Why paid family leave is about more than taking care of babies

Financial Services


Paid family leave isn’t just a child care benefit — it could support retirement security too.

President Trump mentioned nationwide paid family leave during his State of the Union speech on Tuesday, though he did not include many details, like who would pay for it or how long workers would have off.

The White House website says paid family leave would “provide parents the chance to bond with their child while also promoting economic prosperity and financial stability in the household.” The president has suggested this benefit numerous times, including while campaigning and during his first official address to Congress.

If pursued, the right to paid family leave could have a substantial impact on women and their retirements. This benefit could afford workers the opportunity to continue earning an income while also taking care of loved ones. Women in particular are taking on these responsibilities during critical points in their employment, said Amy Matsui, director of income security and senior counsel at the National Women’s Law Center. They leave the workforce — temporarily or, sometimes, permanently — after having or adopting a child, and that usually occurs toward the beginning of their careers. Such a move could cut their potential earnings growth drastically.

See: These women had to crowdfund their maternity leave

But that’s not the only time women leave the workforce, and that’s why Trump’s proposal for family leave should extend beyond child care, Matsui said. Women, who are more often the family caregiver, also leave the workforce when their spouse, parent or another family member falls ill. “That can hit them at the peak of their career when earning the most, and when they’re supposed to be stocking away for retirement and making up for lost opportunities earlier in their career,” she said. “If you don’t take that into account, you’re missing an enormous part of the picture, because so many people will need that kind of leave through the course of their lives.”

Women face many hurdles to comfortably live in retirement. They typically earn less than men in their respective fields, and are more likely to exit the workforce to care for loved ones. An exit, either temporary or permanent, not only reduces their earnings potential, but also lowers their Social Security benefits or accumulation of retirement savings.

Women are 80% more likely than men to be poor at retirement age, according to the National Institute on Retirement Security.

Where the U.S. stands with family leave

Only five states and the District of Columbia offer paid family leave, and just 15% of private industry, state and local government workers have access to the benefit, as of March 2017, according to the Bureau of Labor Statistics. The particulars of these policies vary with the amount of time offered or the percentage of the wages workers get during their time off, according to the Society for Human Resource Management. Federal regulations, under the Family Medical Leave Act, require new parents have up to 12 weeks off, but do not mandate employers pay for that leave.

Don’t miss: Caring for an ailing family member can be a thankless act of love. Here’s how to avoid burnout

Some U.S. companies are stepping up to offer employees paid family leave. Microsoft

MSFT, +0.38%

 IBM

IBM, +0.39%

 Facebook

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 Netflix

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 American Express

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 and Etsy

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 offer a minimum of 12 weeks paid parental leave for the birth or adoption of a child. Etsy gives new parents up to 26 weeks of paid leave to use within the two years following the birth or adoption of a child.

There are a significant number of Americans — 43.5 million — who provide informal but regular care for an older adult, including a spouse or relative, without pay.

Other proposals that would impact women’s retirement

Legislators have put this benefit at the forefront of Congress. Sen. Kirsten Gillibrand, a Democrat from New York, introduced the FAMILY Act in 2017, which would create a universal family and medical leave insurance program for new parents and caregivers alike. The proposal has had bipartisan support, with 68% of Democrats, 61% of Independents and 60% of Republicans in favor of it, according to the National Partnership for Women and Families.

Sen. Patty Murray, a Democrat from Washington state, introduced another bill, called the Child Care for Working Families Act, also in 2017, which would assist parents in finding affordable child care. “As a working mom of a 3-year-old and with another baby on the way, I know firsthand the challenges working parents face, and I’m not alone,” wrote Sen. Tammy Duckworth, an Illinois Democrat, who has since welcomed her second child, making her the first senator to give birth while in office. “Millions of women and men across America struggle each day to balance the demands of their careers and loved ones.”

The inability to find affordable child care is another reason women stay out of the workforce, and why their retirements may be at risk, said Nari Rhee, director of the Retirement Security Program at UC Berkeley. “We need essentially cradle-to-retirement policies that help families and women be able to preserve and build assets,” she said. “It’s important to provide a way for them to stay in the labor force instead of being forced out because they can’t afford to take time off.”

Also see: Why planning for retirement is harder for women

Some proposals would be more harmful than helpful for women and their retirements, experts said. Sen. Marco Rubio, a Florida Republican, suggested the country provide paid family leave in return for giving up Social Security benefits. The proposal, called the Economic Security for New Parents Act, would allow parents leave of at least two months, equating to a 3-to-6 month delay in receiving Social Security benefits. “It asks people to undermine their own retirement security,” Matsui said. “For women especially, they already run such significant risks for retirement, it really is the worst of both worlds.”

The U.S. is far behind other countries in this department

Of 41 developed countries, including Austria, Italy, Mexico, the U.K. and Turkey, the United States is the only country that does not require paid leave, according to the Pew Research Center. Estonia tops the list for this benefit, with 87 weeks of paid leave.

American women are also the sole or primary breadwinner in 40% of all U.S. families with children, which means any unpaid time off significantly impacts household spending. Only a quarter of American workers say they took time off within the last two years of giving birth to or adopting a child, another Pew Research Center report found, and many others said they wish they could. A majority (69%) said they couldn’t afford to lose more wages or salary, and 47% said they were afraid they’d lose their jobs.

Alessandra Malito is a personal finance reporter based in New York. You can follow her on Twitter @malito_ali.

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