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Is Paid Family Leave Really Bad for Business?

Immediate Release: June 24, 2014
Contact: Alan Barber (202) 293-5380 x115

New report demonstrates that the New Jersey Family Leave Insurance program helped meet the leave needs of workers while imposing no undue burden on employers.

Washington DC – Paid family leave was a major item on the agenda at yesterday’s White House Summit on Working Families. One of the items figuring prominently in yesterday’s White house Summit on Working Families was paid family leave. This is not surprising. Despite the fact most people find themselves faced with the need to take time off to care for a parent, spouse or child, or to bond with a new baby, the United States remains the only rich country that does not mandate some form of paid leave at the nation level. Perhaps the biggest argument against paid leaves is that they impose heavy burdens and are bad for business. A new report from the Center for Economic and Policy Research (CEPR) shows that this is not the case.

“It’s a valid question – whether paid family leave is bad for business - and one that comes up every time the policy is proposed. So it seemed worth asking the businesses themselves,” says Sharon Lerner, who spent the last year conducting this research. “I knew the businesses weren’t paying the benefits themselves, so I expected that they wouldn’t feel it weighed on them financially. I was surprised, though, by the number of employers who really liked paid family leave.”

The report, “Business As Usual: New Jersey Employer’s Experiences with Family Leave Insurance” explores the experiences of New Jersey employers whose employees have taken leaves under the New Jersey Family Leave Insurance (FLI) program. The program allows workers to take up to six weeks of paid leave capped at $595 a week in 2014. Under New Jersey FLI, workers can take leaves to care for new babies, seriously ill relatives, or themselves. The program is paid for by a small tax (up to 60 cents a week) on employees.

To assess the extent to which the program had other effects on employers, the report analyzed responses to confidential interviews of employers and HR personnel at New Jersey companies ranging in size from 26 to 36,000 employees (though most were small businesses). The interviews covered such topics as how employers handled work during leaves; how their experiences of dealing with employees’ needs for family leave had changed since the FLI program went into effect; what HR managers and business owners did to inform their employees about the program; whether FLI affected their businesses in terms of morale, efficiency, and paperwork; and any complaints they might have about the program.

Some of findings of the study include:

  • None of the participating employers reported that the Family Leave Insurance program affected their productivity or turnover.
  • Only two of 18 employers felt the program negatively affected their profitability.
  • Some participants found that the program improved employees’ morale.
  • Several employers reported that the length of time employees were home to care for a new baby was longer than before the Family Leave Insurance program was in place.
  • A majority of employers experienced no increase in paperwork due to administration of the program; some employers, however, reported a small to moderate increase.
  • Despite fears that the program would be abused, no employers were aware of any instances of abuse.
  • Men at the workplaces studied took fewer family and medical leaves than women and the leaves they did take tended to be shorter.
  • Some business owners and human resources (HR) managers reported a lack of awareness of FLI among their employees.
  • More than four years after the program went into effect, even some human resources professionals were confused about or unaware of the provisions of the FLI program.

The New Jersey experience was not dissimilar from the experiences in California and Rhode Island, the only other states in the nation that offer paid leave programs. Just as in New Jersey, employers in California and Rhode Island did not feel these programs imposed heavy burdens upon them or were an impediment to business. The release of this report coincides with the Demos sponsored event Good News on Paid Family Leave: Political and Practical lessons from New Jersey and California.

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