TIME’S UP Impact Lab

A National Paid Leave Program Could Add $28.5 Billion Annually to the Economy

Caregiving, Equity, Impact Lab, Jobs Report, Paid Leave

By Anwesha Majumder and Jess Forden

*Updated September 20, 2021. Originally posted June 14, 2021.

The COVID-19 pandemic has exposed the many points of fragility that exist in the foundation of our society, systematically limiting women’s economic and political power and devaluing the work women do. One stark example of this is the state of our caregiving infrastructure that has long been precariously underfunded and dismissed as “women’s work.” Of the many pieces a caregiving infrastructure requires, the lack of a national paid family and medical leave program is particularly glaring. Paid leave, which can cover time to care for a new child, family member, or one’s own health, is often a benefit only available to those in high-paying jobs. A new analysis from TIME’S UP and economist Lenore Palladino from the University of Massachusetts Amherst shows that a national paid leave policy is good for workers and good for the economy, and it is essential to unlocking entrenched gender, racial, and economic disparities.

When the health and safety of millions of workers and their families were jeopardized overnight by COVID-19, more than 30 million workers were not guaranteed a single paid sick day and only 21% of workers had access to paid family leave through their jobs. Many of the workers facing a lack of paid sick leave were in “essential” industries, such as the health care or service sectors; women, particularly Black, Latinx, Asian, and immigrant women, are also disproportionately employed in these sectors due to generations of occupational segregation. A national paid leave program could have dramatically benefited many of these workers and their families when they contracted COVID-19, and it is one way we can truly thank these workers for the sacrifices they made during a global pandemic and ensure that people in their positions are never faced with the same circumstances again. Our estimates suggest that 36,000 COVID-19 deaths could have been averted had workers had guaranteed sick or medical leave, much more of a benefit than nightly claps for essential workers.

The Family and Medical Leave Act of 1993 (FMLA) allows eligible employees to take up to 12 work weeks of unpaid leave during any 12-month period to care for a new child, care for a seriously ill family member, or recover from a significant illness. However, the act excludes many types of employees both explicitly — as the law only applies to businesses with 50 employees or more, and only to workers within those businesses that have worked at the business for at least one year and logged 1,250 hours within the past year — and implicitly — because many low-paid workers cannot afford to take unpaid leave. These exclusions mean that access to leave varies starkly across racial lines: About 71% of Hispanic workers, 67% of Indigenous workers, 61% of Black workers, and 54% of Asian American and Pacific Islander workers are either not eligible for or cannot afford to take unpaid FMLA leave. Other marginalized groups, such as people with disabilities or the LGBTQIA+ community, are also less likely to have access to paid leave because of the disproportionate share of low-wage jobs held by these groups and the non-inclusive ways company policies can be written.

Nine states and the District of Columbia have passed their own comprehensive paid family and medical leave policies in the absence of national coverage: California, New Jersey, Rhode Island, New York, Washington, Massachusetts, Connecticut, Oregon, and Colorado. State-level programs are a step in the right direction, but leaving a crucial benefit like paid leave to varied state solutions and excluding workers in states that will never take action is unacceptable. A national standard is essential to guarantee that everyone is afforded a basic minimum level of support and to ensure that workers know their rights. There is also substantive research showing that state-level paid leave policies often have either neutral or positive impacts to businesses, including small businesses, despite misgivings by some business communities prior to policy implementation. After California implemented its state paid leave program, 87% of employers said costs had not increased and more than 85% of small businesses found that such policies did not harm profitability and productivity.

Working with Palladino, we modeled the effects of a national paid leave plan as proposed by the American Families Plan and the Building an Economy for Families Act. This program would include twelve weeks of paid leave for six types of leave: leave for one’s own medical needs; leave to bond with a new child; leave to care for an ill spouse; leave to care for ill children; leave to care for ill parents; and maternity leave (for women giving birth). Such a program would boost national income, enabling recipients of paid leave to spend money on goods and services, thereby creating jobs in the industries that need it most. We estimate that this program would lead to an additional $28.5 billion in national income. $19.1 billion in wage replacement from the national plan will create 162,000 new jobs, enabling workers who are not directly benefiting from paid leave to earn an additional $9.4 billion in income.

This is because workers who might otherwise have taken unpaid leave or could not afford to take unpaid leave now have additional income from the national program that will flow back into the economy as they spend that income on food, clothes, or other goods and services, which in turn supports additional jobs. In other words, for every dollar earned as paid leave, an additional 50 cents is earned by someone not taking paid leave because of the increased economic activity that newly empowered leave-takers’ access to wage replacement generates.

There are other well-documented channels through which paid leave may also have positive economic impacts that are not measured in our calculations. For example, recent research on state-level paid leave programs show that paid family leave in California and New Jersey improved women’s earnings and labor force participation. Other research shows that paid leave policies can improve health outcomes for mothers and children.

What’s more, a national paid leave program is paramount for addressing key gender, racial, and economic disparities and would especially benefit women, people of color, and low-wage workers. Women comprise 52.7% of those who would use paid leave under this plan, while they are 47% of the labor force. Black women are 8.5% of new leave-takers, while they are 6.5% of the labor force. Women in low-wage jobs (defined as workers earning below $15 an hour) are 27.2%
of new leave-takers, while they are 23.8% of all workers.

Implementing national paid leave and other care investments will not only boost our short-term economic recovery, but address long-standing disparities by gender, race, ethnicity, sexual orientation, age, disability status, and other identities. Paid leave and other caregiving supports are necessary for a just, inclusive, and sustainable economic recovery.