 Good afternoon, everyone. Good afternoon. Hope you're all doing well. Thanks for joining us here. I'm Michael Barr. I'm the Joan and Sanford-Wile Dean of the Gerald R. Ford School of Public Policy. I'm really delighted to see you here today for this special policy talks at the Ford School event. We are calling it perspectives on the future of paid family leave. We have the American Enterprise Institute's Andrew Biggs and the Ford School's own Betsy Stevenson. We've brought Dr. Biggs and Dr. Stevenson together as part of our initiative Conversations Across Difference in a dialogue today moderated by our own Ford School student, Nick Tumano, who's among other things a co-founder of the student group we listen. As you well know, these are challenging times for our country with fractious political discourse, gridlock, partisanship in our nation's capital and an increasing lack of trust in institutions everywhere. Our conversations across different series looks to bring together people from divergent vantage points to tackle significant policy issues with a goal of deeper understanding and a search for common values. The topic of this event, Paid Family Leave, is emerging as a significant election issue, particularly in swing states, as we move closer to the 2020 cycle. Actually, we're in that cycle. According to Pew Research, 82% of Americans support the concept of Paid Family Leave, but only six states in the District of Columbia have passed Family Leave laws. Today, we'll hear two different approaches to the policies that so fundamentally affect working families. Let me just give you a word on format. We'll have some time towards the end for questions from the audience. Please write your question on the cards provided and our staff will collect them. Professor Fabiana Silva of the Ford School, Talia Katz, a student in the Ford School, and Kim Ira Ellison, a student and member of AEI's Executive Council, will sift through your cards and pose questions to the panel. For those watching online, please tweet your questions using the hashtag policy talks. Again, welcome to all of you to the Ford School and Nick, let me turn things over to you. Well, thank you so much, Dean Barr, for that kind introduction and thanks to you all for being here today. I'm especially excited and honored to be with Professor Stevenson and Dr. Biggs on this really sort of salient issue. I remember a couple of months ago in September, anxiously awaiting next door my first economics class with Professor Stevenson, maybe a little bit less nervous than I am now. But a few lectures into the class, she had mentioned that she just wrapped up the second iteration of a working group with the American Enterprise Institute and the Brookings Institution on the topic of paid family leave. So I thought it would be a really great idea to bring Professor Stevenson and someone from AEI together here at the Ford School for this discussion. So I'm really happy to have you guys here and excited that this was able to come together. So I'd like to sort of begin the discussion by prefacing it with the idea that as Dean Barr sort of mentioned, it seems as if on the topic of paid family leave, both lawmakers on the right and the left have sort of come to the general consensus that this is an issue whose time has come. And that's sort of what the AEI and Brookings report said. Last July, when you testified before the Senate, Sherrod Brown, Senator Sherrod Brown mentioned that if we really sort of acknowledge and appreciate the human dignity of work and the dignity of work, we need to embrace a paid family leave policy plan. And Professor Stevenson, you've been working on this for well over two years. So I was wondering if to start the discussion, you could talk a little bit about most basically what paid family leave is, what are some sort of similar styles to the program and potentially if any misconceptions exist, what misconceptions are out there on the policy. Sure. Well, thanks. And thanks to all of you who are coming today. Thank you for having me really as a pleasure to be here. It's the family leave issues a nice one to work on because it's an issue that can bring people together today at a time when I think we particularly need to be brought together. As Nick was saying, there's a growing consensus that a paid family leave policy will be good for families, good for kids, good for the economy as well. The idea is that when a new parent, it's often the mother, but the idea is that most of these plans will be gender neutral. So fathers could take paternity leave as well. But when they have a new child or if they adopt a new child, they can take some time off from work while still receiving pay and spend time in that crucial period of raising their child. There's research that finds that having paid leave available is good for children in terms of nutrition and education and health. It's also good for parents. And it's an ironic thing in the sense that you'd say, well, why would paid leave away from your job be good for people's careers? Well, in the absence of paid leave, what seems to happen, particularly for mothers, is that they become separated from a job. They quit their job when they have a child. And then later, if they want to come back into the workforce, they've lost their seniority. They've lost the skills they're specific to that job. A paid leave policy helps keep people connected to their jobs. So then when they come back into the workforce after spending time with their kids, they come back at higher wages. They come back with more hours work and something which is beneficial, not just immediately, but over the course of their careers. It's something that could reduce the gender wage gap, which is driven mostly by people coming out of the workforce when they have kids. So it's a policy that we think will be good for families, but