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Washington State’s Parental Leave Program Excludes a Huge Amount of New Parents
Washington's current parental leave program is a mess. But it can be easily fixed.
The state of Washington is currently governed by a Democratic trifecta. Democrats control the governorship, 59 percent of the state senate, and 58 percent of the state house of representatives. This is not a recent development. Democrats have controlled the legislative and executive branches of the state for the last 6 years and almost all of the last 20 years.
The dominance of the Democrats in Washington state makes it a good case study for understanding state-level Democratic policymaking in the US. When Democrats control a state government for long periods of time, unencumbered by conservative opposition and anti-majoritarian filibuster norms, what do they actually do with that power? And what could they do better?
Across the next couple of months, I aim to answer this question by applying the same kind of scrutiny I normally apply to federal policy to the policies of Washington. Through this process, I hope to shed light on where state-level Democratic policymaking is falling short and how it could be changed to achieve the policy goals that Democrats often claim they are aspiring towards.
In this first piece of that series, I take aim at Washington’s Paid Family & Medical Leave (WA PFML) program, with a focus specifically on the parental leave element of the program.
The WA PFML program was passed into law in 2017 but did not begin paying out benefits until January of 2020. The program has now been in full operation for three years and, in that time, it has produced useful administrative data about its operations (I, II). By combining this administrative data with CDC data about how many children are born in Washington and Census data about the families and work histories of Washingtonians, we can assess how effective the WA PFML program is at ensuring that parents receive cash benefits while they take care of their newborn children.
As discussed in detail below, this data reveals that the the WA PFML program is performing very poorly.
Nearly four out of ten women between the ages of 19 and 45 are ineligible for benefits under the program because they do not satisfy its steep work history requirements. These work history requirements do not just disqualify nonworkers in the state. They also disqualify many workers, especially those who receive low wages. These eligibility exclusions and low program participation in general has resulted in less than 40 percent of new parents receiving benefits from the the WA PFML program.
The WA PFML is funded by a flat employer-side and employee-side payroll tax assessed on all gross wages earned below the maximum taxable earnings cap of the Social Security program. The precise tax rate varies year to year based on solvency evaluations made by the program administrators. Currently, the employer-side payroll tax is set at 0.22 percent, the employee-side payroll tax is set at 0.58 percent, and the maximum taxable earnings cap is set at $160,200. Businesses with fewer than 50 employees do not have to pay the 0.22 percent employer-side tax, but their employees are still covered by the program.
Individuals are eligible for parental leave under the program only if they have worked 820 hours in the first four of the last five completed calendar quarters or in the last four completed calendar quarters.
Eligible leave-takers receive a 12-week benefit with the weekly dollar amount set equal to a percentage of their average weekly wage. To determine someone’s average weekly wage, the program administrators first add up the total amount of wages an individual received in their top two calendar quarters out of the last four (or five) calendar quarters and then divide that number by 26.
The income-replacement rate is set at 100 percent of average weekly wages below $100, then drops to 90 percent for average weekly wages beyond $111 but below half of the state average weekly wage (currently $793), then drops to 50 percent for average weekly wages beyond half of the state average weekly wage until an individual hits the maximum benefit, which is set equal to 90 percent of state average weekly wage (currently $1,427). In graphical form, the income-replacement formula currently looks like this:
Individuals who participate in the paid leave program are legally entitled to return to their job only if they work for an employer who has 50 or more employees, worked for at least 1,250 hours in the year prior to taking leave, and are not in the top ten percent of salaried workers employed at their workplace.
This means that, although parental leave eligibility requires only 820 hours of work in the last year, job-protected parental leave eligibility requires 1,250 hours of work in the same period. It also means that small business owners, who employ around 20 percent of Washington’s workers, neither have to pay the employer-side payroll tax nor have to follow the job protection rules.
Nearly 40 Percent of Women Are Excluded From Eligibility
Washington women begin having children in significant numbers around age 18 and stop around age 45.
In this 18 to 45 age range, 38 percent of women have worked less than 820 hours in the prior year and are thus ineligible for parental leave benefits under the WA PFML program. The youngest women are especially unlikely to meet the work history requirement.
Many of the people who are ineligible for the program did not work at all in the prior year, either due to unemployment, disability, or caregiving responsibilities. But many others did work, just not enough. Workers who fail to meet the work history requirements of the program are overwhelmingly concentrated at the bottom of the wage scale. These workers pay into the program but cannot claim benefits from it.
