Paid family and medical leave has been extensively proven to improve the health of children and their parents. Despite its benefits, some groups have raised concerns that providing paid family and medical leave — which nearly every country in the world does — would burden small businesses with excessive costs and possibly harm our economy. However, these well-intentioned fears seem misplaced when examining the effects of paid family and medical leave policies already in place. Instead, paid family and medical leave policies improve families’ financial outcomes while benefiting rather than harming small businesses.
Paid family and medical leave leads to happier, more productive employees
Paid family and medical leave helps families economically in a few different ways. The paid leave gives parents time to bond with newly born or adopted children as well as tend to their children’s major illnesses. This, in turn, provides children with a healthier environment in which to grow. Studies have shown children from families provided with paid family leave have lower high school dropout rates and higher wages when they reach adulthood. Parents benefit from access to paid family and medical leave because they are no longer forced to make the difficult decision between maintaining their paycheck or caring for their child. The financial security granted by the paid leave increases labor force participation, employee satisfaction, and productivity while decreasing reliance on public assistance. In short, when families have the economic security they need to care for themselves, they become happier and more productive, which then benefits the economy around them.
Paid leave’s benefits to businesses outweigh the negligible costs
Rigorous analyses show that the demonstrated benefits of paid family and medical leave come at little to no cost to the businesses that offer it. A study in California examining nearly every employer from 2000-2014 found no evidence that businesses faced higher wage costs as a result of the state’s paid family and medical leave program. In a different survey of 253 California small business owners, nearly 9 in 10 employers reported no additional costs, and slightly more than 9 in 10 reported that paid family and medical leave had neutral to positive effects on profitability. In fact, a majority of small business owners supported California’s recent expansion of their paid family and medical leave program.
Paid family and medical leave laws do not burden companies, large or small, because the costs are small and outweighed by the benefits. Across the U.S., paid family and medical leave programs are funded via payroll taxes that rarely exceed 1 percent of employee wages and can be as low as 0.13 percent. Even this small tax is rarely paid entirely by the employer. Instead, it is typically either split between employers and employees or paid solely by employees. Washington D.C. stands alone in requiring employers to pay the full cost of their 0.62 percent tax.
There are many benefits to business owners that offset the minute costs of the payroll tax. For example, business owners that grant paid family and medical leave will likely see increased employee morale and productivity. Additionally, businesses with paid family leave have higher employee retention rates. Since the costs of hiring and training a new employee can be one-half to two times the employee’s annual salary, increased employee retention is a significant cost saver for business owners. In fact, the California study from 2000-2014 found that, as a result of paid family and medical leave programs, the average business had a lower wage bill than before the programs were implemented. Perhaps because of these benefits, there is bipartisan support from small business owners across the country who recognize the need for paid family and medical leave programs.
Paid family and medical leave is a proven way to strengthen our families
While there may be well-intentioned misgivings when it comes to the costs of paid family and medical leave, the research on existing programs should alleviate any doubt. The benefits of paid family and medical leave are clear and come at little cost, even to small businesses. Enacting legislation that guarantees this necessary leave is a proven way for Oklahoma to support its families and modernize its economy.
Actions for Advocates
- Contact your legislators to tell them why Oklahoma families need a paid family and medical leave.
- Share your story if you have benefited from paid family or sick leave or if lack of access to paid family or medical leave has negatively impacted your family situation.
About the Author
Josie Phillips published this blog post as a policy intern for OK Policy and transitioned into a Policy Fellowship with a focus on labor and the economy in August 2021. Read her full bio below.