Paid Family and Medical Leave Cost Model - AEI

Paid Family and Medical Leave Cost Model

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Ben Gitis of the American Action Forum developed the methods employed in this tool.

In recent years, policymakers from across the political spectrum have demonstrated interest in introducing a federal paid family and medical leave program. Proposals that would introduce a new federally financed benefit all face one common question: How much will it cost? Answering this question indicates how much funding the program will ultimately require, whether from new tax revenue or reductions in spending elsewhere in the federal budget.

This tool is intended to illuminate the budgetary cost of introducing a new federal paid family and medical leave program. Specifically, it highlights the impact of two separate yet likely interrelated factors on a program's costs: policy parameters and program use.

The tool enables users to set six distinct policy parameters when estimating the cost of a paid leave program. These parameters include type of leave covered (personal medical, parental, family care, or all three), the maximum duration of leave benefits available, wage-replacement rate, maximum weekly benefit, a work history requirement, and a waiting period. Each of these decisions influence the value of the leave benefit, the workers eligible for the benefit, or both.

The tool also enables users to set assumptions on program use. At the upper end, "FMLA Experience" assumes that program participation would mirror private-sector leave-taking patterns under the Family and Medical Leave Act, the only current federal policy that guarantees family and medical leave. At the lower end, "State Program Experience" incorporates assumptions that are more consistent with the experiences of existing state paid family and medical leave programs.

Specifically, "State Program Experience" incorporates two sets of assumptions that differ from "FMLA Experience." The first, "State Program Take-Up," assumes that not all workers who take family and medical leave would claim the benefit. For instance, it assumes that 50 percent of workers on personal medical leave and 90 percent of those on parental leave would claim the benefit. The second, "State Program Employer Response," assumes that 60 percent of workers who receive paid leave from their employers would use the employer benefit for their first four weeks of leave before claiming the federal benefit. In the tool, "State Program Take-Up" and "State Program Employer Response" illustrate how each set of assumptions individually influence the projected cost of a paid leave program.

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For a more detailed examination of these methods, see Ben Gitis, Sarah Jane Glynn, and Jeffrey Hayes, "Comparisons of Methods for Cost Estimates of a Federal Paid Family and Medical Leave Program Using Public Data," American Enterprise Institute, September 7, 2018.

Data on family and medical leave taking come from the 2012 FMLA public use employee survey, https://www.dol.gov/whd/fmla/survey/.

Wage, hour, and employment data come from the Current Population Survey 2017 Annual Social and Economic Supplement, https://www.nber.org/data/current-population-survey-data.html.