Paid leave and similar employer mandate policies have risen in popularity over the past few years, and really came to the forefront during the coronavirus pandemic. On the surface, these measures will help workers (especially low and middle class) provide for and tend to their families. In reality, they will hurt businesses, cost jobs, and lead to lower wages.
An alternative option would be to allow the private sector to come together to either establish insurance plans that would cover short-term disability or paid family leave plans or allowing lower-income hourly workers to choose if they would want to convert overtime pay to paid leave. If we want to help workers, we should do so in a way that actually helps them.
Especially now, as businesses are struggling to recover from the economic crisis that accompanied the COVID-19 pandemic, employers cannot afford this burden. Losing your job is worse for a worker than losing a paycheck from not having paid sick leave or a paid family leave mandate.
Unfortunately, these platforms leave out a very important part of these types of mandates: the costs that will be placed on employers will end up hurting the very people they are seeking to help. Economic analysis and economists—both liberal and conservative—agree that the main people who pay for employer mandates are employees.
The cost of the health care provided to the employee does not result in more productivity or value of that employee at their firm. By adding this cost, it is more likely that incomes will be lowered in order for the total value of the employee to remain the same, even with additional costly mandates. Sometimes, the cost of these mandates results in layoffs so that the company can afford to provide them to the remaining employees.
So why do politicians who claim to advocate for workers support ideas that will hurt them? Well, it’s easy to support something that sounds good and has hidden consequences and costs.
For low income workers, employer mandates like health insurance mean far higher costs for the employer and a higher likelihood of layoffs. Since people cannot be paid less than minimum wage, the higher costs are forced onto employers who will have to adjust for these costs by laying off workers or cutting hours.
In a 2019 New Hampshire bill to implement a government-administered paid family leave program, a new tax was included to help cover the costs of the mandate. However, the tax that would cost the average worker an extra $267 per year only covered one fifth of the cost of the mandate. In this instance, employees would lose earning from both the tax and whatever cost-cutting measures their employer would be forced to take.
The costs aren’t just monetary.
If an employer has two applicants for a job and one appears more likely to take advantage of a mandate like parental leave (young, female), it might reduce the employer’s willingness to hire that person. Hiring a young woman then becomes a cost burden that an employer may not be willing to take on. In turn, this mandate intended to provide a benefit ends up leading to discriminatory hiring practices and higher unemployment in a new group.
When making decisions that impact businesses, lets allow businesses to contribute ideas for better solutions that benefit employers and employees alike. The government is not the answer to every question.