Bloomberg Tax
Free Newsletter Sign Up
Login
BROWSE
Bloomberg Tax
Welcome
Login
Advanced Search Go
Free Newsletter Sign Up

State-Run Paid Leave Evolves to Emphasize Low-Income Workers (1)

Dec. 14, 2021, 10:54 AMUpdated: Dec. 14, 2021, 6:53 PM

Ensuring low-income workers can access paid time off for family and medical needs has become an increasingly high priority for state-run paid leave programs, including one in Connecticut that’s set to start paying benefits Jan. 1.

The movement among the most recent paid leave adopters—including Colorado, the District of Columbia, Oregon, and Washington state—also helped shape the policy details of a nationwide paid leave proposal that passed the U.S. House last month but faces major hurdles in the Senate.

Newer programs such as Connecticut’s are being designed to replace nearly all of low-wage workers’ earnings during their weeks of leave, as well as ensuring they are protected from losing their jobs for taking time off, said state Sen. Julie Kushner (D), who co-chairs the Connecticut legislature’s labor committee and helped design the state’s paid leave program.

“We had the advantage of looking at other states that had already implemented the program. We did learn from those states,” Kushner said. “We did focus on making sure lower-wage workers got the greatest benefit, because I think they have the hardest time paying their bills at the time when they need to take leave.”

The approach is a shift from the earliest state paid leave programs, in particular California, which initially replaced a much smaller percentage of workers’ income during their time off and didn’t extend job protection. California’s program has drawn criticism from worker advocates because it’s difficult for low-wage workers to use the benefits—creating a problem for racial and gender equity as well.

The state’s low-wage workers are “disproportionately women and disproportionately Black and Latinx workers,” said Kristin Schumacher, senior policy analyst at the left-leaning California Budget and Policy Center.

Whether the lessons that states have learned can make the leap to a nationwide program remains to be seen. Even if the federal proposal can win approval in the Senate, it doesn’t include universal job protection, meaning some low-income workers would still face the risk of being fired for taking paid leave.

Senate Democrats need all 50 votes from their caucus to pass their spending plan under budget rules, but West Virginia moderate Joe Manchin has voiced reservations about the new paid leave entitlement and said he’d prefer to pursue a bipartisan paid leave solution. Party leaders, including Senate Majority Leader Chuck Schumer (D-N.Y.), have said they’re continuing to fight to keep paid leave in the budget bill.

The Senate Finance Committee included the nationwide paid leave proposal that House Democrats passed in the committee’s draft text released Dec. 11, but it’s possible that language could be revised or removed from the spending package before it gets a full Senate vote.

Sliding Scale of Benefits

Early state paid family leave programs such as California and New Jersey provided a flat-rate wage replacement, giving all workers 55% and 67%, respectively, up to a maximum weekly benefit amount, according to an analysis by Vicki Shabo, senior fellow who studies paid leave at the left-leaning New America think tank.

“Washington state’s program, which began paying benefits in January 2020, pioneered progressive wage replacement, replacing 90 percent of wages for low-wage workers and a blended rate for everyone else,” Shabo wrote.

Connecticut’s program will replace 95% of the weekly wages for the lowest-income workers who take leave, providing a smaller percentage for higher income levels. Colorado and Oregon, which have enacted paid leave laws but are still setting up the programs, also will follow that sliding-scale method, replacing 90% and 100%, respectively, for their states’ lowest-wage workers.

California and New Jersey have since increased their wage replacement rates, although Schumacher said the 70% California offers to the lowest-income workers is still too low to be useful.

California Gov. Gavin Newsom (D) declined to sign legislation this year that would have gradually increased the wage replacement. Newsom raised concerns about the cost of the higher benefits and the increased payroll tax rates employees would have to pay.

The federal program, if enacted, would offer 90% wage replacement for the lowest-income workers and then step down the percentage for middle- and higher-income earners. Nine states plus the District of Columbia have enacted paid family and medical leave programs, including those that haven’t begun paying benefits yet, and they tend to offer more than the four weeks annually provided in the federal proposal.

Democrats in Congress have looked for ways to keep their paid leave proposal while trimming the size of their social spending plan below $2 trillion over 10 years. In the process, they shifted the paid leave portion to focus even more on low-income workers, raising the wage replacement to 90% rather than the 85% under an earlier House plan.

The change in percentage was made to account for the federal Office of Management and Budget’s determination that the paid leave proposal—like many of the programs in the Democrats’ broader spending bill—would be subject to federal budget sequestration rules, which trim some types of federal spending by roughly 5% and effectively would mean low-income workers would still get about 85% of their earnings replaced.

At the same time, Democrats’ latest draft reduced the reimbursement amount available to higher-income workers. The maximum weekly benefit under the federal proposal is just over $800, compared with a max of more than $1,300 in California’s program.

The state programs and the federal proposal generally offer paid leave for workers to care for a new child, their own serious medical problem, or for a sick family member, as well as for reasons related to a family member’s military service.

Gaps in Coverage

Targeting government-run paid leave programs to lower-income workers is a smart policy choice, since higher-wage professionals are more likely to receive paid leave benefits from their employers, said Angela Rachidi, a senior fellow in poverty studies at the conservative-leaning American Enterprise Institute.

“From a policy perspective, you’d want to identify where there are gaps in coverage, and that clearly is for the low-wage workers,” she said. At the same time, “it’s a political calculation” by lawmakers that weighting the benefits toward lower-income people and reducing the benefits for higher-wage workers won’t undermine public support for the programs, she said.

In Connecticut, the weekly benefit is capped initially at $780, gradually increasing to $900 once the statewide minimum wage increases to $15 per hour in June 2023. Kushner, the state senator, said it’s still a substantial paid leave benefit for higher-income workers and that the program includes a cap on the payroll tax rate that workers pay to fund paid leave.

“There is some balance there,” she said.

Rachidi said the federal proposal misses the mark, though, partly because it doesn’t extend job protection

The federal Family and Medical Leave Act of 1993 already bars employers from firing workers who take up to 12 weeks off for qualifying reasons. But the law only applies to employers with 50 or more employees and only covers workers who have been with their employer for at least 12 months and worked at least 1,250 in the past year. This leaves out millions of part-time workers, new entrants to the workforce, and those working for small businesses.

The Connecticut program also takes another notable step toward making benefits more widely accessible—using a broad definition of the family members for whom a worker can take time off, said John Stretton and Nicole Mulé, employment attorneys in the Stamford, Conn., office of Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

In addition to listing specific family members whose illness would qualify a worker for leave, the Connecticut law also includes any non-relative whose close association makes them the equivalent of a family member. The federal proposal pending in the Senate uses similar language.

“That’s a pretty broad category,” Stretton said. “It’s really designed to provide a more progressive definition of family.”

(Updated with additional details on federal proposal, benefit caps for higher-income workers.)

To contact the reporter on this story: Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editors responsible for this story: Andrew Harris at aharris@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com