Paid Family and Medical Leave:
Policy Analysis & Recommendations for Indiana
Policies that provide paid time off to care for family members or recover from a serious medical event offer a host of benefits to workers; their newborn, newly adopted, or fostered children; and the ill spouses, aging parents, or military family members for whom they care.
But can paid family and medical leave be good for businesses, too? Compelling new evidence suggests that it can, and now is an ideal time for Indiana to craft paid family and medical leave legislation that will enable employees to access these benefits while making it affordable for employers to offer leave.
• outlines the case for paid family and medical leave, including the potential benefits of expanded access to paid leave for Hoosier families, businesses and the economy
• describes what is currently available in Indiana and in other states &
• makes recommendations for state policy
What do paid leave and retirement security have to do with one another? Read this joint post by IIWF and Indiana AARP to find out!
An estimated 1.1 million Hoosiers lack access to paid sick days. This affects all of us. Read the letter here.
Indiana passed a nursing mothers workplace rights bill in 2008, but paid leave and increased workplace supports are needed to ensure that mothers can meet their breastfeeding goals. Learn more through this joint publication by IIWF and the Indiana Breatfeeding Coalition.
Paid sick leave gives workers financial stability when they need time off to attend to a temporary medical need, like the flu.
MAY 2011 | Download the PDF
Indiana Public Media, 10/14/2016
Fox59 News, 8/9/2016
Eagle 99.3 FM, 08/8/2016
NEARLY EVERY EMPLOYEE will, at some time, need to take time off work to attend to a personal illness or injury or to care for a loved one. When there are no policies in place to help workers and employers meet these needs, both suffer. Stress, absenteeism, poor performance, burnout, exhaustion, decreased organizational commitment, and turnover are all welldocumented consequences of work-life conflict.ii If Indiana intends to retain, retrain, and recruit the best and brightest, it must attend to these needs.
Illnesses and injuries are an unfortunate fact of life. In fact, the Council for Disability Awareness suggests that one in four of today’s 20-year-olds will experience a disabling event – such as a back injury, cancer, or heart disease – before they retire.iii Job loss and financial harm compound the physical and emotional strain of these medical events for many Hoosiers because there are no provisions to protect employment status or wages if the event does not occur at work.
While some employers (less than 40 percent)iv offer short- and/or long-term disability coverage to their employees, the lowest-paid occupational groups are the least likely to have this benefit; 75 percent of service workers lack this type of insurance through their employers.v In Indiana, 24 percent of workers over age 18 are in low-wage jobs.vi When illness or injury strikes, they either attempt to continue working or lose their income.
Furthermore, each year, Indiana welcomes about 85,000 babies to the world,vii yet only 14 percent of workers nationwide and 6 percent of workers in the lowest wage quartile in jobs that offer paid family leave.viii As a result, only a very small percentage of these newborns will enjoy the care and attention of families unburdened by the many financial stressors a new bundle of joy brings with her, including the leave of absence required for her parents to recover from childbirth and bond with a new infant.
Research suggests that these lucky few will reap a host of benefits, including:
• better bonding with parents(ix)
• decreased infant mortality(x)
• increased breastfeeding (along with its accompanying health benefits)xi
• completion of the full batteries of vaccinationsxii • decreased child abusexiii
• increased odds of being placed in high-quality, stable child care.xiv
For far more babies, however, the strain their caregivers experience trying to fit in nighttime feedings and doctor visits will be exacerbated by the pressure to return to work as quickly as possible in order to cope with the costs of raising a child.
