Trading Retirement Security for Access to Paid Parental Leave
By Colleen Flaherty Manchester & Debra Fitzpatrick | October 10, 2018
Across parties, politicians are showing increased interest in developing policies around paid family and medical leave, especially for new parents. The latest creative example is Republican Senator Marco Rubio’s Economic Security for New Parents Act, backed by the Independent Women’s Forum, a politically conservative US non-profit advocacy organization. The bill would allow households with a new child (biological or adopted) to access Social Security benefits to cover their parental leave, in exchange for delaying receipt at retirement. The proposal has received little support from Democrats or the public, yet it is noteworthy that Republicans are offering new ideas for addressing the changing nature of and needs of modern families – for instance, the mother is the sole or primary earner in 40% of families with children under age 18 (2013 Pew report) – for paid leave after the arrival of a child.
The United States is an outlier, late to the recognition that economic instability during family formation is a public problem worthy of a public response.
Research shows the benefits of such paid leave for mothers, fathers, children, and employers. The dominant policy around the globe and in seven US states is publicly run social insurance, under which workers and/or employers contribute to a fund accessed by workers during their leave.
Rubio’s bill pursues a different approach to addressing some of the important challenges associated with parental leave, particularly how to best spread the costs and benefits to include fathers as well. Among its unintended consequences, however, the Rubio/Independent Women’s Forum proposal has the potential to exacerbate retirement woes that disproportionately fall on women, especially women of color. By allowing the transfer of benefits from one parent to another, it may also continue to burden birth mothers with the majority of costs associated with leave (as does the status quo). Finally, the proposal reinforces the idea that families alone should bear the costs of having children, even when the benefits accrue to society as a whole.
Further jeopardizing retirement security
Currently, just 38% of men claim social security at the earliest possible age (62), while 44% of women do so, suggesting that women are already less able than their male peers to delay the receipt of benefits. Claiming Social Security early reduces monthly benefit levels across the rest of a recipient’s lifetime, a fact that’s compounded by women’s already-lower benefits (due to the gender pay gap and time out of the workforce dedicated to caregiving). Women, especially women of color, are also more likely than men to rely exclusively on Social Security for retirement income, meaning a delay in accessing benefits would hit them harder. Put differently, this proposed legislated solution for parental leave will amplify the vulnerability of already disadvantaged seniors.
Further, accessing retirement benefits early is a dangerous precedent to set. Most Americans already feel inadequately prepared for retirement: the 2018 Retirement Confidence Survey found that only 17 percent of American workers are “very confident” in their ability to live comfortably throughout retirement. Legislating access to retirement income prematurely may encourage further procrastination (the tendency to spend today, despite intending to save for the future), and may even condone actions like early (and heavily penalized) withdrawal from individual retirement accounts.
Reinforcing the motherhood penalty
One policy innovation included in the Rubio proposal is the allocation of benefits to a household rather than to individuals. This would give fathers the ability to transfer their entitlement to mothers or vice versa. While this approach would potentially even out the Social Security hit experienced by mothers, experience from other countries suggests that it has the potential to reify the role of mother as primary caregiver. Internationally, the norm has shifted to nontransferable leave (i.e., use it or lose it) provisions in a mostly successful attempt to encourage more fathers to take leave. Research suggests that paternal leave is associated with a host of benefits, including a lower pay gap for mothers.
However, it is unclear how single parent households, the majority of which are headed by women, would fare under such an approach. Presumably, they would not be able to access an uncooperative father’s benefits, furthering and reinforcing disparities in leave access already experienced within these households.
Society benefits while parents pay
While expanding the “cost” of leave from the individual mother to the household is a step in the right direction, the Rubio approach does not challenge the idea that individual families are responsible for their paid leave. The benefits of paid parental leave potentially accrue to the society as a whole, but the Rubio proposal continues to place all costs on parents (in practice, mostly mothers). In addition to the delay of Social Security benefits, these costs include potential loss of employment during leave, since the Rubio approach does not provide additional job protection for the 40% of workers not covered under the Family and Medical Leave Act. A more comprehensive social insurance model, on the contrary, would provide job protection and require all workers and/or employers to contribute to a fund, lowering the costs to new parents and recognizing the society-wide value of providing all children and families a solid, healthy start in life.
Taken together, Rubio’s Economic Security for New Parents Act adds to an important policy discussion. We cannot fully understand its potential consequences without using the data now available from other countries and the seven US states already implementing such programs.
Taking a risky new policy approach when a proven one is available makes little sense.
Any successful public approach to addressing the need for paid leave will need to carefully consider how to allocate the costs and benefits of that leave, rather than continuing to require parents, especially mothers, to foot the bill or compounding their burden by reducing their financial security in retirement.