COVID-19 has brought a new perspective to paid family and medical leave.
By Jamie Kalamarides
Eleven years ago, America began its slow but steady recovery from the Great Recession. By 2018, the economy was on track to surpass the 1991-2001 boom as the longest on record. 2020 began with an unemployment rate of 3.6 percent, and on January 31, the CDC’s total number of reported novel coronavirus infections in the U.S. stood at two. Three months later, unemployment had skyrocketed to 14.7 percent, 23.1 million Americans were out of work, and reported cases of coronavirus in the U.S. had risen to 1.5 million.
The COVID-19 pandemic shines a light on the financial vulnerabilities of Americans without access to paid leave. Consider that prior to the pandemic, millions of Americans -even those in higher income brackets -already lacked sufficient savings to weather a disruption in income or other financial emergency. While many are now unable to work because they have become ill or must care for a loved one, most have simply seen their workplace shut down for months on end. Even for those who may not become ill, the cumulative economic and emotional toll of the pandemic is of a magnitude arguably not experienced since the Great Depression.
The CARES Act provided a temporary, yet much-needed, financial lifeline for individuals, families with children, workers, and retirees. New proposed federal legislation dubbed “The HEROES Act” would provide somewhat longer-term assistance in the form of an additional $3 trillion coronavirus relief package. While these are important efforts, the Congressional Budget Office’s U.S. economic outlook for 2020 estimates continued hardship for the 74 percent of Americans who live paycheck to paycheck and will once again find themselves in a position where unpaid leaves of absence could jeopardize their day-to-day financial health and long-term financial security.
The current patchwork of solutions cannot cure America’s paid family and medical leave crisis. The pandemic has amplified the urgent need for a permanent, comprehensive and bipartisan solution that provides paid family and medical leave (PFML) to all workers, although discussions about expanding the availability of PFML were already underway prior to the COVID-19 outbreak.
Among the patchwork of solutions currently in place is the Families First Coronavirus Response Act (FFCRA), which establishes an emergency paid leave program for employees of smaller businesses who take COVID-19-related work absences. Its provisions are set to expire at the end of 2020. For those who qualify, there are Social Security disability benefits, selected state social insurance programs providing paid leave for self-care and caregiving, and short-term disability benefits typically available to employees of larger organizations.
But the pandemic has exposed several shortcomings in these solutions, and significant segments of the population are left to fall between the gaps. For example, only 30 percent of the nation’s lowest-paid private sector workers have access to paid sick days. Without the option to work remotely, many will continue to show up at work and risk spreading illness. In addition, African American and Latino workers are less likely than white or Asian American workers to have any workplace leave benefits at all.
A public-private partnership can help expand access to paid leave. At some point, it’s likely that most Americans will need to attend to a personal illness or care for an ill family member, new child, or aging relative. With the current state of PFML in this country, far too many will have no way to maintain an income during those times. It will take the collaboration of the public and private sectors to develop and implement an inclusive and permanent solution. Such a solution could restore financial stability to employers and enable sustainable financial wellness for workers and their families.
Proof points can be found in how existing state- and/ or employer-sponsored paid leave programs benefit workers, employers, and society at large. For workers, these programs inspire confidence that their income will be protected in the event they need to take leave. For employers, the programs allow them to reap the benefit of greater productivity in workers whose financial stress levels are alleviated. The societal benefit arises from the healthy symbiosis between the two.
Similarly, existing public-private sector partnerships have proven successful, including the combination of Social Security benefits and private-defined pension or contribution savings plans from which retired workers have been drawing income for decades. More recently, the SECURE Act, through the concept of risk pooling, relies on the private sector to help expand access to retirement plans for small business workers who previously lacked access to such vehicles. This same concept could be replicated to expand access to PFML.
A sustainable and inclusive PFML policy that generates the best outcomes for all parties will draw upon several of the private insurance sector’s key strengths, including:
1. Coordination of all benefits, helping workers optimize their leave in conjunction with other employer-provided benefits, thereby reducing the burden on employers’ HR staff.
2. Sharing the burden with other employers through risk pooling, providing economies of scale to smaller employers and their workforces.
3. Helping to reduce the duration of certain disability leaves by partnering to provide workplace accommodations and other employee support measures.
HR decision-makers have been reluctant to implement a paid family and medical leave policy because of perceived costs. Partnering with a benefits provider can help develop a policy that reduces both administrative and cost burdens. Such partnerships would be further enabled by the implementation of an employer tax credit. Arriving at a sustainable, equitable, and bipartisan solution will be critical as the pandemic continues -and long after it subsides.
Jamie Kalamarides is president of Prudential Group Insurance.