COVID-19 Is Not a Good Reason to Enact a Permanent Federal Paid-Leave Entitlement

By Veronique de Rugy & Donald J. Boudreaux.

"The pandemic is a serious problem, and it requires a serious policy response. The paid-leave proposals floating around Congress won’t cut it.
 
Many progressives and conservatives have long supported a federal paid-leave policy. And the intense concern brought on by the COVID-19 pandemic may make it harder for an already-too-tempted Trump administration to resist the large number of calls for this new entitlement — at least as it would apply to workers who may become sick or must stay home to care for family members. As a Washington Post reporter recently worried, the absence of such a policy “could make a widespread coronavirus outbreak here worse than it would be in a comparable country that takes sick leave seriously.”

It’s one thing to support temporary provision of sick leave paid for by the government when we face a public-health crisis. During emergencies, taxpayers, workers, employers, and Americans in general may be willing to bear a short-term burden that would be unacceptable during normal times. (This explains why even private companies such as Uber are temporarily offering paid leave to their drivers.) But it would be deeply misguided to use COVID-19 as an excuse for a permanent policy change.

Panic is no friend to sound policymaking. If Congress rushes through a universal paid-leave plan, it could fail to target those people who actually lack such a benefit from their employers — a smaller number of workers than many paid-leave advocates acknowledge — and overwhelmingly benefit those companies that already provide paid leave. And if it permanently adopts such a measure, many employers will reduce their privately supplied coverage in response. Such crowding-out is what has already happened in states where paid-family-leave programs were adopted, with many companies that once voluntarily provided paid leave as part of their workers’ employment packages now requiring employees to first tap all the available taxpayer-provided benefits, which in turn has produced larger-than-expected budgetary costs for state governments.

Of more immediate concern, several features of the various current proposals out there make them poorly suited to help control the spread of the coronavirus. For instance, the Healthy Families Act (HFA) proposed by Senator Patty Murray (D., Wash.) and Representative Rosa DeLauro (D., Conn.) would require “all employers to allow workers to accrue seven days of paid sick leave and to provide an additional 14 days available immediately in the event of any public health emergency, including the current coronavirus crisis.” That sounds good in theory, but symptoms manifest themselves between two days and two weeks after contraction of the virus, a period of time during which asymptomatic carriers will not take leave and may unknowingly spread the disease. This is particularly important in the absence of widely available testing for those who fear they may have been infected.

Of course, it’s true that when workers without paid leave don’t work, they aren’t paid, so they may be reluctant to stay home even if they start to exhibit symptoms. It’s also true that if more workers had paid sick leave, fewer sick workers would show up to work and fewer people would become infected. Considered in isolation, this outcome is, of course, good. But it cannot be considered in isolation.

Obliging companies to permanently provide paid sick leave to workers who don’t currently have it would impose eventual reductions on their take-home pay. The provision of such benefits isn’t costless. We can be sure that in the long run — after the coronavirus fades from the headlines — mandated paid leave would inflict a pricey and permanent toll on workers who would prefer to receive more of their compensation as take-home pay and less as paid leave. Such workers, being disproportionately low-income, would be the least able to bear even marginal reductions in take-home pay.

This negative effect would exist even if leave benefits were paid for through the government and financed with a payroll tax split between employers and employees, as they would be in the Family and Medical Insurance Leave (FAMILY) Act also proposed by DeLauro and Murray (and in other such proposals). Payroll taxes are highly regressive, and existing ones already impose a heavy burden on a majority of Americans. Unfortunately, the requirement that part of the tax be paid by employers is a legalistic formality: Economics dictates that the cost of this part of the tax, too, will over time fall on workers in the form of lower wages.

Yet many support the FAMILY Act, probably because, like the HFA, it’s been around as a proposal for years. As currently designed, it would provide payments for up to three months at a time to eligible people who, among other things, take leave from work because they have serious health conditions or need to care for immediate-family members who are seriously ill. But it would do little to encourage coronavirus-related leave.

Why? For one thing, it does not include a requirement that all employers extend paid leave. For another, it does not provide job protection to workers who don’t already qualify for the similarly titled Family Medical Leave Act of 1993 (and who must work mostly full-time for firms with over 50 employees). That means it wouldn’t cover many workers who currently don’t have paid leave. For a third, it would almost certainly take a weeks-long or months-long application process before benefits could start being paid out. That is what’s happening in Washington state, where, only a few weeks into the adoption of a new paid-leave program, the huge volume of applications has led to wait times of at least a month to process claims — a month during which workers without enough savings are unlikely to forgo work and the vital income it provides.

The spread of coronavirus is a serious problem, and it requires a serious policy response. We must not further enfeeble American workers by using it as an excuse to enact permanent government mandates and entitlements that risk unleashing unintended negative consequences."