Washington, D.C.’s, new proposed paid leave bill sounds like a winner, especially for women.
Employees would be entitled to four months of paid leave when they become sick or had a baby. But in reality, women would be the losers. Because they would be more likely to take time off, employers would be less willing to hire them, and it would be harder for them to find jobs. And Washington would be stuck with a tax that would send firms to the suburbs.
Mayor Muriel Bowser, who has expressed doubts about the bill, should veto it if it passes the D.C. Council.
The Universal Paid Leave Act of 2015 was proposed by D.C. Council members David Grosso and Elissa Silverman on Oct. 6. The bill would amend the D.C. Medical Leave Act of 1990 and enable all employees to take four months of paid leave for childbirth, to care for a sick relative, or for their own illnesses whenever they become eligible.
While residents of New Jersey, Rhode Island and California are entitled to smaller amounts of paid sick leave, no U.S. law calls for four months of paid leave. New Jersey and California allow six weeks, and Rhode Island allows four weeks.
The bill includes the creation of a fund ministered by the city. The fund would draw money from a tax on all employers. All D.C. employees would pay for paid leave with a supplementary tax of 1% of their earnings.
At the highest end of the spectrum, employers would pay in an amount equivalent to 1% of the salary of any employee making above $150,000 annually. For employees making below minimum wage, employers would pay an amount equivalent to 0.6% of their salaries.
When employees become eligible for paid leave, they would make their claim to the fund. They would receive all their salaries for the first $1,000 of their pay per week, and half their remaining salaries from $1,000 to $3,000. All employees who make annual salaries of $52,000 or less could count on the fund to fully replace their paychecks. Employees of the District of Columbia would have to make similarly measured contributions to the fund on their own behalf.
At first glance, this scheme seems to be a means to help women at a low cost. Who would be unwilling to give up 1% or less of their salary for four months of paid leave? However, not everyone takes maternity or sick leave. Those who do might not want four months. And everyone who works in the District of Columbia has to pay the cost.
Not all would benefit, though. Those who work for D.C. employers but who live outside the District, in Maryland or Virginia, would not be able to claim benefits. They would prefer to get jobs in Maryland or Virginia.
The tax could not be levied on federal government employees, but D.C. residents who work for the federal government would be required to pay on their own and would be able to claim benefits.
Imposing a new tax, even disguised as a mandatory fund contribution, on D.C. firms would discourage them from locating in D.C. Companies would flee the District for neighboring suburbs, eroding the tax base. That is obviously why Mayor Bowser is unenthusiastic about the proposed law.
Currently women negotiate compensation packages with firms that may or may not include paid maternity leave. At the top end, female associates at some leading D.C. law firms receive five months paid leave and the option of working a paltry eight hours a day, three-quarters of normal law-firm hours, after their babies are born. Some employees can save up sick leave and vacation time to have some paid maternity leave. Others, hourly workers, may not receive any paid leave and have to resort to savings to get them through the 12 weeks of unpaid family and medical leave.
Individual companies and employees manage by negotiating leave on their own. Everyone knows that in order to get a job that qualifies for paid sick leave and vacation, they need a certain level of skills that often can be achieved only with a college education. You want paid maternity leave? Make yourself valuable to your employer, like the female attorneys.
Requirements for paid leave come with higher federal and state taxes, if funded by the government, and higher costs for businesses, if funded by employers. Higher taxes discourage women from entering the workforce, because a larger share of their paycheck goes to the government. Higher business costs discourage women from being hired. If a firm can choose a man who does not come with the cost of four months’ paid leave, men are more likely to be hired.
The proposed law is lose-lose for D.C. and for women. The District of Columbia is already having trouble paying its bills. It is asking Uncle Sam to help it with funds to repair the broken Metro system. It certainly does not need another law that would further erode its tax base. And women don’t need a law that would encourage firms to hire men.
This opinion piece was published originally in Dow Jones' Market Watch.