also good for the economy in the sense of maximizing people's productivity. So it's something that's bringing together people from both sides. So I think it's really good you started asking this question about what do we mean by paid leave? Because one of the things that we've seen happen is some of the discussion around what a paid leave plan should look like gets caught up. And what do we mean when we say paid leave? So you just talked about paid maternity and paternity leave. That's a very specific bucket. Well, what about the six month checkup or what about the one year well child visit, what about the parent teacher meeting? So can you take time off when you need to care for your kids when they're young? When what about when they're 12, what about when they're 14? Well, OK, now we want to think about parents being able to take time they need when a kid's sick. Well, what about when they're sick? What about when their spouse is sick? So where how do we start to think about what kind of paid leave plan do we want? Do we want something that's really only maternity and paternity leave? Or do when we say parental leave, most people are talking about being able to take leave to care for sick child as well as at the at the time of birth. And that then starts to dig into this policy debate, which is how big of a program do we want? What you know, what what do people expecting government to provide? And it gets at the root of the changes in the labor market that have brought us to the place we are today. So over the last 70 years, male labor force participation has been on the decline and female labor force participation has largely over that seven decade time been increasing. So the gap today between male labor force participation and female labor force participation is much smaller than it used to be. And what that means is that, you know, four generations ago, three generations ago, there was a secondary earner and a primary earner. And so if there was something where somebody needed to take a kid to a doctor's appointment, miss a day of work in order to care for sick child, we knew who was going to do it. It was going to be the parent whose job was less important. Now all the jobs are important. So we we see women are out earning their husbands in 38 percent of marriages where women work. And they're actually equal in an even larger share. So there's not somebody who's like, you know, like we could we could use it or lose it when it comes to my wages. So it becomes very hard for parents to juggle. And that is where this pressing need comes from. Not it does come partially from the we know that kids are better off. As you said, we know women are more attached to the labor force if you can take time with a new baby. But we also have to figure out how people can manage work life and taking time off to care for their families through the course of raising children. Yeah, no, that's great. So I suppose my second question is you've sort of outlined why the time is now to approach the issue. For both of you, could you talk a little bit about why you think it is that has taken this long? There are sort of two ways that I sort of think about going about this. The first is it do we believe that private employers should be the ones providing this sort of benefit? Or alternatively, could you talk about why in your estimation government should be involved in the program at all? Well, that's a good question. I mean, I I'm sort of a free market oriented person myself. So if I think about proposing a new government program, you know, you want to ask yourself, you know, why is it government needs to do this? Why is the private sector not doing it already? Do we need to mandate something that can be done voluntarily? And the answer is that the paid leave is already happening in a lot of instances in the private sector. Larger firms, higher paid employees, many of them already have paid leave benefits. But smaller firms, often they're running on a shoestring. They're just getting started. They don't have the wherewithal to offer paid leave. A lot of lower income employees aren't offered paid leave on the job. So the idea of having a government program is to facilitate those benefits because those are benefits not just, you know, for the parents themselves. It's benefits for society. So I think we can fill a gap in that. Now, in terms of why it's come about now, you know, I would like to think it's because, you know, everybody has studied the research and we've now determined that this is worthwhile. But I think it's in terms of society. It is, you know, people see, you know, sort of the disruptiveness of people trying to manage their lives. You have two earners, you're worrying about taking time away from work. It is, I think there's just more political concern within both parties about how do we add some stability to people's lives? And this seems like a way you can do it. It's not going to solve all the problems people have. But I think there's people coming together and say, this is can make life a little bit easier for people. And so it's facilitating that kind of thing. So to put a little bit more, dig a little bit more into, like, why do some people get this as a benefit? And why won't the market provide it for everybody? One is some workers develop really specific skills that are tied to the job. And we think of those as, you know, job-specific investments. So when that person leaves the labor force, not just the labor force, but quits that job because they've got a new child at home, the employer loses something of value. And we've seen a lot of companies that have actually done the math on this. So Google sat down and realized that their paid leave program at the time of a new birth was too short, given the number of people they were losing that were not returning back. They lengthened it, got greater return