COUNTERPOINT

support for working families is a worthy cause-one that, as Senate President Travaglini notes, is important to employers. His specific proposals, however, are a mixed bag.

Although Associated Industries of Massachusetts does not take positions on personal tax issues except as they affect business competitiveness and the fiscal stability of the Commonwealth, it is certainly arguable that restoring the standard deduction to its pre-2002 levels, as the Senate president suggests, among his tax proposals, should be a higher priority than reducing the income tax rate to where it was in 1988, as the rollback from 5.3 percent to 5 percent would do.

The mandatory paid leave proposal, however, although well intentioned, is very troubling. It is likely to be much more expensive than projected—and while the benefits may prove altogether too popular (hence the higher cost), the means of paying for them will make the program much less popular with the employees who pay the cost.

A red flag is the comparison to California’s paid leave plan, which is similar, but only superficially. In fact, the Senate proposal is so different that the California experience cannot provide constructive comparisons or reliable cost estimates. Here are the facts:

• The Senate plan is, as the Senate president says, much more generous than California’s. Indeed, it offers 100 percent wage replacement, not 55 percent as in California, for up to $750 a week—which means taking a leave entails no sacrifice of income for individuals earning up to $39,000 a year, and higher benefits than California’s for those with individual incomes of up to $70,000.

• The Senate proposal would also extend job protection, guaranteeing to all employees who take a leave that their jobs will be held for them, no matter how small the company they work for. California does not extend protection beyond that of the federal Family Medical Leave Act, which covers only firms with 50 or more employees. This provision in the Massachusetts bill increases the number of people eligible for job protection by 64 percent.

• In California, paid leave is a supplement to a much larger mandatory temporary disability insurance (TDI) program that is already in place. Birth mothers, the most frequent users of California paid leave, have already had six weeks of TDI when they make the decision on whether to return to work or take additional time off. Here, the new paid leave program would kick in on the very first day.

The econometric study cited by the Senate president depends critically on estimates of plan usage that are simply not plausible. The report foresees only a 16 percent increase in eligible leaves. Obviously, people already take leave from jobs for serious medical conditions of their own, and for maternity and adoption, even without pay—and even, if their employers are small, without any kind of guarantee that their jobs will be there when they return. But with pay (full pay for many) and job protection, surely these people will stay out longer, and many more will opt to take leave for paternity or to care for a family member. It is difficult to believe that the program will mostly just provide income replacement for people now taking unpaid leave.

Care for family members is an important wild card, potentially opening up eligibility widely. The Senate president argues that critics of his plan “misunderstand that paid leave would be allowed only for serious medical conditions, not merely because a worker has an aging parent who can use some help around the house.” But the distinction is not as clear as he implies. He cannot mean that chronic, long-term debilitating conditions such as Alzheimer’s are not really “serious,” and that sufferers’ children merely provide “help around the house.”

Entitling employees to 12 weeks of paid leave per year with job protection would be extremely disruptive for employers. Small employers, covered by the Senate plan (but not by federal or California law), would be most affected, because each of their employees may have a unique role. Nor can they necessarily hire a contingent worker to fill the temporarily vacant position.

This tax will be especially unpopular following the state’s new health care law.
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The Senate president argues that the business community should not be concerned about this proposal because employees, not employers, would pay for his plan. But employers would collect the tax, and the tax collector is never popular—particularly when the tax itself is highly unpopular, as this one is likely to be, because it will be much more expensive than current estimates. And it would be especially unpopular because it so closely follows the state’s new health care law, making it the second “individual mandate” enacted this year.

The health care reform law enacted earlier this year, to the great credit of the Senate, the House, and the administration, includes a mandate on individuals to obtain health insurance coverage, as well as employer and state responsibilities. We are now beginning the process of implementing this pioneering piece of legislation—a complex process that will require hard work and careful attention. This is no time to rush through another mandate that will distract us from that work, and detract from that accomplishment.

Richard C. Lord is president and chief executive officer of Associated Industries of Massachusetts.