A case for State facilitated paid parental leave paid through payroll tax

A typical payroll financed parental leave program may provide for a percentage of pay continuation for a limited number of weeks. If the terms of the program were that a new parent  would receive 2/3 of their normal wages for 20 weeks how much would that cost the average worker?  – A Lot Less than you may think

The following data is from the US Census Bureau and the Bureau of Labor Statistics.

  • Oregon average weekly wage: $929
  • Oregon employment (Dec. 2016): 1,971,700
  • Births in Oregon (2015): 25,476
  • Percent of mothers with babies under 1 year old who are in the labor force: 55.8%

A Plan

 

A typical payroll financed parental leave program may provide for a percentage of pay continuation for a limited number of weeks. If the terms of the program were that a new parent  would receive 2/3 of their normal wages for 20 weeks how much would that cost the average worker?

The Math

  • Number of benefit instances:

Births in Oregon multiplied by the percent of mothers with babies under 1 year old who are in the labor force gives a good estimation of the number of working mothers who would be eligible for the program each year. 25,476 live births, times 55.8% is 14,216 instances where a working parent is entitled to benefits. There may be a bit more if there is a working father and no stay at home co-parent. We should also add the instances where there is an adoption with no stay at home co-parent. So, lets add another 10%. Bringing the benefit instances to 15,638

  • Benefit Amount:

The average weekly benefit amount is the average weekly wage times 2/3 or $620/week. If the benefit envisioned 20 weeks of paid parental leave – which could be divided between co-parents if both are working – the total annual benefit paid would be $12,400 per birth, with the total program costing $193,911,200. If programming costs were 1% the cost of the program, including benefits and administration, would be $195,850,000

  • Payroll Tax/Cost per worker

Total annual program cost divided by total employment in Oregon: $195,850,000 divided by 1,971.700 workers is $99.36/worker/year.

Per week, the cost is$1.91 for the average worker and As a percent of median/average payroll it’s  0.002. or point two percent ($1.91/$929).

Compare that 0.2% cost to other Oregon payroll taxes

  • Lane County Transit tax:     0.72% of payroll
  • Tri Met Transit Tax:        0.7437% of payroll
  • Workers Benefit Tax:      2.8% of payroll
  • Unemployment tax (Variable depending on industry and rating):  1.2% – 5.4% but typically about 2.6%

The Argument in Favor

So for a small fraction of what we now pay for our unemployment, transit related tax, and for “workers benefit” (which is a form of workers compensation for on the job injury, though it’s in addition to workers compensation insurance your employer pays), we could offer all parents and co-parents 20 weeks of paid parental leave. Unlike unemployment or workers compensation, it’s a benefit that either ourselves or our sons, daughters, siblings friends and co-workers will almost surely be able to utilize.

I say yes.

 

Notes:

  • One problem with State organized parental leave is that Republican ideology is opposed to big government so some may reflexively reject the idea based on ideology and not on the merits. Many businesses object because of a concern that  they will get stuck with the the entire cost, and/or be put at a competitive disadvantage in some way. 
  • Government does exist, in it’s more essential form, to act by efficiently pooling resources when we as a society decide that a particular policy is important (and constitutionally permitted) and cannot equitably be addressed by the private sector. Though the parental leave program needn’t be run by the State directly. It could operate as an adjunct to the Workers Compensation program and administered by SAIF or a SAIF like non profit State chartered organization 
  • From a practical standpoint, Parental leave appears less of a financial and fiscal problem as it is a political ideology problem. The math works fairly well. It should have a lot of support because virtually everyone will use it at some point in their work career. And even if you’re past child bearing years, your children and grandchildren will use it. 

 

 

 

 

 

 

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