According to the WA Employment Security Department, workers receiving less than $17 per hour make up 24 percent of the WA workforce, but only 15 percent of the workers who are eligible for the WA PFML program. On the other end of the scale, workers receiving more than $46 per hour make up 25 percent of the WA workforce and 30 percent of the workers who are eligible for the program.
When paid leave programs are pitched to state legislatures and the public generally, the benefits they provide to new parents are overwhelmingly emphasized. But the Washington administrative data shows that parental leave events only make up 37 percent of all leave events covered by the WA PFML program.
In the last reporting period, the WA PFML program paid out parental leave benefits to 65,720 individuals. Over this same period, there were 83,741 live births in the state. Each live birth creates approximately two parents of a newborn, meaning that parental leave benefits only made their way to approximately 39.7 percent of all new parents. Many of the remaining 60 percent were ineligible for benefits for the reasons described above. Others were eligible for benefits but chose not to claim them due to a lack of job protection. Still others were eligible but chose not to claim them for some other reason.
Fixing the Program
Before explaining how to fix this program, it’s important to briefly dwell on some of the unique dynamics of state-level policymaking, especially when it comes to the parental leave issue. In my experience working on this topic, I have learned that, for the most part, state lawmakers who have passed paid leave programs have taken almost all of their cues from the National Partnership for Women and Families (NPWF). This means that state lawmakers are not really independently making each of these bad design decisions, but are instead having these decisions placed in their laps fully formed.
The NPWF promotes the idea that parental leave programs need to be nestled inside a broader program that includes unrelated things like military and medical leave, that all of the leave types in this broader program should be identically designed, and that every reform needs to take as its jumping off point the inadequate federal Family and Medical Leave Act that the NPWF helped pass 30 years ago. All of this is a mistake.
The correct way to design a policy like this is not to model it on a bad piece of legislation from the 1990s but instead to start with a fresh set of eyes that is informed by the best practices found across the world. When you take that approach, a few design principles stand out:
Every parent of a newborn or adopted child should be eligible for parental leave benefits regardless of their work history.
Parents should receive a benefit equal to a high percentage of their prior earnings up to some maximum amount or receive a flat minimum benefit, whichever is greater in their case.
Each parent of a new child should receive the same number of weeks of benefits by default, but should then be able to transfer some of those weeks to the other parent if they choose to do so.
Single parents should receive both sets of leave weeks.
Applying these principles to the parental leave benefit in the WA PFML program yields the following recommendations:
The WA parental leave program should establish a minimum weekly benefit that no new parent can get less than regardless of their prior work history or prior average weekly wage. The state’s minimum wage, which is currently $629 for a 40-hour week, provides a logical basis for the minimum weekly benefit.
Of the 12 weeks of leave provided to each parent, up to 8 of those weeks should be transferrable to the other parent.
Single parents should be eligible for all 24 weeks of leave.
The rule that workers employed by businesses with less than 50 workers are not eligible for job-protected leave should be eliminated.
The rule that workers who are in the top ten percent of salaried workers at their workplace are not eligible for job-protected leave should be eliminated.
In addition to these program structure reforms, Washington should also consider reforming some of the program’s tax and benefit parameters:
The payroll tax should be applied to all gross wages, not just gross wages below the maximum taxable earnings cap of the Social Security program. This would allow the state to reduce the payroll tax rate while still generating the same revenue for the program.
Small businesses should be required to pay the employer-side payroll tax just as larger businesses do.
Self-employed individuals and independent contractors should be required to pay the payroll tax rather than being allowed to choose whether to participate in the program or not.
The maximum benefit should probably be set higher than 90 percent of the state average weekly wage. At minimum, it could be increased to the state average weekly wage so as to make leave slightly more viable for high-earning workers.
The benefit should be increased from 12 weeks. This is low by international standards. At minimum, it could be increased to 16 weeks.
In closing, it’s important to emphasize once again that the parameters of the parental leave program do not need to be identical to the parameters of other kinds of leave programs. So the changes discussed above do not need all need to be applied to every type of leave covered by the WA PFML program, only the parental leave program.
In my survey of the world’s welfare states, I have never seen one that that uses the same eligibility requirements and benefit amounts for parental leave as it does for all of its other leave benefits. This is no doubt because it is absurd to believe that the kind of leave someone needs for a surgery is identical to the kind of leave someone needs to care for a newborn.
Creating a truly universal and generous parental leave program is neither especially difficult nor costly. Yet states like Washington have been led down a path of policy dysfunction on this topic. The issues with these programs can be fixed by making a handful of smart reforms and they should be.