By BLR Founder and CEO Bob Brady

Back when the Family and Medical Leave Act (FMLA) was first passed, many opposed it on the grounds that “unpaid leave” would quickly lead to “paid time off.”

In fact, some proponents of the original FMLA never hid the fact that that was their ultimate goal. In most industrialized nations, paid time off after childbirth, for example, was a right won decades ago. But they realized that paid time off was not a political possibility. So they waited.

Now, as the Democrats have regained a majority in Congress, the prospect of paid time off is being raised once again. My own Senator, Chris Dodd (D-CT), introduced a bill calling for just that. California already has a law that gives some forms of paid family leave. The benefit is funded through a payroll tax.

While it is unlikely that the federal law being proposed will pass in the near future, there is no doubt that it will be raised again.

It is a popular rallying cry for the politicians because young families face enormous financial and social pressures. Both partners must work in order to meet middle class expectations. Like it or not, this is clearly an idea with a great deal of political force behind it.

My prediction is that at some point in the future, paid leave will be mandated. The big question is, who will pay for it: Employers, employees, or the taxpayers?

The Problem with Employers Paying

Many think employers should pay for it. After all, they’re the ones who benefit from their workers’ labor, and this is a way of giving back. Also, taxes would not need to be raised and yet another government bureaucracy would be forestalled. All true, but here is a problem with having employers bear the cost.

If I am a U.S. employer, paid family leave will raise my costs. As a result, prices will rise. My widgets will now cost more when the consumer buys them at Wal-Mart or Target. But that’s OK because this is a good cause and the consumer should help bear the burden. True?

True to a point. The problem is that foreign manufacturers, in nations with low cost structures, will not have raised the price, and the consumer at Wal-Mart or Target will make the rational choice to buy the lower-priced product. Soon, that many more jobs are outsourced. What about service jobs that can’t be outsourced? Well, those services would simply cost more.

Is this an argument against paid leave? No, it is not. It is an argument in favor of spreading the cost of providing an important societal benefit to all demographic segments, not just employers. Paid family leave would help a great many people. But we kid ourselves if we think we can make employers pay for it without impacting their ability to compete in the global economy.

The California law takes a middle ground by having employees themselves bear the cost through a payroll tax. This approach spreads the cost without completely hiding it. It adds some bureaucracy, but limits the administrative burden on employers.

I will be curious to see how the federal approach develops. (And if it doesn’t, we can probably expect more states to follow California’s approach.)

That’s my e-pinion. Let me know yours. Use the Share Your Comments button or e-mail me at Rbrady@blr.com.

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