July 18, 2017

Family Allowances are the Conservative Alternative to Paid Family Leave



The United States is the only developed country that does not guarantee paid family leave — a fact that First Daughter Ivanka Trump has made her mission to change. So far, however, she has struggled to find Republican allies on the Hill. As I recently told the Washington Post: “Ivanka faces a major dilemma in having to construct a plan that appeals to both Republican lawmakers and the longtime advocates of paid leave on the left. Too generous, and the plan will be dead in the water. Too weak, and the left will excoriate her. It’s not an enviable position to be in.”

For the most part, Democrats want a paid leave plan that is not only generous (extending to medical and family leave more generally) but also non-optional, and implemented by the government through state unemployment insurance systems. In contrast, the few Republicans that support paid family leave, like Sens. Rubio and Fischer, would prefer to provide a tax credit that incentivizes firms to implement paid family leave plans of their own, but which otherwise leaves the choice up to businesses. Awkwardly, Ivanka Trump and her team prefer the approach favored by Democrats, which gets to the crux of why she is having so much trouble finding a single Republican lawmaker to explicitly endorse her plan.

Conservatives have deeper philosophical concerns with paid leave, as well. As Robert VerBruggen of the National Review has noted, the “use it or lose it” structure of paid family leave “pushes new parents along a specific path” and “blunts the natural incentive for parents to go back to work promptly.” Of course, there’s nothing wrong with a parent choosing to bond with their child over returning to work early, or vice versa. But as a proponent of liberal neutrality, there is a major problem with the state putting its thumb on the scale of such a value-laden choice.

As an alternative, VerBruggen points to my paper Toward a Universal Child Benefit, which makes the case for a periodic child allowance to replace more bureaucratic and paternalistic federal programs. He adds just one tweak: parents would receive the cash benefit as a lump-sum when the child is born. I call this idea a family allowance, and it has a lot of merit.

How a Family Allowance Would Work

Consider that a big hurdle currently faced by paid leave proposals is the problem of redundantly subsidizing firms which already provide leave. Family allowances get around this problem by targeting the benefit directly to new parents. This means that if a firm already provides paid maternity and paternity leave, parents would simply receive the allowance in addition to the leave. That is, its incidence on the person rather than the firm helps avoid benefit crowd-out at both the firm- and state government-levels. Additionally, given that the existing Family and Medical Leave Act (FMLA) already grants eligible employees 12 weeks of job-protected unpaid leave following the birth of a child, a family allowance would, in effect, transform the FMLA into a de facto paid leave program, without the contentiousness that comes with re-writing labor law.

To see exactly how it would work, let’s use the recent “consensus” proposal put forward by the AEI-Brookings Working Group on Paid Family Leave as our baseline. Their plan calls for a paid family leave program with “a wage-replacement rate of 70 percent up to a cap of $600 per week for eight weeks,” implying a maximum benefit of $4,800. This same benefit could be transformed into a family allowance by creating a new child tax credit with a maximum benefit of $4,800 that phased in at 70 percent, based on a look-back of the parents’ most recent tax return. This would provide parents with the equivalent of the full paid leave benefit — 70 percent of eight weeks of earnings — without punishing parents for returning to work early, or crowding out existing paid leave benefits, or imposing new regulations on businesses.

But as long as we’re deviating from conventional paid leave, why tie a family allowance to earnings in the first place? Any social benefit attributable to supporting parents in the early weeks of their child’s life are surely just as valid, if not more so, for those new parents who earn too little to file federal tax returns. The ideal way of administering a family allowance would therefore be through the Social Security Administration (SSA), which would provide a one-time allowance to families who register their newborn for a Social Security card — minimizing the potential for mispayment. In most states, the SSA only takes one to two weeks to process and return cards for new children. Under this proposal, the envelope would simply be a check-width thicker.

Paid Family Leave is a Failure of Imagination

There are a number of other factors that make family allowances a strong alternative to paid family leave. For starters, a simple, flat family allowance is guaranteed to be more progressive than leave policies that explicitly vary with employee earnings. Family allowances would provide a significant boost to families who might otherwise be ineligible for leave due to spotty work records — an all-too-common problem faced by low wage and part-time workers. They would also ensure equal benefits flow to workers in industries for which leave of any kind is detrimental to normal business operations, and thus likely to be exempted from a politically viable paid family leave program.

Indeed, the existence of paid family leave policies vary widely by industry, from 37 percent in finance to around 5 percent in construction. Knowledge-workers, including those of us who work in think tanks, should be wary of an elite bias in the effort to universalize our own in-work benefits. At best, it reflects a failure of policy imagination. At worst, it risks committing a kind of category error that sees government’s role as simply recreating in-work benefits through the public purse. Governments are not firms, and so we should think twice before nationalizing relatively sector-specific firm-level benefit structures.

Supporters of paid family leave have particular goals in mind: maternal labor market attachment, parent-child bonding, and providing financial resources to new families, to name a few. It’s worth questioning, however, whether paid family leave is the best tool for government to support those ends. Family allowances provide a promising alternative for conservatives who favor all of these goals, but who also put significant value on individual choice and fairness in policy design.