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Analysis: Urban Study Understates Benefits of Rubio Paid Parental Leave Plan

Aug 30, 2018 | Comunicados de Prensa

Miami, FL – U.S. Senator Marco Rubio (R-FL) today released the following analysis showing the Economic Security for New Parents Act (S. 3345) provides new parents with significant wage replacement rates during the course of a three month leave.
In a new report (“How Much Would Senator Rubio’s Proposed Paid Leave Program Help New Parents?”) released today, The Urban Institute found “One-half of participants would replace at least 80 percent of their pretax earnings—the median replacement rate—if they spend only two months out of work but 53 percent if they spend three months out of work.” The Urban analysis also found claimants in every quintile – except the top quintile – would receive a wage replacement rate of at least 73 percent for two months of leave and at least half for three months of leave.
It is important to note, however, that the Urban study does not take into account one of the most family-friendly, flexible features of the Economic Security for New Parents Act: transferability.
“The benefit will also be transferable between parents in the household,” Senator Rubio and Rep. Ann Wagner (R-MO) wrote earlier this month. “And unlike other paid parental leave proposals, this option would be available to working and stay-at-home moms and dads alike.”
Under the Economic Security for New Parents Act, parents taking the option will receive a Social Security benefit to use for at least two months of leave across their household. Two-parent households will be able to transfer their benefit to their spouse. For example, one parent could use the benefit for two weeks of leave, while the other uses their individual benefit in addition to the other parent’s benefit for at least six weeks.

The gray area in the chart represents the range of possibilities under a transferable benefit, assuming spouses of equivalent incomes and spouse taking the lower period of leave takes leave for two weeks. In other words, the transferability provision of the Economic Security for New Parents Act would allow many lower income parents to receive nearly 100 percent wage replacement over three months.  Transferability is a critical, pro-family provision that significantly enhances the wage replacement rate. Analysis that does not incorporate the possible impact of it is incomplete.

Additionally, Urban notes “Our simulations do not account for the possibility that access to parental paid leave could allow new mothers to keep their jobs and raise their earnings after their leave.”  This is a significant shortcoming of macroeconomic analysis because academic studies suggest paid parental leave programs increase women’s attachment to the workforce and therefore future earnings. Greater earnings would mean more room for retirement savings and increased tax revenue.

For example, an analysis on the “Effects of California’s Paid Family Leave Program on Mothers’ Leave-Taking and Subsequent Labor Market Outcomes” found “evidence that [paid family leave] PFL increased the usual weekly work hours of employed mothers of one-to-three year-old children by 10 to 17% and that their wage incomes may have risen by a similar amount.” When the study was conducted, California’s state plan had an average wage replacement rate of 55 percent, well below what many participants could receive under the Economic Security for New Parents Act.