Is it too much to ask that our elected officials acknowledge the costs of their proposals? Every time there’s a new policy to be pitched, proponents focus only on the benefits and pretend there will be no costs. That’s what Gov. Whitmer is doing with her proposed family and medical leave mandate.
“Too many Michiganders cannot be there for their families without sacrificing a paycheck,” Whitmer said last month about her recommendation to require employers to pay employees during extended absences. “No one should have to choose between their health, their newborn, or a sick relative and paying the bills and putting food on the table.”
Whitmer’s pitch is all benefits and no costs. Perhaps she believes voters won’t notice the price of her mandates. There are no solutions, only trade-offs, as economist and columnist Thomas Sowell remarked.
Compensation packages that now require employers to pay workers during extended absences leave less breathing room for other types of compensation, whether wages or employer-covered insurance or the many other benefits that employers can provide.
Paid leave policies operate like insurance for employment accounting purposes. Extended absences from employees are risks, and employers can lower those risks by setting aside money to pay workers when they take absences. This costs money that could otherwise be spent on wages or other compensation.
There are clear costs in the bills introduced on the subject. They would require employers to allow employees paid leave for defined reasons, including some extensive absences, and it authorizes payroll taxes to fund employees’ time off. Payroll taxes already exist in several states that have extended paid leave policies. The mandate makes employment more expensive, and there are consequences to it.
Payroll taxes have a lot of negative effects. They lower take-home pay and cost the economy jobs.
Even without a payroll tax, a mandate to provide paid leave makes employment costlier for employers. This can cost workers wages or other compensation, and it may cost people their jobs.
Lower wages in return for extended leave may be worth it to some people. Everyone’s got their own preferences. Some employers already provide extended leave benefits without being required to do so by the state. There are many things that can make jobs more appealing to potential employees.
Other employees can provide these benefits to themselves through insurance markets. Most people have probably heard the AFLAC duck’s pitch for supplemental insurance. Workers can buy policies to get steady compensation for extended absences even if employers don’t offer this benefit themselves.
The selection of benefits comes from the push-and-pull between employers and employees over wages and benefits. It’s also a way that some employers can stand out against others. Mandating one type of benefit gets in the way of the conversation between employers and employees and takes it from the realm of voluntary, mutually beneficial exchange into one where state lawmakers foist their preferences on others.
Maybe Whitmer’s political sense is right, and people either won’t consider the cost of the mandate or decide the benefits are worth it. Still, her proposal has serious costs, and people should want their elected officials to make better cases for their policies.
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