Will D.C.’s new paid family leave policy unintentionally encourage discrimination?

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A baby sits on his mother's lap in their apartment at a public housing facility in the Rockaway section of the Queens borough of New York November 17, 2012. Some residents have struggled to get their lives back to normal more than two weeks after Hurricane Sandy with some essential services still yet to return to some areas of the city. REUTERS/Eric Thayer (UNITED STATES - Tags: DISASTER ENVIRONMENT) - RTR3AJRT

DC’s new paid family leave is one of the most generous in the nation. But economist Harry Holzer worries the policy could have unintended consequences and hurt the women it’s trying to help. Photo by Eric Thayer/Reuters

Editor’s Note: Last week, the District of Columbia passed a new paid family leave policy, allowing new parents to take eight weeks leave, workers caring for sick family members six weeks and workers who are sick themselves up to two weeks.

The policy is a generous one for the United States, a global outlier as the only industrial nation in the world to not offer paid family leave. While other countries have successfully implemented such policies, they remain largely uncharted territory in the U.S.

Will D.C.’s new paid family leave policy help or hobble business? Will it help workers or unintentionally hurt them?

Economics correspondent Paul Solman posed that question to two different economists: Heather Boushey of the Washington Center for Equitable Growth who is in favor of the new policy and Georgetown University economist Harry Holzer who is concerned the policy will do more harm than good. You can read Paul’s conversation with Boushey here and his conversation with Holzer below. The following conversation has been edited for clarity and length.

— Kristen Doerer, Making Sen$e Editor


PAUL SOLMAN: So you opposed the original version of the bill here in D.C., right?

HARRY HOLZER: I did.

PAUL SOLMAN: Why?

HARRY HOLZER: It was extremely generous. It provided up to 16 weeks of parental leave and up to 16 weeks of family leave. And I thought that would have been extremely costly a) to the taxpayer and b) to employers.

There were at least two big risks. Number one, I thought the plan would be underfunded, meaning that the tax revenues they raised wouldn’t be sufficient to cover all the leave they were promising to pay out. And secondly, I thought this would be very costly to employers, even if they’re not paying directly out of pocket for all the leave. It would cause a lot of disruption. They wouldn’t know when the disruption was coming. And I was fearful that they would cut back on employment, especially of young, less educated women because of that.

PAUL SOLMAN: Disruption? What kind of disruption?

HARRY HOLZER: Disruption to the workplace. You know, if I’m an employer, I was counting on having this employee here, working full time. All of a sudden, she or he disappears for 16 weeks, and especially if I have to keep that job open, I can’t replace them with a permanent worker. It’s hard for businesses to plan when you have a lot of that kind of disruption going on.

PAUL SOLMAN: But the bill that passed is not 16 weeks.

HARRY HOLZER: No. The bill that actually passed was scaled back even from what the council was proposing just a few days ago. And now they’re going to provide eight weeks of parental leave, six weeks of family, two weeks of personal sick leave. So that does make it much more affordable. I still do have some concerns, even about the bill that was passed. They’re providing 90 percent wage replacement up to close to $1,000 a week. You’re giving the worker almost no incentive to limit the amount of time they ask for. Other states that have done this provide 60 percent, maybe 70 percent. So I think the incentives are not there for workers to try and limit this and that will then generate more leave perhaps than necessary.

PAUL SOLMAN: How do we determine how much leave is necessary?

HARRY HOLZER: Well, there’s not an absolute number. I do believe that there are important benefits. I’m a supporter of paid family leave, certainly to the moms. It enables them to stay attached to their employers and to the labor force, to the kids and, in some cases, even to employers, because it cuts down on unnecessary turnover and things of that nature.

“In economics, we’re always looking for that right balance between benefits and costs.”

But in economics, we’re always looking for that right balance between benefits and costs. We want employers to stay in D.C. We want them to keep thinking that it’s profitable to hire workers. When we make it so costly for them to hire workers, especially from a particular part of the population, they could cut back on their hiring. That doesn’t do anybody any good. So we’re looking for that right balance between the benefits and the costs.

PAUL SOLMAN: So you’re worried that employers would leave D.C. or replace workers with what?

HARRY HOLZER: They have a lot of different options if they want to. The first option is not to reduce overall employment, but to cut back on hiring the particular employees most affected by this. So number one, they could simply cut back on less-educated young women in the childbearing age and just replace them with other employees. That’s one possibility.

PAUL SOLMAN: But the other employees would be more expensive.

HARRY HOLZER: But they would presumably try to hire employees who would take less leave. So for instance, young men of the same age are less likely to take leave, because they’re less likely to have custody of the kids, and in general, the men take leave less frequently. They would try to hire anyone that they think might take less leave — somewhat older people, somewhat more educated workers, maybe men instead of women.

PAUL SOLMAN: So you’re particularly worried about young, relatively low-wage women.

HARRY HOLZER: That’s right. And the employers often have stereotypes about who is likely to stick around anyway and who’s likely to have a lot of kids. I fear that many employers in the low-wage labor market will see young, less educated minority women and assume that, number one, they’re not going to stick around for than six months or a year, and number two, now they’re going to take a lot of family leave and be disruptive even more. So my concern is that they would really try to discriminate against them in their hiring.

“So my concern is that they would really try to discriminate against [young, less educated minority women] in their hiring.”

Another concern is that employers in Washington, D.C., simply might move across the river to Arlington, Virginia, because the state of Virginia is not imposing a paid family leave policy on employers in the state. And this is especially true after the city of Washington has imposed many costs on employers, like a $15 minimum wage, and all kinds of other restrictions in their hiring policy, each of which makes employment costlier in the city, and there might be a cumulative effect of all these policies together.

PAUL SOLMAN: But doesn’t paid family leave make Washington, D.C., a more attractive place for people to come and work?

HARRY HOLZER: It might make it a more attractive place for people that don’t have that policy already, but if employers aren’t willing to hire them, then that doesn’t matter, and the jobs won’t be there. My fear is that we will be driving employers either out of D.C. or at least out of the hiring activities for this low-wage earning group. I’m worried about the low end of the job market where employers don’t have that much trouble finding the people they need, and if we make it so much costlier for them to do so, they will simply do less of it, one way or the other.

And of course another possibility is they can stay here and simply hire fewer low-wage, less educated workers. In fast food restaurants or coffee bars, they can use a lot more robots over the next five to 10 years.

PAUL SOLMAN: So you’re afraid this will accelerate the move towards automation.

HARRY HOLZER: I think it could if it’s costly. The automation is coming anyway. This will create incentives for it to happen faster than it otherwise would and make the robots look that much more attractive in comparison to workers.

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