Updated on December 20, 2016
This week, the District of Columbia is poised to become the next in a growing number of state and local governments to provide workers with a benefit not offered under federal law: paid leave for new parents. The United States remains the only industrialized nation to not offer the benefit, but if the District’s proposed legislation passes, it would become the most generous paid-family-leave law in the country.
D.C.’s proposed law would create a fund that would provide private-sector workers with up to 90 percent of their full wages for eight weeks,* capped at $1,000 a week. The leave would cover care for a newborn or adopted child, or provide six weeks to care for a seriously ill relative. In the bill’s current iteration, the mayor’s office would be in charge of overseeing the program and doling out the funds, which would come from a 0.62-percent increase to employer payroll taxes. How the funds would be raised and collected is perhaps the most controversial portion of the bill, and one that could change before the final vote.
As the council prepares for a final vote Tuesday on the Universal Paid-Leave Amendment Act, there has been a last-minute rush to come up with a version of the bill that will cement support from two of its critics: Mayor Muriel Bowser, who has been skeptical all along, and the D.C. Chamber of Commerce, which has opposed the bill since its inception. The Chamber has expressed concern about taxing D.C. businesses for a benefit that will mainly go to workers who live outside the city (about 64 percent of workers who would get the benefits live in Maryland or Virginia). And the mayor seems unhappy about the prospect of creating a new city office to administer the program, which she says would cost millions and take years to set up. “It would be almost three times as much as we are spending on affordable housing, more than we spend on parks and recreation, more than we spend on public works. It would be the fifth-largest expenditure for the city,” Bowser said on a recent episode of The Kojo Nnamdi Show.
On Monday, council members Mary Cheh and Jack Evans announced that they will introduce an amendment to the bill that the council will vote on on Tuesday, which would fund paid leave through an individual-employer mandate, in which employers pay for parental leave when employees need it, instead of the current plan to raise taxes and provide the benefit through a public-insurance program. The amendment would also give a tax credit to small businesses to help them cover their employees’ wages while they are gone.
It’s a major change to the proposal, one that has angered many supporters of the bill. Councilwoman Elissa Silverman, one of the co-sponsors of the original legislation, says the tax credit of $200 per employee will not be enough to help many small businesses cover the cost of an employee’s wages while they are on leave. “This is a risky, untested, unvetted scheme to derail the Universal Paid Leave Act,” she said. She points out that all the other states that passed paid-leave laws created a public-insurance program, like the one included in the original bill. This approach keeps costs down for small businesses, she says, even if they are paying the same tax rate as larger businesses.
When the council first proposed a family-leave bill in 2015, it seemed like a long shot. After all, the first version offered twice as many weeks of paid leave and a tax rate nearly twice as high. It was also unclear what kind of economic impact the law would have: Would the cost cause businesses to leave the District or stop hiring? To come up with some concrete answers, the District’s budget office released a detailed report that analyzed more than 170 peer-reviewed studies on the impact of paid family leave on individuals, families, businesses, and the labor market in regions that had already passed similar laws. It then created a forecasting model to estimate its effect on D.C.’s local economy and businesses.
The conclusions were promising for paid-leave advocates. The report found that a slightly older version of the plan—offering 11 weeks of leave with a payroll-tax increase of 0.62 percent—would have a minimal effect on the District’s economy over the next 10 years. The District could lose as much as $15 million in GDP during the decade, or it could gain up $122 million. Even at the extremes, those outcomes are just a fraction of the $28 billion in economic growth currently projected during that time. Among the other findings were that the law would slightly slow down job growth, costing the District anywhere from 90 to 1,300 new jobs in the next decade, which could result from businesses hiring less or moving out of the city. But even in the worst-case scenario, that number is also only a fraction of the 87,000 new jobs the District is expected to create during that time.
The report went on to look at how other states have fared since passing their own paid-leave laws. In 2004, California became the first state to offer paid family leave, followed by New Jersey and Rhode Island. They each provide fewer weeks of parental leave with a smaller percentage of workers’ wages reimbursed, though they offer more weeks of paid medical leave that mothers can use to extend their time off. (New York will begin offering paid parental leave starting in 2018.) According to surveys with business managers in these states, the laws either had no noticeable impact on their business, or resulted in positive outcomes. The majority said that the family-friendly policies improved employee satisfaction resulting in better customer service, reduced employee turnover, and lower recruitment and training costs.
Nathan Ackerman, who represents businesses in the Adam’s Morgan Business Improvement District, says most small-business owners want to offer paid leave to their employees, but they object to being treated the same as corporations under the law. “You can’t treat a mom-and-pop operation the same as a national chain; [small businesses] operate on a much smaller profit margin,” says Ackerman. Ideally, he would like to see a lower tax rate for businesses with fewer than 50 employees, or some other exception targeted at small businesses.
And yet, despite such concerns, residents of D.C. are overwhelmingly in favor of the measure. About 80 percent of voters in the District want to see it happen, and many small businesses are supportive too.
* This article has been updated to reflect a change made to the proposed law that decreased the number of weeks private-sector workers could receive most of their wages while on leave.