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Paid family leave in New York ‘does not seem to hurt employers,’ a new study finds

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By Meera Jagannathan

New York’s paid family leave policy “has imposed minimal costs on employers,” suggests a new study distributed by the National Bureau of Economic Research — and may even have some upside.

The state-level policy, which took effect in January 2018 and is funded by an employee payroll tax, “does not seem to hurt employers,” study co-author Maya Rossin-Slater, an economist and associate professor at the Stanford University School of Medicine, told MarketWatch. “It seems to improve their ease of managing worker absences, at least in the short term,” she added.

The working paper’s authors fielded a survey between 2016 and 2019 of employers with 10 to 99 employees in both New York and Pennsylvania, which doesn’t have a paid family leave policy. They matched each New York firm with a comparable Pennsylvania firm, and used a difference-in-differences approach to estimate the policy’s causal impact on employer outcomes. Overall, more than 4,500 unique firms took part in the survey in at least one year.

Among the study’s findings: During the paid-leave policy’s first year, employers’ ratings of their own ability to manage lengthy worker absences increased, though the effect appeared short-lived. 

While the reasons for this impact are “speculative,” Rossin-Slater said, her sense is that “having a state-level policy provides a standardized system for employers to navigate situations when their workers need to take leave” — rather than absences occurring on a one-off, case-by-case basis, with workers potentially patching together sick days and vacation time. 

The researchers also found no evidence the policy had any adverse effect on employer-rated performance markers such as employee productivity, commitment, attendance, teamwork and cooperation. “[A]verage employer ratings on these dimensions are already high in the years before the law, suggesting minimal scope for additional improvements in them,” the authors wrote.

The second year after the policy was instituted, the study found a substantial increase in employees taking paid family leave, “concentrated among firms whose employees were previously not eligible for FMLA leave.” (The Family and Medical Leave Act , which provides eligible workers with up to 12 weeks of unpaid leave in certain situations, applies to public agencies and private-sector employers employing at least 50 workers.)

A majority of employers in the survey were supportive of New York’s policy both before and after its implementation, Rossin-Slater said.

“That being said, there is a small minority that is very opposed, and that share does grow over time,” she added. 

While it’s hard to know exactly why the share of opponents increased over time, qualitative evidence suggested that some lacked clarity on how the policy worked or how it was financed, Rossin-Slater said — potentially including smaller businesses without a robust human-resources department.

One key takeaway: “In general, most people don’t think that these policies are going to be really beneficial for employers. I think people are worried that it would be costly,” Rossin-Slater said. “The good news here is that they don’t seem to be costly.”

The U.S. is the one of the only highly industrialized nations where there’s no federal law requiring companies to provide paid family leave for employees. The District of Columbia and at least nine states — California, Colorado, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island and Washington — have enacted their own paid family and medical leave laws, according to a tally by the Kaiser Family Foundation , a healthcare think tank.

Meanwhile, retailers like Target /zigman2/quotes/207799045/composite TGT +2.92% , Amazon /zigman2/quotes/210331248/composite AMZN +0.19% and Walmart /zigman2/quotes/207374728/composite WMT +1.81% have introduced paid family leave benefits in recent years. As of October, federal workers can also receive 12 weeks of paid family leave.

In 2020, just 20% of private-industry workers and 26% of state and local government workers had access to paid family leave, according to the Bureau of Labor Statistics .

In response to COVID-19, federal lawmakers passed the Families First Coronavirus Response Act (FFCRA) , which temporarily granted workers who’d been on payroll for at least 30 days an additional 10 weeks of paid expanded family and medical leave at two-thirds their regular pay rate, in addition to providing emergency paid sick leave. 

Under President Biden’s $1.9 trillion American Rescue Plan, refundable tax credits for paid family or sick leave made available through the FFCRA are now set to expire Sept 30 .

The study distributed by NBER was limited by virtue of the fact that New York’s policy went into effect in 2018, Rossin-Slater said. She and her co-authors were only able to follow businesses for two years before the coronavirus hit.

In light of the pandemic, “it’s really important to understand how both workers but also employers have been navigating this system where suddenly a lot of people have had to take time off,” she added, whether due to COVID-19 itself, children not attending in-person school or other family care needs.

“What we don’t know is, how have employers in places that actually have state-level paid-leave policies fared during this time — relative, for example, to employers in places that have not had state-level paid-leave policies?” she said. “I think that’s a big, important question.”

Don’t miss: California’s paid leave law has cost new mothers an estimated $24,000 over a decade, research shows

Also read: Do companies suffer by offering paid parental leave? These economists believe they’ve found an answer

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