the
program to include PFL in
2013, calling it Temporary
Caregiver Insurance (TCI).
(h) Based on the current
rates, a Rhode Island worker
could pay up to a maximum
of $14.82 a week in TDI/PFL
taxes.
(i) Among women in
California, who are more
likely than men to be primary
caregivers and thus to need
PFL, 53% earn under $25,000
and 8% earn over $84,000.13
In each of these states, PFL is structured as an extension of Temporary Disability Insurance (TDI),
a program that provides short-term wage replacement for people who miss work due to non-workrelated illnesses or injuries.(g) The PFL program
expands this coverage to people who miss work
because of a family member’s health needs, rather
than their own.
All three states fund PFL through an employee
payroll tax. Funding the program in this way
ensures that the beneficiaries (workers) pay for
it, rather than placing the burden on employers.
While having workers fund the program makes
sense, the particular structure of the employee
contribution system is, in practice, regressive, in
that it places a greater burden on low- and middle-income workers. Like some other programs
funded by payroll taxes, such as Social Security,
PFL is funded through a fixed tax rate applied to
a worker’s taxable earnings up to a specific income
level, above which the tax is no longer applied. In
Rhode Island, for example, the PFL and TDI programs are funded through a joint 1.2% tax on a
worker’s first $64,200 in income.(h) The combination of the flat tax rate and the income cap means
low- and middle-income workers end up paying
a greater percentage of their earnings to fund the
program than high-income workers (see Figure 6).
Despite the fact that low-income workers contribute a disproportionate amount of their paychecks
to fund the program, they are less likely to utilize
PFL than high-income workers. The most recent
data from California, where PFL has existed the
longest, shows that individuals earning below
$24,000 a year account for less than 20% of PFL
claims.13 On the other hand, individuals earning
over $84,000 a year account for more than 20%
of PFL claims, a share that is growing. However,
according to the Census’s Current Population
Survey for 2013, individuals earning over $84,000
a year make up just over 12% of the population
5
The Collaborative | March 2015
FIG. 6 PERCENT OF SALARY PAID BY WORKERS FOR
PFL AND TDI COMBINED
1.20%
1.20%
CA
NJ
.90%
.90%
RI
.67%
.55%
.34%
.22%
.08%
$19,790
$50,233
The U.S. poverty
line for a family
of three
$140,000
The m edian U.S. The start of the
family income
top 10% U.S.
family income
bracket
ANNUAL INCOME
of California whereas over 40% of workers in the
state make less than $25,000 a year.(i) The data
suggest that paid family leave is drastically underutilized by those who need it most – the working
poor.14
WHY DOES PAID FAMILY LEAVE
BENEFIT SOME WORKERS MORE THAN
OTHERS?
Low-income workers contribute a greater share of
their salaries to fund PFL, but may be using the
program less than high-income workers. Why?
One reason may simply be lack of awareness
about the program. Despite overall growth in the
utilization of PFL,13,15 more than half of workers
in New Jersey15 and California6 were unaware of
their state’s PFL program or their eligibility for it.
Furthermore, income level was highly correlated
with awareness of the program: lower wage workers in California were far less likely to know about
the availability of PFL or the fact that they pay
into it.6
ENSURING PAID FAMILY LEAVE PAYS OFF
FIG. 7 AVERAGE WAGES AND RHODE ISLAND PAID FAMILY LEAVE WAGE REPLACEMENT RATES IN RELATION TO THE POVERTY LINE
POVERTY LINE ($380.58/WK)
$8
AVERAGE WAGE
WAGE REPLACEMENT RATE
HOURLY WAGE
$10
$15
$20
$25
$30
$35
0
$100 $200 $300 $400 $500 $600 $700 $800 $900 $1000 $1100 $1200 $1300 $1400
WEEKLY INCOME
A more troubling problem is that many lowincome workers may be unable to afford to take
leave, even when they have access to a state-sponsored partial reimbursement. Existing PFL programs provide less than two-thirds of a worker’s
missed wages. As Figure 8 shows, for Rhode Island families already living in poverty, losing a
third of their income may simply leave them with
too little to make ends meet. The maximum PFL
benefit for a full-time, minimum-wage worker in
Rhode Island with two children is $192 per week,
which is 50% below the poverty line.(j) Most
likely, workers like these simply cannot afford to
take time off, even with the 60% wage replacement provided by PFL. If taking time off is unavoidable, it might make more sense for a worker
to quit their job and apply for state aid than to
take PFL. In Rhode Island, only full-time workers
earning more than $15.86 per hour receive PFL
benefits that put them above the U.S. poverty line
(assuming a family of three that includes a single
parent and two children).
