Study Finds Economic Benefits in NJ’s Paid Family Leave

Beth Fitzgerald | January 20, 2012 | Health Care
Parents remain in workforce, earn higher salaries, according to Rutgers report

Parents who take a paid leave from work to care for a newborn or adopted child are more likely to stay employed, to see their wages increase and to avoid becoming dependent on public assistance, according to a new study from the Center for Women and Work at Rutgers University.

New Jersey is one of five states with paid family leave benefits. More than 75,000 New Jerseyans have used the program, funded by payroll taxes on workers, since it began in 2009. In 2012, New Jersey workers will pay a maximum of $24.24 annually into the system.

The Rutgers researchers said their study supports the economic value of creating a national paid family leave system, self-funded by contributions from employers and workers, which has been proposed in recent years as an extension of Social Security.

Five states — California, Hawaii, New Jersey, New York and Rhode Island — provide wage replacement for time women take off from work during and immediately after pregnancy, and California and New Jersey provides six weeks of paid family leave for parents to bond with a newborn or adopted child or care for a seriously ill relative.

Most U.S. workers who take a paid family leave use vacation or sick time, or their employer provides a family leave as an employee benefit. Since 1993, federal law has required larger employers to provide unpaid family leave. Under the Family and Medical Leave Act (FMLA), employers with 50 or more workers must provide up to 12 weeks of unpaid leave, and to guarantee that the worker can return to the job.

“Women who report taking a paid leave are far more likely — in fact 93 percent more likely — to be working 9 to 12 months after a birth than those who took no leave at all,” said the study’s co-author Linda Houser, a professor at Widener University and fellow at the Rutgers Center for Women and Work.

The study indicates that paid family leaves strengthens the worker’s connection to the workforce and reduces the risk of unemployment, Houser said. “Paid leave allows the individual to remain in a job they desire even if they need some time for recovery and bonding after a birth.”

This is quite a different situation than if “their only choice is to leave that job and then when they are ready to return to look for a different job,” Houser said. “When that happens, when there is that disconnect, even for a relatively short period of time, the likelihood of re-entering the workforce goes down and the longer the disconnect, the lesser the likelihood.”

“Vicki Shabo, director of work and family programs at the National Partnership for Women & Families, participated in a telephone discussion Thursday of the report, which was commissioned by the partnership, with support from the Rockefeller Foundation.

“Employees feel more loyal to their employer when they are offered some form of leave — if they know it is acceptable for them to take leave and then come back,” Shabo said. Paid leave also helps employers “because this increased labor force attachment means reduced turnover, training and recruitment cost for the employer.”

Among the findings: Women who take a paid leave of 30 or more days are 54 percent more likely to report wages increased in the year following the child’s birth than women who take no leave at all. Also, women who return to work after a paid leave are 39 percent less likely to receive public assistance in the year following the birth. The study results have been adjusted to account for the fact that access to paid family leave is higher for women who are over 25, white, married and college educated.

New Jersey’s family leave law, an extension of the state’s temporary disability insurance program, provides six weeks of partial wage replacement for birth, or the care of a seriously ill family member. According to the state Department of Labor, since 2009, 75,573 New Jersey workers have used paid family law leave for a total of $177.6 million.

John Sarno, president of the Employers Association of New Jersey, said he supported the New Jersey program and said it has proven a good piece of social legislation. Given the state of the economy, this may not be the time to marshal support for a national paid family leave law, “but it’s an issue that does not go away,” he said. “It is an issue that could resonate widely because of the demographics of the workforce,” and the need to care for aging family members.

“I think it would be a mistake to view this as a dormant issue,” Sarno said. “I think this issue is always on the edge of reemergence nationally because of the demographics. I would not be surprised that it will be part of the national debate,” after the 2012 presidential election.

Rather than extending Social Security to fund national paid family leave, Sarno said he favors revamping the unemployment insurance system. “We could look at the unemployment system as a kind of flexible, paid time off bank so that employees can take time away for training, retaining, to attend classes and also to care for ill family members or for newborns,” he said.

“I think that is a better national model,” Sarno added. “We face a crisis now with regard to workforce skills development. Most employees don’t use unemployment, but we could rethink unemployment so they can use it for training.”

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