Family leave is about caring for loved ones of all ages. At the same time, aging Hoosiers and returning military family members also require care from Indiana’s workers. Approximately one in six American workers provides care for a family member, relative, or friend, and Hoosiers spend an estimated 650 million hours providing informal care to aging or disabled loved ones.xv More than two-thirds of working caregivers nationwide report having to reduce hours or take unpaid leave to meet their care-giving responsibilities, while a smaller percentage leave their jobs. Those who drop out of the workforce accrue an average of more than $300,000 in wage and benefit losses over their lifetimes.xvii Given that the demand for elder care is expected to exceed available resources within the next decade, the need for family leave to care for aging loved ones will only increase as time goes on.xviii
Family policies are important for reducing gender inequities at home and work. Beyond making time to care available to our most vulnerable populations, paid family and medical leave policies are also important to reducing gender inequities both at home and at work. Economic research has firmly established that there is a wage gap between men and women in the workplace.xix One reason for this gap is that women are more likely to take time away from the workforce to care for family members or newborns, thereby upsetting the progress of their careers. Research suggests that paid family leave increases the likelihood of women returning to work (rather than dropping out of the workforce) and may thereby reduce the wage gap.xx At the same time, when fathers take leave after the births of their children, they are more likely to be involved in their children’s care over the long term.xxi Expanding access to paid family leave will only increase the number of men taking parental leave, thereby increasing gender equality.(xxii)
WHILE MORE THAN 90 PERCENT of recently surveyed business leaders favor or feel neutral about offering parental leave policies,(xxiii) small businesses in particular often raise concerns about new leave policies, wondering if they will impose additional compensation costs, reduce productivity, or add to the paperwork and record-keeping required of them.xxiv
The experiences within states that have enacted stateadministered family leave policies show that there is a path forward that can provide benefits to both employees and employers. All existing state family leave insurance programs are 100-percent employeefunded, with no out-of-pocket costs to employers. Support for this type of collective insurance pool is strong; among voters surveyed in 15 states, 64 percent expressed willingness to contribute to a national paid leave fund, and many indicated willingness to pay much more than it would actually require to fund a paid leave program.(xxv)
Similarly, recent polling in New Hampshire found that more than two-thirds of voters were willing to contribute up to $5 per week into a leave insurance fund,xxvi while an analysis of Massachusetts’ proposed family and medical leave plan – one of the more generous seen to date – suggests it would cost an average of $3 per employee per week, or a 0.325 percent payroll premium.xxvii Because the insurance fund pays the employee who is not working, an employer can use the funds that would have otherwise been used to pay an employee’s salary to hire a temporary replacement or pay overtime to other workers. For those businesses that already offer temporary disability insurance and/or paid family leave, the implementation of a state-administered plan could result in savings or enable employers to “top off” or extend benefits.(xxviii)
Among states that have enacted family leave insurance programs, the response from businesses has been positive. In California, which began offering family leave insurance in 2004, employers reported that the state program had either a positive or neutral effect on productivity (89 percent), profitability/ performance (91 percent), turnover (96 percent), and employee morale (99 percent).(xxix) Many California businesses that previously bore the entire cost of providing paid time off now benefit from a program that is fully funded by employee contributions.
In fact, firms with fewer than 50 employees reported more positive outcomes than those with 100+ employees. Overall, 87 percent of employers reported no cost increases and 9 percent reported a cost savings via reduced turnover. This may underestimate savings accrued by coordinating employer-provided benefits with the state program.xxx Similarly, one year after implementation of family leave in Rhode Island, a majority of small business owners reported that they favored the program. This may be due to the fact that it helps to erase the competitive talent recruitment and retention disadvantage small businesses face in hiring as compared to large businesses that can offer more substantial benefits packages.(xxxi)
Larger companies, including some with a presence in Indiana, have recognized the benefits of paid leave and have extended it to their employees. Research in the United States and from abroad shows that workers who take paid leave are more likely to return to their same employers than those who take unpaid leave.xxxii This can reduce turnover costs and preserve companies’ and states’ investments in their workers.
A review of 27 case studies found that turnover costs typically amount to one-fifth of an employee’s annual salary. For more specialized jobs, the costs can be even higher.(xxxiii) It makes sense, then, that companies are now offering benefits that keep trained workers from turning over. Eli Lilly was named one of Working Mothers Magazine’s Best Companies, thanks in part to its generous leave policies. Hilton Worldwide recently extended leave to salaried and hourly employees as part of its strategy to “recruit and retain the best talent.” xxxiv Marcia Morales-Jaffe, senior vice president at Paypal, noted that their policy aligned with the company’s desire to support employees “as they raise their families, care for their aging parents, or volunteer in their communities.”xxxv By 2018, Nestle will join the ranks extending maternity leave policy as part of its stated commitment to exclusive breastfeeding during the first six months of life.(xxxvi)
Unfortunately, these examples are still rare. The 2016 Bureau of Labor Statistics National Compensation Survey of Employers found that a scant 6 percent of workers in the lowest wage quartile had access to paid family leave, while only 22 percent of workers in the highest quartile have it.
Benefits reach beyond businesses. Beyond direct benefits to companies, the state economy as a whole can benefit from expanded leave policies. It is well-established that family leave increases labor-force participation and employee retention and can create cost savings in other public programs.xxxvii Among workers who took unpaid FMLA leave or who received partial pay during leave, 15 percent relied on public assistance to make ends meet, and 37 percent used savings designated for retirement, education, or another purpose.(xxxviii)
Using a nationally representative sample, researchers at Rutgers University found that compared with women who returned to work following unpaid leave for the birth of a child, women who took paid family leave had a 39-percent lower likelihood of receiving welfare and a 40-percent lower likelihood of receiving food stamps one year following their return to work. Similarly, men who returned to work after paid family leave reported a significantly lower likelihood of receiving welfare or food stamps. This does not account for the potential savings that may accrue from increased breastfeeding and well-child medical care, earlier detection of developmental needs, enrollment in high-quality child care, and paternal involvement – all of which have been augmented by paid family and medical leave policies.