Is paid family and medical leave a good idea?
One of the likely recipients of a chunk of Minnesota’s forecast budget surplus of $17.6 billion is a scheme for paid family and medical leave.
You might ask yourself, ‘What’s the point?’ The Minnesota Chamber of Commerce says 80% of its member companies already provide paid family leave. A 2019 analysis by nonpartisan House researchers found that just under 200,000 Minnesota workers would take up benefits in the program annually — less than 7% of the state’s workforce.
So why does the government need to get involved? Because KSTP reports, “Democrats say the fact that so many companies already offer paid family leave is one reason to expand it to many small businesses that don’t.”
“I think they should go and talk to the chambers and the Minnesota Business Partnership because most of the big companies already do it,” former DFL state Sen. Jeff Hayden, of Minneapolis, said. “So the small companies are the ones they have to talk about. (Big companies) saw this as something that adds value to their businesses and it’s a way to grow…”
So the purpose is to impose on small businesses those practices that big businesses have adopted willingly. But it isn’t obvious why we should use the law to make small businesses run like big ones. The National Federation of Independent Business, an association of small businesses in the United States, says:
The vast majority of small business owners provide flexibility for employees to pick up kids from school, attend tee ball games, and attend to family emergencies. A one-size-fits-all government mandate is both financially and administratively burdensome. NFIB opposes these unnecessary mandates.
There are also practical concerns. When paid family and medical leave was proposed back in 2020, I wrote:
The proposed scheme would take the form of a new 0.6% payroll tax which, according to Bill Marx, the House chief fiscal analyst, would be split between the employee and employer’s income. This revenue would be used to pay for a maximum length of 12 weeks per year for medical or pregnancy leave and up to another 12 weeks for other qualifying exigencies for those who qualify.
As the Pioneer Press noted about a similar scheme in 2021, this would fund:
…an entire new state program — similar to the state’s unemployment program but actually more complicated — with at least 320 full-time workers, a complex new computer system, and at least around $2.1 billion in taxpayer funds over the first four years to get it started, according to the last state financial analysis, which was done in 2019.
This bureaucracy will be needed because, as my colleague, Martha Njolomole wrote in January:
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.
If a scheme for paid family and medical leave is proposed in the new year and is similar to those proposed recently it will construct a very expensive, over-engineered hammer to crack a relatively small nut. The costs — in terms of a higher tax and regulatory burden, especially for a state already struggling economically with such burdens — are not worth the benefit.