An interesting proposal has been made that, if adopted, could substantially raise the cost of female labor, and it comes from perhaps a surprising source.
Regulations on labor increase its cost relative to other inputs in a firm’s production. For example, by requiring employers with 50 or more employees to offer qualified health care plans, the Affordable Care Act makes it more expensive to employ people rather than machines. From a firm’s perspective, having to purchase a $10,000 health insurance plan for a full-time employee is equivalent to a ($10,000/2,000 hours per year =) $5 per hour wage increase. At the high end of the labor market, this is not a significant increase. But at the bottom end, where workers are paid (say) $8 per hour, the insurance mandate is equivalent to a forced wage increase of 63%. So it is unsurprising that many employers of minimally skilled workers are reducing hours below the 30-hour per week cutoff in order to avoid the ACA’s insurance mandate.
Family and medical leave is a federal regulatory mandate from the 1990s. The Family and Medical Leave Act (FMLA)
entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. Eligible employees are entitled to:
- Twelve workweeks of leave in a 12-month period for:
- the birth of a child and to care for the newborn child within one year of birth;
- the placement with the employee of a child for adoption or foster care and to care for the newly placed child within one year of placement;
- to care for the employee’s spouse, child, or parent who has a serious health condition;
- a serious health condition that makes the employee unable to perform the essential functions of his or her job;
- any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty;” or
- Twenty-six workweeks of leave during a single 12-month period to care for a covered servicemember with a serious injury or illness if the eligible employee is the servicemember’s spouse, son, daughter, parent, or next of kin (military caregiver leave).
Except for the cost of sustaining group health insurance, the leave is unpaid.
The Wall Street Journal’s Eleanor Warnock reports today that Hillary Clinton delivered a speech to a Japanese audience in which she appears to have telegraphed the view that FMLA leave should be paid leave:
In a videotaped speech to a largely adoring crowd, Mrs. Clinton highlighted that paid leave is one area the U.S. still lags behind even Japan.
“The United States, unfortunately, is one of a handful of developed countries without paid family leave,” the former secretary of state said in a video address to attendees of a Japanese government co-hosted conference on women’s issues.
U.S. federal law does not guarantee that leave by workers to care for newborn children or sick family members is paid. In Japan, a portion of pay is guaranteed.
“If we give parents the flexibility on the job and paid family leave it actually helps productivity, which in turn helps all of us,” she said.
Though all employees would be eligible, women would benefit the most.
At least, that presumably would be Mrs. Clinton’s intent. But a regulatory mandate could significantly increase employers’ costs, meaning it would significantly increase the price of labor. That would make employees more expensive, and the subset of employees that would become the most expensive is women who have (or are likely to bear) children.
Firms could not legally terminate female employees because they became disproportionately expensive, and they also could not legally discriminate against female job applicants. Nonetheless, a lot of factors go into the evaluation of job candidates, so one should expect female candidates to become less desirable employees if paid family and medical leave were made mandatory. Paid family leave would be an attractive benefit to female workers, but not for women it pushed out of the labor market.