Here is what’s wrong with a state family and medical leave program
Since the Minnesota Management and Budget announced that Minnesota is expecting a $7.7 billion surplus, numerous spending proposals have come out. And among the top spending priorities for Democrats and Gov. Tim Walz is the creation of a state family and medical leave program.
A state-run paid family and medical leave program, however, would be costly, exert excessive bureaucratic burden on employers, and expand the size and scope of the Minnesota government.
During the last legislative session, the Minnesota House of Representatives passed a bill creating a state family and medical leave program which would be run like the state unemployment insurance program, with employers chipping in throughout the year. According to financial analysis, the program would cost taxpayers $2.1 billion over the first four years to fund start-up costs.
The program would also need at least 320 workers and a new computer system, further adding to the size and scope of the Minnesota government in the economy.
Despite the sheer cost and size of the program, however, research evidence shows that only a few workers would benefit from such a program. A 2019 report from a nonpartisan House Researcher, for example, found that only 200 thousand workers –– or less than 7 percent of Minnesota’s labor force — would enroll into the program.
The model version program that was passed by the House makes a lot of stipulations, like when employees can take leave, how employers should and should not treat employees who take leave, and others. These stipulations and violations would raise the administrative, bookkeeping, and compliance costs for employers.
Furthermore, the opt-out portion of the bill requires that private benefit plans mirror the state-mandated program if businesses are to be exempt. Not only that, but private benefits programs will be overseen by a commissioner, who has the power to terminate such programs if a business violates rules. Violations warranting terminations can be as minor as businesses failing to provide reports.
So in essence, the state program exemption rules lock employers into the mandated paid leave program, increasing bureaucracy and government control over private business operations.
Size and scope of government
Generally, Minnesota ranks unfavorably in studies analyzing economic freedom. One of the main contributors to that, apart from our high tax rates, is restrictive laws in the labor market.
In their 2021 freedom report, for example, Cato ranked Minnesota 38th among the states on labor-market freedom. This is due to our lack of right-to-work laws, the existence of a minimum wage law, and strict workers’ compensation rules.
A mandated state family and medical leave will add to existing rules that employers already have to follow, further weakening freedom in the labor market.
An all-around bad idea
At a time when employers are facing a worker shortage problem, a mandated state leave program will increase the cost of hiring, hindering recovery, and will also increase the size and scope of the Minnesota state government into private businesses, weakening freedom in the labor market.