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INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | JULY 3, 2000 STAFF & BENEFITS Here Comes Paid Parental Leave What workers cheer, some employers may fear. Still, many states with flush unemployment funds are giving it serious thought
You soon may have no choice but to let new parents go, however, if your state legislature adopts a new Labor Dept. rule that went into effect June 20. The rule gives states the option to take the payroll taxes you're already sending to the unemployment insurance trust fund and use the money to cover paid leaves for workers with newborn or adopted children. Whether you like the concept or hate it, you're likely to worry about how your company will function when key staffers are absent. The details -- the leave's duration, pay, and eligibility criteria -- would vary from state to state (see table, below). "A mom needs to spend time with her child to bond properly," says Patti Glick, registered nurse and founder of The Foot Nurse, a wellness services and products company in Cupertino, Calif., "but as a business owner, it would be a hardship." CYNICAL PANDERING? Now, 15 states with strong economies and unemployment-fund surpluses are seriously considering the measure. Some observers see Massachusetts passing it by late July. Critics and advocates have come out swinging, with women's and labor organizations rallying behind the program and the business lobby lambasting it as an illegal "raid" of state unemployment funds they say were set up 60 years ago exclusively to help sacked workers looking for a job. "By opening it now for other purposes, workers won't get it when we hit a recession -- or there'll be increased taxes on employers to replenish the fund," says Randy Johnson, vice-president for labor and employee benefits with the U.S. Chamber of Commerce. The chamber accuses Clinton of "cynical" pandering to female swing voters in an election year, and hopes to kill the program with a lawsuit against the Labor Dept. TODAY'S EMPLOYEE. But what's really giving the program its impetus is something else entirely: the new character of today's workforce, and recognition from states that something has to be done to bring these employees under the traditional safety net. Recently, states have begun quietly expanding unemployment-insurance eligibility, responding to the fact that fewer and fewer people have been qualifying. In the 1970 recession, 75% of unemployed workers collected unemployment benefits. Now, it's just 35% on average (in Texas, it's 22%). Those who were brought under the net included part-timers, frequent job-changers, former welfare recipients, and parents with more than one job. That new parents would be next in line for some help from unemployment insurance isn't surprising given who today's employee is. More often than not today, both parents of a two-parent family work, says the Labor Dept. The percentage of single mothers with children under a year old who work is surging and is now about 60%. Fully two-thirds of working mothers earned half or more of their family's income as of the late 1990s, according to the Center for Policy Alternatives. WELL-FUNDED. Studies show that "Baby Unemployment Compensation," as the program is nicknamed, wouldn't cost much, so it wouldn't saddle small-business owners with a new tax burden. Most state unemployment trust funds are flush -- they've doubled on average since the end of the last recession, from a total of $26 billion in 1992 to more than $50 billion in 1999, says Maurice Emsellem, director of public policy with the National Employment Law Project. As of December, 1999, 33 states' funds were "solvent," he explains -- defined as being able to pay out a full year of benefits during a severe recession without taking in any revenues. The states seriously considering the program are much better off. In Massachusetts, the program would cost between $32 million and $42 million a year, out of a trust fund of $1.9 billion. It's ironic that business groups say people taking leave would "raid" state trust funds. Companies themselves have effectively cost the funds $34 billion dollars through payroll tax cuts enacted by 25 states since 1994. FLEXIBLE FIRMS. When it comes to entrepreneurs' most immediate concern -- temporary loss of a staffer -- what data exist are encouraging. Given a maternity leave and time to establish breastfeeding, studies show women actually return to work sooner, stay with their employer longer, and are absent less often to care for a sick child. When they are, the absence is usually briefer. And small companies have the advantage of flexibility, says Glick. "We'd work something out," she says. "I'd probably hire a temp." "You don't lose an employee just because they're on leave," says Maryann Ridini, president of Ridini Entertainment, a production company in New York and Los Angeles. "I'd work it out. They're just a phone call away." How the Plan Would Work: Employers pay a tax, which goes into a state trust fund. This employer payroll tax varies by state, but on average it's levied on the first $11,000 of each employee's salary (it's only $11,000 because it hasn't been indexed to rise with the growth in wages). In some states, the tax rate is fixed. In others, the more people you fire, the higher a tax you have to pay. The federal government sets certain minimum standards, but state governments handle the details, including deciding who's eligible, (normally you need to have earned a certain amount in the past four quarters) and the scope of benefits, which can vary from six weeks of payments to 12. The payout can be as little as $40 a week or as much as several hundred, depending on the worker's salary.  By Jill Hamburg Coplan  | | |
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