TIME’S UP Impact Lab

Paid Leave Is Essential for Businesses and Key to Building a More Equitable, Sustainable Economy

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

By Anwesha Majumder and Jess Forden

When COVID-19 first hit last year, it exposed many of the gaps in our social support structures that have been precariously underfunded for decades. One of the most glaring gaps is the lack of a national paid leave program. Paid leave — which can cover time to bond with and welcome in a new child, or to care for a loved one or one’s own health — is often seen as a benefit that comes along with high-paying, white-collar jobs. In reality, 20 million people end up having to take unpaid leave every year in the U.S. A new analysis from TIME’S UP and economist Lenore Palladino from the University of Massachusetts Amherst shows that these policies are good for workers and good for the economy, and they are essential to unlocking entrenched gender, racial, and economic disparities. 

As the pandemic posed an imminent threat to the health and safety of millions of workers and their families, over 30 million workers (or 22 percent) were not guaranteed a single paid sick day — let alone paid family and medical leave. These workers have been concentrated in “essential” industries, such as health care, education, and food service. A national paid leave program in place would have dramatically  benefited front line workers, who are disproportionately women of color and workers in low-wage jobs. By some estimates, guaranteed sick leave could have averted 36,000 COVID deaths, demonstrating that not only is paid leave good for worker’s well-being it is also essential for the businesses who employ these workers. 

While 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 serious illness, it excludes many types of employees both explicitly as the law only applies to businesses with 50 employees or more 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 percent of Latinx workers, 67 percent of indigenous workers, 61 percent of Black workers and 54 percent of AAPI workers are either not eligible for or cannot afford to take unpaid FMLA leave. 

As of 2021, nine states and the D.C. have passed paid leave policies, but what is really needed is a national standard so that everyone is afforded a basic minimum level of paid leave. Such a standard would allow workers to know their rights and multi-state businesses to standardize their processes. Opponents claim that it would negatively impact the economy and businesses, pointing to its potential costs. But after California implemented its state paid leave program, 87 percent of employers said costs had not increased and more than 85 percent of small businesses found that such policies did not harm profitability and productivity

Working with Palladino, we modeled the impacts of a comprehensive federal paid leave program on the economy based on the “Building an Economy for Families Act.” This program would include twelve weeks of paid leave for six types of leave one’s own illness, maternity disability, new child (also called parental or bonding), care of ill child, care of ill spouse, and care of ill or frail parents with a wage replacement cap of $1,000 per week. Such a program would not only provide access to paid leave for millions of workers who do not have employer-provided options, but would also contribute to economic growth: We estimate that this program would lead to an additional $1.3 billion in income. Two-thirds of this income would go directly to leave recipients and the other one-third would come from new jobs created by higher spending by new leave recipients. 

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. For every dollar earned by a worker on leave through the national paid leave program, an additional 50 cents are earned elsewhere in the economy, which translates to thousands more jobs as well. Importantly, this analysis uses 2018 economic data in order to estimate a “normal” economy not in the throes of a public health crisis, meaning that paid leave would be even more impactful in the current economy.

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. Paid leave may also have positive economic impacts on businesses especially in industries where pay is low, including the restaurant industry where paid leave could reduce turnover by almost 50 percent. This is particularly important as the hospitality industry attempts to recover from the economic devastation of the first year of COVID-19 and looks to hire back millions of workers.

What’s more, a national paid leave program is paramount for addressing key gender, racial, and economic disparities. Workers in the top quartile of the income distribution are over three and a half times more likely to have access to paid family leave than those in the bottom quartile. And more than half of Latinas and one-third of Black women do not have the option to take paid time off when they are sick, and seven out of 10 workers in low-paid jobs do not have paid sick days. 

Implementing a national paid leave program would help to extend access to the many workers who do not have paid leave. In fact, we estimate that 27 percent of new leave takers under a national paid leave program would be women making under $15 an hour. Leaving these disparities in access to paid leave unchecked will only reinforce gender, race, immigration status, job and wage inequalities with the most marginalized groups once again bearing the brunt of our country’s failures. 

Paid leave is not only good for workers and families it’s also good for businesses and the economy. A national paid leave program is a win for everyone and it is a step towards unraveling entrenched gender, racial, and economic disparities as we work towards a world where work is safe, fair, and dignified for all.