You Want Paid Leave? I Want A Free Tesla.
Veronique de Rugy writes at EconLib about issues with the Democrats' push to create a federal paid leave program.
She debunks the idea "there's a 'failure' in the labor market that is evidenced by the fact that when workers are asked if they would like to get paid leave benefits, without ever being told at what cost they would get it, most workers say they would love to":
Yet not all workers receive paid leave. This reality is no more evidence of market failure than is pointing to poll that shows that most Americans would be happy to receive a Tesla for free if given to them and calling the reality that most of these Americans do not have a Tesla a market failure.The market is a process of exchange through which order emerges, not a static snapshot or outcome of exchange. And so the market shouldn't be judged by comparing the outcomes of exchange at a certain point in time to the outcomes desired by policy makers or pundits. The fact is in most cases, there is simply a gap between what people think the world should look like and what the world really looks like given the necessity of making tradeoffs.
The other point ignored by the WSJ is this: Whether the provision of paid leave is private or public, over time it will reduce the wages portion of workers' total compensation. This tradeoff is one of the reasons why not everyone gets paid leave. This point is important to understand especially for those who claim that the main reason to require paid leave is to improve the lives of workers. The adoption of a paid leave policy will only improve the lives of workers during the time that these workers value the benefit more than the cost of taking home less money as a result. This tradeoff exists whether the benefit is public or private.
This is important to understand even for those conservatives who are trying to find "more market" solutions to the lack of paid leave benefits for lower income workers. The more total compensation is paid for in the form of fringe benefits, the more they invite the left to complain that wages aren't growing fast enough. There is no way around that.
As for how well this works in other countries, De Rugy on Denmark:
"Consider Denmark. Its government offers 52 weeks of paid leave and other generous, family-friendly benefits. But even in paradise, there's no such thing as a free lunch. A well-cited study shows that while men's and women's pay grew at roughly the same rates before they had kids, mothers saw their earnings rapidly reduced by nearly 30% on average; men's earnings were fine. Women might also become less likely to work, and if still employed, earn lower wages and work fewer hours. Women are also seriously underrepresented in managerial positions.Some people argue that paid leave is only one side of the equation: In order to get the full benefit of paid leave, the government needs to subsidize childcare, too. This is incorrect. A recent paper looking at 50 years of data from Austria shows that the generous expansion of paid leave benefits, even when coupled with generous childcare benefits, "have had virtually no impact on gender convergence." In other words, those claiming that the benefits are necessary to close any real or imaginary gender gaps in the workplace should find another way."
De Rugy quotes Heritage Foundation scholar Rachel Greszler:
Canada. Government paid family leave programs have exacerbated class inequality: "Despite proportionate and obligatory contributions of all employers and employees to these programs, the distribution of benefits is unbalanced and aids the social reproduction of higher-income families, especially outside of Québec." While Quebec, which operates its own program, has taken action to increase government benefits, they "are still not equally used by mothers with lower socio-economic status."Norway. In Norway, which expanded paid leave to 100 percent replacement rates for nearly all mothers, researchers found that "paid maternity leave has negative redistribution properties," and that "the extra leave benefits amounted to a pure leisure transfer, primarily to middle and upper income families." The researchers concluded that "the generous extensions to paid leave were costly, had no measurable effect on outcomes and [also had] poor redistribution properties."
Here's the WSJ on California's system:
"The dirty secret is that government leave programs end up helping middle-income folks who can live on partial pay. A 2013 analysis out of California, which offers a state benefit, found that less than 4% of claimants earned less than $12,000; more than 20% earned north of $84,000. Based on the Ways and Means bill's formula, a new parent earning $200,000 a year could be eligible for more than $1,000 a week for 12 weeks every year. No matter if this person is married to another six-figure earner, who can also claim the leave."
"Based on the Ways and Means bill's formula, a new parent earning $200,000 a year could be eligible for more than $1,000 a week for 12 weeks every year."
This statement is as accurate as it is meaningless.
In order for someone to be eligible "every year" would require them to be pregnant each and every year or to adopt a new child each and every year.
It is ridiculous to try and craft laws around the hypothetical behavior of a person earning $200,000 a year who plans on giving birth and then getting pregnant again 3 months later and repeating this behavior over and over again for the substantial portion of their career.
When one bases their objections around such absurdities their argument itself loses all credibility.
In any event, paid parental leave exists for the benefit of the children... and hence is beneficial to society at large in the long term.
Sending children into overwhelmed day care facilities at 6 weeks of age is not optimal for a thriving civilization.
For those who opt not to have children and hence believe they are not benefiting, my question is whose exactly do they expect to be caring for them as they get older if not the children of other people?
We are all better off if these children get a good start in life.
Artemis at September 27, 2021 11:01 PM
Does the money come out of the multi-trillion-dollar fund for endless profitable wars in far-off lands?