HOW TO ENSURE PAID FAMILY LEAVE
BENEFITS ALL WORKERS
Most people in the United States cannot take
time off work after the birth of a child or to take
care of a sick family member without risking
their economic security and potentially their job.
Rhode Island, California, and New Jersey have led
the nation in addressing this issue by passing paid
family leave policies that help workers take time
off to care for their families.
(j) According to the U.S.
Census, 13.6% of the state’s
population lives below the
poverty line.
These states can continue to lead the way by ensuring that low-income workers benefit from PFL
(which they help pay for), so that it isn’t a program
that taxes them more while benefitting them less.
As the group most at risk of losing their job or
winding up on state assistance without PFL,
low-income workers should be a high priority for
states trying to protect their economies.
There are several measures that could help increase
the use of the PFL program among the working
The Collaborative | March 2015
6
ENSURING PAID FAMILY LEAVE PAYS OFF
poor, and therefore maximize the economic benefits of PFL to the state economy. A statewide education campaign, with a particular focus on low-wage workplaces, could increase utilization by educating
workers about the program and their entitlement to benefits. The state could also consider requiring all
employers to provide information about PFL to workers.
Perhaps more importantly, implementing a more progressive wage replacement system so that lowerincome workers who take PFL receive a higher level of benefits could ensure that no one falls below the
poverty line as a result of taking paid family leave.
Given that low- and middle-wage workers are those who both need PFL
the most and who pay the largest portion of their salary into the program, it
is essential that these workers can afford to take advantage of it. Ensuring
all workers have access to PFL could also be a smart economic move for
the state. It could keep people employed and reduce social service reliance
during times of family crisis, and lead to higher earnings, and thus more
tax revenue, in the long run.
7
The Collaborative | March 2015
WILL EXPANDING MEDICAID HELP THE ECONOMY?
ENSURING PAID FAMILY LEAVE PAYS OFF
ENDNOTES
1.
Adam Peck and Bryce Covert (2014) “U.S. Paid Family Leave Versus The Rest Of The World, In Two Disturbing Charts,” Think
Progress, July 30. Laura Addati, Naomi Cassirer, and Katherine Gilchrist (2014) “Maternity and paternity at work: Law and
practice across the world,” Geneva: International Labour Organization.
2.
Bureau of Labor Statistics (2013) “National Compensation Survey: Employee Benefits in the United States, March 2013,”
Washington, DC: U.S. Department of Labor.
3.
National Partnership for Women and Families (2013) “A Look at the U.S. Department of Labor’s 2012 Family and Medical
Leave Act Employee and Worksite Surveys,” Washington, DC.
4.
Tom W. Smith and Jibum Kim (2010) “Paid Sick Days: Attitudes and Experiences,” Washington, DC: Public Welfare
Foundation. In their survey, 11% of people said they had lost a job after taking time off to recover from an illness or care for a
sick family member.
5.
Daniel Cooper (2014) “The Effect of Unemployment Duration on Future Earnings and Other Outcomes,” working paper no.
13-8, Boston: Federal Reserve Bank of Boston.
6.
Eileen Appelbaum and Ruth Milkman (2011) “Leaves that Pay: Employer and Worker Experiences with Paid Family Leave in
California,” Washington, DC: Center for Economic and Policy Research.
