A California Dream for Paid Leave Has an Old Problem: How to Pay for It

Gavin Newsom, campaigning last fall with his son Dutch, emphasized family-friendly issues like early childhood education programs and prenatal and child care during the closing weeks of his race.
Credit...Jenna Schoenefeld for The New York Times

The United States has long been the only industrialized country not to offer paid leave to new parents. Instead of waiting for the federal government, the incoming governor of California intends to change that in a significant way for families in his state.

He is expected to introduce a proposal to give families six months of paid leave after the birth of a child.

What’s unclear is how California would pay for it.

The proposal, which the governor-elect, Gavin Newsom, is expected to include with his budget after he is sworn in on Monday, would be the most generous state policy in the nation, at a time when federal paid leave proposals have stalled. Yet it does not include a plan to finance it, and there is no guarantee that the Legislature would approve raising the money.

It’s the same challenge that has stymied the policy at the federal level. Around 80 percent of Americans consistently say they support paid parental leave, and some Republican lawmakers have joined Democrats in embracing the idea. Yet federal lawmakers have declined to pass tax increases or corporate mandates to make it a reality.

California’s proposal continues an effort by governors to pass laws on the issue while Congress is gridlocked. Massachusetts, Washington and New Jersey recently passed or expanded paid family leave policies. Advocates say Oregon, Colorado and Connecticut are poised to do so, too. In competitive races in the recent midterm elections, 29 percent of candidates for Congress and governor included paid leave in their platforms, up from 4 percent four years earlier, according to the National Partnership for Women and Families.

But the California proposal, shared by a Newsom adviser on condition of anonymity, is set apart by the length of the proposed leave. The state currently offers six weeks of partly paid leave (with an additional six weeks of disability for birth mothers). The five other states offering it, along with the District of Columbia, give between four and 12 weeks.

Many of the biggest companies give certain new parents between two and 16 weeks. Some of the most generous companies, like those in Silicon Valley, give around four months; Netflix offers a year. But only 16 percent of American workers get paid leave from their employers.

Economists have found that about six months of parental leave is ideal. A shorter period offers fewer benefits for babies’ health and development, and a longer one can hurt women’s careers and earnings.

The absence of paid leave and other family-friendly policies has been found to be the major reason that more women aren’t working in the United States, and the reason American parents say they are unhappier than nonparents and parents in other countries.

“My career never recovered and never will,” said Charlotte Brock, 39, a mother in Vienna, Va. When she had her first child eight years ago, she quit her job as a think tank analyst and moved in with her parents because she had no paid leave.

Now an analyst at NASA, she is expecting twins, and has pieced together sick leave followed by part-time work. Her husband doesn’t get paid parental leave either. “People don’t realize the recovery for women, even physically, is a lot longer than what’s advertised in our culture,” she said. “And just in terms of the experience of bonding, the closeness, and breast-feeding is so much easier if you can do it without having to pump.”

The share of American women who are working has stalled, researchers say, hurting families’ incomes and the country’s economic output, even as that share has continued to climb in other rich countries. As employment has improved since the last recession, men have benefited more than women. Economists have pinpointed the lack of family-friendly policies as a big reason. In Canada, by comparison, some parents can stretch out their paid leave over 18 months, and in Britain, many parents can take one year. Both nations also provide subsidized child care.

“Because we refuse to acknowledge that people have families and care issues, we’re falling behind our economic competitors,” said Heather Boushey, the executive director of the Washington Center for Equitable Growth, who advised Hillary Clinton on economic issues during her 2016 presidential campaign.

If policies like paid parental leave and subsidized child care enabled more mothers to work, the United States could add five million prime-age workers to its labor force, according to a new economic letter from the Federal Reserve Bank of San Francisco. Spending on child care makes the biggest difference in female employment, earnings and fertility, found a recent paper.

The California policy would be the nation’s biggest test of the idea that longer leave, by encouraging parents not to quit their jobs and by delaying the need to pay for infant care, can help economic growth.

But the governor will face questions about whether it would require a tax increase; how the program could stay solvent if there were a recession; and how businesses would cope with employees’ long absences. California’s existing paid leave program is financed by a 1 percent payroll tax. Increasing that tax would require the approval of two-thirds of the Legislature, not assured despite Democratic control.

The proposal unites two of Mr. Newsom’s campaign themes: help for young children and reductions in the expenses of daily life. Infant care costs an average of $1,230 a month in a child-care center. His budget proposal will also include $1.8 billion for early childhood education, as reported by The Los Angeles Times, including expanded prekindergarten programs, subsidized child care and nurse home visits for pregnant low-income women.

The ideas signal the extent to which the new governor wants to take California in a different direction. His predecessor, Jerry Brown, pushed back on what he saw as extravagantly expensive plans, and warned in exit interviews of an approaching recession. California has a history of fervent opposition to taxes. Democrats now have supermajorities in both the Senate and the House, but many of them have embraced fiscally conservative policies.

California was the first state to pass paid parental leave, in 2002, and researchers have already been able to assess some effects. Even though California companies opposed the original policy, surveys have found either no effect or a positive effect on productivity and turnover. Paid leave increases mothers’ wages and work hours, research shows, and improves the health of babies and mothers. Mothers breast-feed longer. Fathers who take leave are more involved in child care for years to come.

California’s leave program is paid for entirely by employees’ payroll taxes, in a fund that is part of the state’s temporary disability insurance program. New parents receive a percentage of their earnings, up to $1,216 a week. The new plan would allow new parents to divide six months of paid leave as they see fit, or to give it to other family members caring for the baby.

Reaching six months of leave could take several years, said the Newsom adviser. First, the administration plans to extend leaves by an unspecified shorter period. It would free up money to do so with a policy change: The trust fund that administers paid leave would be required to hold three months of reserve funds instead of six.

Then the administration would start a task force to address questions like how to reach six months of leave, including the biggest issue of all: how to pay for it.

Adam Nagourney contributed reporting.

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