Gog_Magog_Carpet_Reclaimers at September 28, 2021 8:55 AM
Progressives always believe they know better than you do how you should live your life. Many uber drivers, for example, want to work when it is good for them. Maybe they work around kids school or they are in school or they have a part-time job. In the name of "unfair"--actually kowtowing to the taxi union--Calif has been trying to force uber drivers to become employees. But many drivers do NOT want to become employees and Uber does not want drivers that only work now and then to be employees so these people are out of luck.
When they raised the min wage in Las Vegas (IIRC) the hotels found ways to compensate--no more free uniforms or free meals for example. All benefits (retirement, health care, gym in the office, snacks) are just money in another form.
cc at September 28, 2021 9:35 AM
"Does the money come out of the multi-trillion-dollar fund for endless profitable wars in far-off lands?" ~Gog
Sorry, that line of credit is tapped out.
"All benefits (retirement, health care, gym in the office, snacks) are just money in another form." ~CC
They really should be taxed the same in my opinion. Avoiding taxes is the main reason for benefits. But most benefit programs aren't useful to employees. Killing off the tax exemption would drive more of people's income into the cash economy, which honestly is better for them. People know what they want to buy. Let them do it themselves.
Ben at September 28, 2021 2:29 PM
When I was an adjunct, anyone who taught 3 or more classes a week was considered full time and the University was required to give them benefits. Result: they only hired people to teach 2 classes.
It was ok for people like me who had a spouse with benefits and didn't need to work full time, but some people really needed full time work, so in order to make ends meet, had to work at more than one University. The Unis not being next door to each other, they had to drive hours around the Philadelphia area to get enough hours.
If benefits weren't required, they'd be hired to teach all their classes in one place, improving their quality of life. As it is, they're driving all over AND have no benefits.
When I was a tutor, if I worked for an agency I'd get 20-30 an hour. If I freelanced, I'd earn 40-150 an hour with an average around 60-70. So when there were all these pushes for making sick leave and vacation and the rest mandatory, I was against it because it meant having to work for an agency as individual employers aren't going to bother with all that. And agency pay sucks.
NicoleK at September 28, 2021 10:01 PM
The entire concept of "benefits" was born of the wage and price controls during World War II. They were a way to increase the compensation to workers when salaries were capped.
Federal funding of paid leave will mean higher taxes on someone and that cost will be born by consumers or taxpayers. Employees who choose not to have children will bear the cost of paid leave for employees who do through higher costs/taxes and increased workloads.
Now, as Artie points out, sometimes a benefit to parents delivers a benefit to society as a whole. I won't argue that this is one of those times; or that it isn't. I will say that those holistic benefits to society as a whole are rarely measurable. However, they often form the justification for those who would impose collectivism on a society. So we should be wary of imposing burdens that promise those types of immeasurable benefits.
I generally feel that paid family leave should be left to individual companies to offer, and not mandated by the government (beyond what it already is), or funded by taxpayers. That, however, presents a new set of problems: pregnancies cannot always be planned, nor can deaths.
It's nice that Sweden and other countries with generous social programs offer long paid leave. Keep in mind, however, that many of those countries have not, in the past, been high immigration countries. As such, replenishment of their population depended upon maintaining a higher birthrate. Making it possible for citizens to spend time with new children helped to further that aim. The US has always been a high immigration country, replenishing and growing its population through a combination of births and immigration.
And, as Crid likes to point out, many of them depended upon the US to offer an umbrella of protection that allowed them to shift spending from defense to social programs.
Conan the Grammarian at September 29, 2021 8:58 AM
Conan Says,
"The US has always been a high immigration country, replenishing and growing its population through a combination of births and immigration."
This does not support your argument.
US population growth rate in 2019 was ~0.5%
Sweden population growth rate in 2019 was ~1.1%
Historical growth rates are not a legitimate argument when the current growth rates no longer reflect what has been true in the past.
The data indicates that the US is in greater need of generous social programs offering long paid leave than Sweden based upon the reasoning you have presented.
We do not make laws or policies to address the state of the nation decades ago... we need to be responsive to the modern day.
Artemis at September 29, 2021 3:14 PM
"The data indicates that the US is in greater need of generous social programs offering long paid leave than Sweden based upon the reasoning you have presented."
Well, some data may look like that to you -- if you ignore that this government funding can only be taken from the rest of the taxpayers. Perhaps you missed the blog item Amy posted about Scandinavian social programs not being the utopian plans some pretend.
It's a vote-buying scam. Vote for Uncle Sugar to "give" you money so you can stay home.
Radwaste at September 29, 2021 6:00 PM
I'll go with the UN figures, thanks Artie.
Population in 2020:
Sweden = 10,099,265
US = 331,002,651
Net population growth from prior year:
Sweden = 62,886
US = 1,937,734
Yearly population change:
Sweden = 0.63 %
US = 0.59%
Net migration in 2020:
Sweden = 40,000
US = 954,806
Sweden's slightly higher rate of population change is off a much lower base than the US change. The actual US population change dwarfs Sweden's.
