With the Senate next to consider paid vacation, opponents still say it’s too expensive. Yet, as our data shows, almost each country – 186 – grant paid leave to new mothers, the majority grant paid leave to fathers, and 181 countries guarantee paid sick leave at the national level.
If paid vacation is so unaffordable, how do all other countries pay for it?
The first part of the answer is that it costs a lot less than other social programs. Since paid leave only covers a few months at a time over a lifetime, its affordability should come as no surprise. The United States has long shown that it is possible to fund decades of retirement, and these investments have been both very impactful and remarkably popular. Paid leave, which is covered by over 80 percent of Americans, would be no different.
The second part of the answer is that the paybacks on paid vacation are huge. Indeed, family medical leave helps women – who disproportionately assume caregiving responsibilities – to remain economically active, and women are a powerful engine of economic growth. The OECD indicated in 2015 that the equalization of the participation rates of women and men by 2030 would lead to a 12% increase to GDP in high-income countries. In the United States, that would equate to $ 2.64 trillion per year. Other estimates are even higher. McKinsey’s top business consultants estimated that by 2025, the United States could add another $ 4.3 trillion to annual GDP by closing the gender gap in the workforce – an increase that could more than fund all of the spending under consideration.
Paid family medical leave could help close the gender gaps that are so costly to the economy in such important ways. Research has repeatedly shown that granting paid parental leave boosts women’s employment: in countries around the world, mothers who have access to paid leave are more likely to stay in the workplace. Workforce, work more hours and return to same job. The benefits for employers are substantial: Reducing turnover costs and retaining experienced and knowledgeable employees can easily save businesses Billions every year. It is therefore not surprising that more than 300 companies and 160 executives have signed a open letter in Congress urging them to adopt paid time off.
In this context, any reasonable estimate would conclude that the introduction of paid family medical leave would quickly pay off. The Biden administration estimated that its initial proposal for paid leave would cost 225 billion dollars more than 10 years. In response, critics questioned whether this was the full cost and whether the United States could afford it. Yet even as we evaluate a significantly expanded and more generous policy, covering all Americans from the start – with a significantly higher price tag – we find that the benefits would quickly outweigh the costs.
For example, if we decreed three months of paid parental leave, paid at 100 percent of the median income of a 30-year-old, the total costs would rise to around $ 66 billion per year if they covered all parents, including those working full and part-time, and those in the formal economy and informal. Estimate based on US rates of hospitalization and time to recover, a much more generous policy than that provided by law, covering serious personal illnesses and longer family illnesses, could cost extra $ 117 billion for the entire United States if paid 100 percent of wages up to the median, or $ 94 billion if up to 80 percent.
Yet even this much more expansive policy would quickly produce more economic returns than its cost. Consider the more conservative estimate of the economic gains if we close the gender gap in the labor force: $ 2.64 trillion per year. Even if the adoption of paid leave only narrowed the gap by 15%, it would bring in $ 396 billion a year, far exceeding the cost of that even more generous paid leave. And 15% in itself is a conservative estimate: Previous research has shown that the lack of “family-friendly policies” in the United States – in particular, paid time off – drives the gender gap and was responsible for almost a third the decline in female labor force participation in the United States from 1990 to 2010, when it fell from sixth among 22 OECD countries to 17th.
Major economies have recognized the potential of paid family medical leave. Take two: Denmark and Japan. Both are class among the ten most competitive countries in the world by business leaders at the World Economic Forum. Both also guarantee about a year of leave for each parent: Japan guarantees 52 weeks for mothers and fathers, to be taken in the first 14 months if parents share the leave, while Denmark guarantees 46 weeks for parents to share. , as well as 18 weeks reserved. for the mother. Additionally, Japan guarantees up to 18 months of paid personal sick leave, Denmark guarantees sick leave for as long as an employee needs it, and both have generous family sick leave.
So how do they achieve this in practice? The leaves had made their economies stronger and more competitive. Both countries, like countries around the world, have insurance systems to ensure costs are low and stable every year, instead of hitting a small business when an employee falls ill.
While Congress must continue to debate specific design choices, one thing is clear: adopting a comprehensive and inclusive paid vacation policy is easily achievable and would have strong economic returns. As the United States seeks to recover from the pandemic, we cannot afford to pass up this opportunity.
Jody Heymann is Distinguished Professor in the Faculties of Public Affairs and Public Health at UCLA and Founding Director of the WORLD Policy Analysis Center. Aleta Sprague is a lawyer and senior legal analyst at WORLD.