7.
Alison Earle and Jodi Heymann (2006) “A comparative analysis of paid leave for the health needs of workers and their
families around the world,” Journal of Comparative Policy Analysis, 8(3): 241-257.
8.
Linda Houser and Thomas P. Vartanian (2012) “Pay Matters: The positive economic impacts of paid family leave for families,
business, and the public,” New Brunswick, NJ: Rutgers University Center for Women and Work. Linda Houser and Thomas P.
Vartanian (2012) “Policy Matters: Public Policy, Paid Leave for New Parents, and Economic Security for U.S. Workers,” New
Brunswick, NJ: Rutgers University Center for Women and Work.
9.
Lynn Feinberg (2013) “Keeping Up with the Times: Supporting Family Caregivers with Workplace Leave Policies,” Insight
on the Issues series, no. 82, Washington, DC: AARP Public Policy Institute. Karen White, Linda Houser, and Elizabeth
Nisbet (2013) “Policy in Action: New Jersey’s Family Leave Insurance Program at Age Three,” New Brunswick, NJ: Rutgers
University Center for Women and Work.
10. Daniel Da Ponte (2014) Chairman, Rhode Island Senate Committee on Finance, personal interview with Rachel-Lyn Longo,
April 9.
11. Sharon Learner & Eileen Appelbaum (2014) “Business As Usual: New Jersey Employer’s Experiences with Family Leave
Insurance” Washington, DC: Center for Economic and Policy Research.
12. California Employment Development Department (2015) “2015 California Employer’s Guide,” DE 44 Rev. 41 (1-15),
Sacramento, CA: State of California, Labor and Workforce Development Agency. New Jersey Department of Labor and
Workforce Development (2015) “Family Leave Insurance Benefits - General Information,” Trenton, NJ [website accessed
January 9, 2015]. Rhode Island Department of Labor & Training (2015) “Temporary Disability Insurance / Temporary Caregiver
Insurance,” Cranston, RI [website accessed January 9, 2015].
13. Brie Lindsey and Daphne Hunt (2014) “California’s Paid Family Leave Program: Ten Years After The Program’s
Implementation,” Sacramento, CA: California Senate Office of Research.
14. It is important to note that not all workers earning less than $25,000 a year are eligible for PFL. If they work intermittently or
not at all, they may not have any income during the period on which benefit calculations are based. As a result, it is difficult
to calculate the exact percentage of the public who make under $25,000 and qualify for the program.
15. State of New Jersey Department of Labor and Workforce Development (2014) Family Leave Program Statistics, 2009-2014
[data files].
The Collaborative | March 2015
8
The Collaborative was developed in response to calls from the Governor’s office,
public officials, and community leaders to leverage the research capacity of the
state’s 11 colleges and universities and to provide non-partisan research for
informed economic policy decisions.
50 Park Row West, Suite 100
Providence, RI 02903
www.collaborativeri.org
Amber Caulkins
Program Director
amber@collaborativeri.org
401.588.1792
Following the Make It Happen RI economic development summit, the Rhode
Island Foundation committed funding for the creation of The Collaborative. As a
proactive community and philanthropic leader, the Foundation recognized The
Collaborative as an opportunity for public and private sectors to work together
to improve the quality of life for all Rhode Island residents. In FY 2013, the State
of Rhode Island matched the Foundation’s funding, viewing The Collaborative as
a cost-effective approach to leverage the talent and resources in the state for
the development of sustainable economic policy.
Rhode Island’s 11 colleges and universities agreed to partner with The
Collaborative, and the presidents from each institution formed the Leadership
Team. A Panel of Policy Leaders was appointed by the Governor’s office,
the Rhode Island House of Representatives, and the Rhode Island Senate
to represent both the executive branch and the legislative branch of state
government. This panel is responsible for coming to consensus on research
areas of importance to Rhode Island.
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The Association of Independent Colleges and Universities of Rhode Island is an alliance
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2015
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