Like so much else President Trump has proposed, his paid parental leave plan is a head fake. Its sole purpose is to let the President and First Daughter Ivanka claim they are doing something for working families that need paid time off when they welcome a new child; in reality, the Trump parental leave plan is a total non-starter.
The Trump plan proposes to use the already fragile unemployment insurance (UI) program to finance six weeks of paid parental leave for new parents. The full burden of financing paid parental leave would fall on a UI system that is already under stress and poorly prepared to pay unemployment compensation to workers who lose their jobs in the next recession.
According to the Trump Administration’s estimates, Trump’s paid parental leave program will cost $18.5 billion over 10 years. To pay for it, an Obama-era proposal to impose a “solvency standard” – a funding level adequate to meet expected demands on the system – for state UI funds was dusted off. The Trump plan requires employers to pay higher taxes in states where the solvency standard is not met.
Establishing such a solvency standard would raise $12.9 billion over the ten-year period according to the Administration. But shortfalls in state UI funds are the result of years of successful efforts by business lobbyists to hold down employers’ UI contributions, despite the fact that this has meant paying lower benefits to a smaller share of unemployed workers. Only about a quarter (27 percent) of unemployed workers receives UI benefits, the average benefit is $344 a week. Does anyone really think that this Republican Congress will mandate that states with UI shortfalls have to raise employer UI taxes to fund paid parental leave?
Tying parental leave benefits to the UI system raises serious problems. Many workers – especially women and part-time workers – do not meet states’ work hour requirements and do not qualify for UI benefits. They would not be eligible for pay while recovering from childbirth or bonding with a new child. Wage replacement rates in most states’ UI programs are woefully inadequate. Many new parents would not be able to afford to utilize the program.
Other measures in the Trump plan to pay for paid parental leave include faster re-employment of unemployed workers and stricter assessments of eligibility for UI benefits. This is expected to raise another $4 billion over 10 years. Reducing overpayments, the large majority of which are honest errors by the agency or workers, is projected to raise $2.2 billion. In total, the poorly funded UI system is being asked to contribute a total of $19.1 billion over 10 years for the President’s paid parental leave program.
Using UI to let workers who are eligible for unemployment compensation collect benefits while they are caring for a newborn or newly adopted child – so-called Baby UI – is not a new idea. The Clinton Administration issued a regulation allowing states to use UI funds for paid parental leave. Fifteen states considered Baby UI programs in 2000; 20 considered them in 2001. None implemented such a plan. Employers objected to being taxed to pay for it. Unions were concerned that payments to new parents would drain funds meant to tide workers over a period of unemployment. Apprehension over the solvency of state UI systems after the 2001 recession and objections from employer groups to using UI funds for new parents led the Bush Administration to rescind Baby UI in 2003. The Trump paid parental leave proposal, as the President and his advisors must surely know can be expected to meet a similar fate.
In every way, Trump’s proposed paid parental leave program falls short. It may give the President and First Daughter bragging rights and let them pose as champions of working families. But it is unlikely to bring any relief to working families that currently lack access to paid time off to recover from child birth or to care for a new child.