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Want to Boost the Economy? Give Mothers (and Others) Paid Family Leave

Women’s paid employment rose dramatically in the US between 1979 and 2000, driven by dramatic increases in the proportion of mothers in paid employment and in their annual hours of work. When the share of women in paid employment peaked in 2000, three-quarters of mothers with children under the age of 18 held paying jobs and nearly half of mothers (46 percent) worked full-time. Largely as a result of mothers entering the labor force, the average annual hours of work for all adult women increased from 966 in 1979 to 1,281 in 2000. This had a major effect on the size of the US economy, increasing it by about 10.6 percent, or $1.5 trillion in today’s dollars.

Women’s average annual hours of work have stalled since then, actually declining by 2.1 percent between 2000 and 2016. As a result, the economy was 2.1 percent smaller in 2016 than it would have been if women’s hours had remained at their 2000 level. The drop in women’s work hours can be attributed to the decline in the workforce participation rate of women aged 25 to 54, prime years for both employment and raising children. It fell almost 3 percentage points between 2008 and 2016, according to a recent report from the International Monetary Fund (IMF).

This contrasts with the experiences of other advanced countries where the share of prime-age women in the labor market increased steadily despite cyclical ups and downs and the effects of the financial crisis, giving a welcome boost to their economies. Many countries that lagged behind the US in women’s participation in the labor market in the 1970s have now caught up, and some have surpassed us by a wide margin. What explains this?

The answer is policy. In a cross-country analysis, the IMF found that – despite unfavorable cyclical developments and over and above the effects of education, family status, exposure to automation, and opportunities for part-time work – access to childcare and paid maternity leave enabled women who want to work to do so. This explains much of the growth of women’s participation in Europe and other advanced economies.

The US can’t afford outdated policies that reduce the growth of the economy; working mothers can no longer accept a situation that creates stress and leads to lost income.

Working mothers in the US need meaningful family leave policies. New mothers in the EU are entitled to a minimum of 14 weeks of paid maternity leave, and new fathers often receive paid parental leave as well, while new parents in the US have no guarantee of any paid maternity or parental leave.

The Trump administration’s proposed policy solution is to have workers borrow from Social Security to finance parental leave. Details are sketchy, but an analysis of the potential impact of such a plan finds that workers who take one 12-week leave to bond with a child would have to delay retirement by as much as 25 weeks. Those with two children would have to push retirement back until they are almost 68. For many workers, this is unrealistic: punishing physical labor, deteriorating health, or loss of a job leads many to retire at 62.

Depleting Social Security by diverting funds to pay for parental leaves threatens to weaken a system that should, instead, be shored up. Social Security would not recover funds paid out for parental leave until decades later when leave recipients reached retirement age. Furthermore, the proposal does not cover workers who need paid time off for their own medical or temporary disability needs, to care for a seriously ill family member, or for military caregiving purposes.

Contrast this proposal with the Family Act, which is designed to make it easier for women who want to work, or to work full-time, to do so – without forcing them to choose between their caregiving responsibilities and their retirement.

The Family Act would create a comprehensive paid family and medical leave program. Modeled on successful programs in California, New Jersey, and Rhode Island that have been shown to meet the needs of today’s working women and men, the Family Act would establish an insurance fund to provide workers with two-thirds of their weekly income for up to 12 weeks. The program would be funded by small employer and employee contributions of two-tenths of one percent of wages – typically less than $2 a week for the employer and the worker – to cover administrative and insurance costs for new parents and for workers with medical problems or who need to care for a seriously ill family member.

Faster economic growth and paid family leave for workers are both urgently needed in this country. The IMF’s analysis strongly suggests that passage of the Family Act will increase mothers’ participation in the labor market, simultaneously boosting economic growth and providing much needed support to working families.

This column originally appeared in The Hill.

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