Paid Leave and COVID-19 Relief

Eakinomics: Paid Leave and COVID-19 Relief A key element of the Biden Administration proposal for COVID-19 relief is to extend and enhance the existing temporary provisions for paid leave. Recall that the Families First Act mandated that workers be eligible for up to 2 weeks of fully paid sick leave for those ill, quarantining, or taking preventive measures regarding the coronavirus, and 12 weeks (10 paid and 2 unpaid) of child care leave to care for children whose school or day care closed, or family leave to care for a family member suffering from COVID-19. The federal government would provide tax credits to cover the cost to employers. Businesses with more than 500 employees were exempt from the mandate; businesses with less than 50 employees were exempt from the mandate but could receive the tax credits if they chose to offer such leave. The Consolidated Appropriations Act of 2020 passed in December extended the tax credits through March 2021, without the requirement to provide such leave. As detailed by AAF's Tara O’Neill Hayes, Biden’s plan would reinstate the mandate through September 2021. It would extend coverage by eliminating the exemptions for employers with more than 500 or less than 50 employees and for federal workers. This expansion of the requirement is estimated by the Biden Administration to cover between 68 and 106 million additional private-sector workers plus 2 million federal workers. Employers with less than 500 employees and state and local governments will be fully reimbursed for the cost of providing this benefit. Hayes estimates that the “cost to the federal government to cover these benefits could be between $132.0 billion and $154.6 billion.” Further, large employers could face additional costs of between $72.3 billion and $124.6 billion.” The paid leave provisions raise several questions about the $1.9 trillion effort. First, the plan is to spend hundreds of billions of dollars to make schools safe to reopen. Why is it also necessary to provide paid leave for parents to care for those students? Second, why is it necessary to spend hundreds of billions of dollars on schools when all that is necessary is to vaccinate the adult personnel and then safely re-open? And come to think of it, if the proposal contains $400 billion for a vaccination program, why is any of this necessary? Is the Biden Administration expecting it to fail? The paid leave provisions also reveal the muddled thinking about growth. Democrats have argued that the $1.9 trillion scale is necessary to avoid the supposed failure to provided adequate stimulus after the Great Recession. But notice that embedded in the $130-$150 billion “stimulus” from paid leave is a de facto tax of $70-$125 billion tax on large employers. This costly mandate is eerily reminiscent of the $110 billion in regulatory burdens the Obama Administration doled out annually. Press reports indicate that a group of Republican senators has an alternative, smaller proposal that they wish to present to the president. Certainly, it would be possible to get the same economic bang with a smaller, better-designed effort.