And, while Sweden's demographics may be changing due to immigration, the Scandinavian county still has a much more homogenous culture than the US has and is traditionally less reliant on immigration than the US is for population growth; and less accustomed to accommodating it.
According to the Migration Policy Institute, in 1980, migrants made up 4.0% of Sweden's population and 5.9% of the US population. It wasn't until 1990 that the percentage of Sweden's population made up of migrants caught up with the US's - 9.2% for both. Sweden's was still off a much smaller base, however.
In the next few decades, Sweden's migrant percentage grew at a smaller rate than the US's. Then, in 2010, Sweden's migrant percentage of the population again caught up with the US's and began surpassing it. As of 2020, Sweden's migrant population was 19.8% of the total and the US's was 15.3%.
Sweden's acceptance of immigrants is a heavily debated matter in Sweden. In addition, Sweden is having an issue with rejected asylum seekers disappearing into the shadows before they can be deported.
Sweden's experience with large-scale population changes due to immigration is relatively new, especially when compared to the US's. And its culture drivers are still traditional Swedish, not melting pot.
Conan the Grammarian at September 29, 2021 7:52 PM
Conan Says:
"Sweden's slightly higher rate of population change is off a much lower base than the US change. The actual US population change dwarfs Sweden's."
So let me get this straight... you believe that public policy should be determined by the absolute quantity of people being born or moving into a country... and not the relative quantity to the population as a whole?
If that is the case then let's at least be consistent here"
US Covid Deaths = ~715,000
Sweden Covid Deaths = ~15,000
Based on your style of analysis we would have to conclude that the US has a pandemic response that was ~50x less effective than Sweden.
Of course that would be a silly conclusion because the metric of interest is death rate... not absolute number.
The same applies when it comes to population growth.
Simply put, you are not looking at the data, analyzing it properly, and then drawing your conclusions.
Instead what you seem to be doing is having your conclusions first and then trying to see how you can squint your eyes and look at the data in a very peculiar way to try and make it consistent with what you already believe.
"According to the Migration Policy Institute, in 1980, migrants made up 4.0% of Sweden's population and 5.9% of the US population. It wasn't until 1990 that the percentage of Sweden's population made up of migrants caught up with the US's - 9.2% for both."
That is 40 and 30 years ago respectively.
You are living in the past.
As I told you, things in the US have changed dramatically since the time frame you want to reference.
As things stand right now, if you really believed what you said earlier you should be consistent and be in favor of parental leave policies.
"It's nice that Sweden and other countries with generous social programs offer long paid leave. Keep in mind, however, that many of those countries have not, in the past, been high immigration countries. As such, replenishment of their population depended upon maintaining a higher birthrate." - Conan the Grammarian at September 29, 2021 8:58 AM
You were talking about birthrate until I pointed out that your birthrate argument doesn't apply in 2021.
You talk about how these countries have not had high immigration in the past... but now you recognize that Sweden matched the US in terms of immigration rate as far back as 30 years ago.
Only after you discovered that both birthrate and immigration rate did not support your position did you abandon those numbers in favor of absolute numbers.
It is not credible to perform a comparative analysis of nations based on absolute demographic numbers as opposed to numbers relative to the population as a whole.
You have thrown out logic and reason to try and make them subordinate to a conclusion you want to have... but what else is new.
Artemis at September 30, 2021 9:51 AM
Radwaste Says:
"Well, some data may look like that to you -- if you ignore that this government funding can only be taken from the rest of the taxpayers."
The argument Conan presented is consistent with being in favor of parental leave policies if one looks at the relevant data.
Your argument about "taxpayers" is mute because the people gaining such benefits are also taxpayers.
You don't get parental leave from work if you aren't working.
Additionally, the style of analysis that tries to quantify taxpayer cost is so incomplete as to be useless.
It is like trying to analyze the performance of a boat by only looking at engine output and neglecting friction.
That kind of analysis is cute for a high school student trying to grasp the fundamentals of Newtonian mechanics, but it isn't the least bit useful in terms of determining the actual performance of boat... simply put, it neglects too many factors.
For example, taxpayers pay for many things that can be impacted by proper care of newborns.
Children who have been raised in loving environments end up being better socialized for example... hence we should expect an associated reduction in taxpayer funds going towards programs and institutions intended to deal with children with maladaptive behaviors associated with less ideal childhood environments.
Where was that accounted for in the analysis you want to reference Radwaste?
It wasn't... it was neglected much like high school students learn a very idealized and relatively simple form of physics where everything is a sphere and air resistance is ignored.
Artemis at September 30, 2021 10:04 AM
You really don't read for comprehension, do you, Artie?
I'm beginning to think you just make up whatever you want the other person's opinion to be, and then you argue against whatever you made up.
My argument does not, in any way, favor a US system of government-mandated and taxpayer-funded family leave.
Conan the Grammarian at September 30, 2021 10:41 AM
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