Job protection, wage insurance, and universal benefits

Become a Patron!

As readers may have observed, I’ve been doing a lot of research lately on paid family and medical leave policies around the country, and I’ve found myself frustrated by the way several different ideas are confusingly and unnecessarily combined. Today I want to spell out the relevant issues, and try to explain how they do and don’t interact with each other.

Job protection

The most basic protection workers can be provided for family and medical leave is job protection. That’s because even if someone can afford to go without pay while recovering from childbirth, bonding with a child, or caring for themself or a relative, no one can afford to do so without knowing they have a job to return to.

Currently, the only form of nationwide family and medical job protection is the Family and Medical Leave Act of 1993. For qualifying events, the law provides:

• 12 weeks of leave in a 12-month period;
• to employees who have worked for at least 12 months, and at least 1,250 hours in the previous 12 months, and 
• at private-sector employers who employed 50 or more employees in 20 or more workweeks in
  the current or preceding calendar year.

Note that the qualifications are non-transferrable. In order to qualify for job-protected leave, it’s not enough to be continually employed for 12 months and work 1,250 hours in the previous 12 months: you have to be employed for 12 months at the same employer. That means workers with working two jobs with 20 hours per week at each will never be eligible for job-protected leave from either employer, since their 1,040 hours of work each 12 months leaves them short of the 1,250 minimum.

When we isolate job protection in this way, we can imagine all sorts of possible improvements:

• Increase the quantity of job-protected leave. If we think 12 weeks of leave is inadequate, we might increase the amount of time workers have to return to their jobs after taking family and medical leave. The public health consensus seems to be that about 6 months of leave after having a child is optimal for child and maternal health, so we could increase our job-protected leave from 12 to 26 weeks.
• Make more workers eligible for job-protected leave. The obvious way to do this is linking eligibility to the individual’s work history instead of their employment at a specific firm. Instead of requiring 1,250 hours and 12 months of employment at a specific firm, eligibility could be based on total hours worked at all employers over the preceding 12 months. Likewise, the number of hours and required length of employment could be reduced.
• Require more firms to provide job-protected leave. Like many social phenomena, employer size has the curious characteristic that while most workers are employed by large employers, most employers are small employers. Reducing or eliminating the number of employees before a firm is required to provide job-protection is an obvious way of expanding access to job-protected leave.

The reason it’s worthwhile to isolate job protection from other features of a family and medical leave policy is that job protection is valuable whether a worker’s leave is paid or unpaid. That is to say, there is a difference between going 12 weeks without pay after giving birth knowing you’ll have a job to return to, and going 12 weeks without pay after giving birth knowing that you’ll be unemployed at the end of the 12 weeks and need to seek out a new employer.

Wage insurance

The second piece of a family and medical leave policy we can isolate is wage insurance, also sometimes called wage replacement, during a period of leave. The argument for wage insurance is that whether or not a worker is entitled to job-protected leave, they may not be able to afford to go weeks or months without a paycheck, and so return to work earlier than would be ideal for their own or their child or dependent’s health.

The United States has no national system of wage insurance, and consequently a substantial number of new parents return to work without using their full 12 weeks of FMLA leave, even when eligible, because they can’t afford to go without a paycheck any longer. Fortunately, as demonstrated in the states operating their own paid family and medical leave systems, wage insurance is extremely cheap to provide. From a recent National Partnership for Women and Families fact sheet, the total employer and employee cost, wage replacement rate, and maximum benefit of each state’s program is:

• California: 1% of employee’s first $118,371 in annual wages, replaces up to 70% of average weekly wages, up to $1,252.
• New Jersey: up to 1% of employee’s first $34,400 in annual wages, replaces up to 85% of average weekly wages.
• Rhode Island: 1.1% of employee’s first $71,000 in wages, replaces 60% of average quarterly wages up to $852 per week.
• New York: up to roughly $139.17 per year, replaces 55% of average weekly wage, up to 55% of state average weekly wage (rising to 67% in 2021).
• District of Columbia: 0.62% of wages, replaces 90% of average weekly wage up to $1,000.
• Washington: 0.4% of employee’s first $132,900 in wages, replaces 90% of average weekly wage, up to $1,000.
• Massachusetts: 0.63% of wages, replaces up to 80% of weekly wages, up to $850.
• Connecticut: up to 0.5% of wages, replaces up to 95% of average weekly wages, up to 60 times the Connecticut minimum wage.
• Oregon: up to 1% of employee’s first $132,900 in wages, replaces up to 100% of average weekly wages, up to 120% of the state’s average weekly wages.

Note here again that job protection and wage insurance are conceptually totally unrelated. You can provide wage insurance without providing job protection, and you can provide job protection without wage insurance. Indeed, that’s precisely the situation in the 42 states that don’t provide paid family and medical leave.

Once you’ve conceptually isolated them, you can suddenly imagine all sorts of combinations: you could leave job protection at 12 weeks and expand wage insurance to 26 weeks. You could expand job protection to 26 weeks and wage insurance to 40 weeks for folks willing to forego job protection.

Universal benefits

There’s a final set of benefits that are sometimes pulled into discussions of paid family and medical leave but that are rightly considered separately, and that is universal or near-universal benefits. Universal benefits in this context are those you’re eligible for regardless of work or earnings history. The great advantage of universal benefits is they allow us to put the material welfare of people above incoherent attempts at social engineering.

Job protection protects only those with eligible jobs and work histories. Wage insurance supplements the income of workers whether or not they are eligible for job protection. Only universal benefits are aimed at ensuring the material well-being of people regardless of their employment status or wage record.

The closest thing we have in the United States to a universal benefit is the refundable Child Tax Credit, which increased to $1,400 per year in 2018, or roughly $116 per month per child.

The problem with the Child Tax Credit, of course, is that it’s only claimed once a year; a parent who gives birth or adopts a child in January won’t see any benefit until as late as April the following year, and has to wait a full additional year to receive their next cash infusion. This is an absurd system and, oddly, another better system is already in place: Social Security Child’s Insurance Benefits. These cash payments are available to the minor children of disabled and retired workers, and are received monthly, either by paper check or direct deposit.

Besides providing benefits to parents, patients, and caregivers with insufficient work and earnings histories, universal benefits are also capable of reducing the stakes involved in job protection and wage insurance. As indicated above, the maximum weekly wage insurance benefit in most states is around $1,000. Mechanically, a $1,000 monthly universal basic income would allow that maximum wage insurance benefit to fall to just $750, leaving the maximum income of parents with work histories unchanged (at $4,000 per month) but increasing the income of non-working parents from $0 to $1,000.

Conclusion

This post isn’t intended to convince you of any one particular policy solution. Personally, I think we need more job protection, more universal wage insurance, and more universal benefits, but I don’t know for sure whether we need 26 weeks or 40 weeks of job protection, whether we need 66% or 100% wage insurance, and whether we need fully universal benefits or a mixture of universal benefits and wage insurance and job protection.

Rather, this post is meant to help you ask the right questions when your state, your congressperson, or your senator makes a paid family and medical leave proposal: does it extend job protection to additional workers, or beyond 12 weeks? Does it provide wage insurance, and if so, for whom and at what rate? Is it universal or is it means-tested?

If you ask the right questions, you at least have a chance at making the policy better. And if you don’t know what questions to ask, we’ll be stuck with the stingiest welfare state and unhealthiest population in the developed world.

Become a Patron!