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Small payroll tax is best way to cover paid maternity leave

A pregnant woman walked outside the State Department in Washington, D.C.AFP/Getty Images/file 2010/AFP

The United States has the dubious distinction of being the only developed nation not to guarantee its workers paid maternity leave, an issue that President Obama was right to highlight at last month’s White House Summit on Working Families. It’s clear the current system isn’t working. Only 12 percent of American workers receive paid family leave through their jobs. And the Family and Medical Leave Act — which since 1993 has provided most workers with unpaid medical leave — has proved to be inadequate. According to the Department of Labor, almost 50 percent of workers can’t afford to take off the 12 weeks allotted to them by the law. The question shouldn’t be whether or not the United States needs paid family leave — it’s clear that it does. Instead, Congress should be asking what is the best way to give workers the time they need to bond with new children or care for sick relatives while protecting businesses from undue harm.

The good news is that there are models at the state level which provide a workable solution. California, New Jersey, and Rhode Island have all implemented family leave laws funded by a small employee payroll tax that works much like Social Security. The results have been impressive. California’s law — which since 2004 has provided many citizens with 55 percent of their average weekly earnings for six weeks — has allowed more than 1.4 million residents to take either parental or medical leave. And a study by the Center for Policy and Economic Research reports that the vast majority of business owners did not report any negative effects on their bottom line. The study also showed that the program led to an increase in employee retention and worker morale.


The Family and Medical Insurance Leave Act, introduced in the House by Democrat Rosa DeLauro of Connecticut and in the Senate by Democrat Kirsten Gillibrand of New York, aims to replicate this success on the federal level. Also known as the FAMILY Act, the measure would levy a tax of 0.2 percent that would pay into a fund run by the Social Security Administration. Workers would then be entitled to receive 66 percent of their average salary, capped at $4,000 a month.

The bill is a good start. Critics insist that offering maternity leave, even one paid for by employee contributions, would be a real burden to a small business. But Congress has the option of moving family-leave legislation forward while amending it to include additional protections for smaller employers. The law already requires beneficiaries to have been working for a year before they can draw benefits. Perhaps that stipulation can be strengthened to require employees to work at the same company for a year before they can take a 12-week leave.


Paid leave will be a tough sell in the current political environment. But the need for it remains. Family leave enjoys broad public support, even with a small tax-hike attached to it, and California’s experience shows that it can be popular with businesses as well.