in shortening and lowered their costs. So they were like, this was a cost-saving maneuver to lengthen our maternity and paternity leave because it gave us greater retention of very valuable employees. So they're talking about employees where it can cost them one to two years' salary just to recruit a replacement. So holding onto that person is worth paying them for four months. So there are some people who have those very specific job-specific skills. And that's why we're going to see highly compensated workers are going to be more likely to be offered this benefit than lower-skilled workers, workers who are less paid because they are not as expensive to replace, frankly. That's the bottom line. Then you also mentioned small employers. There's also just an issue of how do you smooth this out? If you're a giant employer with 10,000 employees, you're going to basically be paying the same amount each year in maternity costs. If you've got 50 employees and you have a bad year where three of them are giving birth, this is going to really shake your costs. Next year, nobody gives birth. Yay, like we're reporting awesome profits. That's not really how you want to run your business with that kind of volatility. So those are the two issues to think about. It's like volatility. And then what are the benefits to the firm versus society? And that's what you said. There are big benefits to society. That's why I, you know, that's the justification for government involvement. But I do want to address something specifically you mentioned, which is, you know, the idea of employers providing it or maybe we're going to get this, should we require employers to provide it? And I think that hopefully, even though the public tends to support the idea of an employer mandate, I think regardless of party, we all hate it. That was like the thing we got to unite behind in our AI Brookings proposal, which is a employer mandate. It's a terrible, terrible idea, right? Because we don't want to put additional costs on businesses what that require, that lead them to do things like discriminate against certain groups of people. And if you're a small business and you don't think you can handle the cost of paid leave and we're saying you have to pay it, then what are they going to do? They're going to avoid the people who look the most like they're going to use it. And that's a problem. And that is why no developed country has a national employer mandate when it comes to paid maternity and paternity leave. Great. So before diving a little bit deeper into more of the compromise in the policy that the working group created, sort of in keeping with the idea of conversation across difference, sort of within the context of the AI and Brookings working group or elsewhere within your experience on the topic, specifically related to paid family leave. Could you talk a little bit about what that process has been like both in DC and in academia generally? What sort of problems you've encountered? Things of that nature. You were with the working group longer. I think the thing is that. This it's it's somewhat surprising to me. So I'm sort of don't know where to start. We went from barely being able to talk about paid leave as a realistic policy choice in say 2009 to I think having genuine bipartisan support in Congress and in the policy world that we need something here we are in 2019. So that's a big movement in terms of attitudes. And you had asked earlier sort of why that movement happened so fast. I don't really know the answer to that, but I think that it is the culmination of companies doing the math, the research coming out and people starting to say, wow, we are actually shooting ourselves in the foot. The other thing we've learned is that the US used to be one of the highest countries in terms of female labor force participation in the OECD and now we've slipped to to very far right. So we were number six. We're now like number 20 and researchers have pinned a lot of that on the fact that, you know, over a 20 year period, all these other countries started to pass things like paid parental leave improved their access to high quality childcare, increased access to workplace flexibility, we were doing none of that stuff. And so it's part of our loss of international competitiveness. And once people start to think about it that way, I think it starts to change the conversation. I think the biggest challenge in talking to people is how are we going to fund it? How much are we going to cover? What are we talking about? How long is it going to be? And that's a really, I think, a big debate because nobody in the US is talking about the kind of leaves that you see in Europe. So in Europe, you'll see like people get a year off and no one's really talking about that. But the researchers who've been looking at child health, they really want to see 12 weeks. And that's because that's what they've really seen as being best for the kid. And they have a really hard time compromising on that. And I think people who are conservative are like, whoa, that's a lot of time to just jump on into why don't we start with something smaller? And so, you know, that has been a big issue. I think there's this natural inclination on the Republican side to figure out what you can do through tax cuts and tax incentives. And I just don't think this is one where we can do it cost effectively through tax incentives. But I think that's been a big part of the debate. And I think the bigger overarching thing that you run into when you talk to people about this is we have to make decisions as a nation about how much spending we want to do. And this is getting caught up in that. You know, 50 years ago, more than that, 70 years ago, we made a decision that we are going to spend like crazy for people over the age of 65. And goodness, we have been successful. Now they live forever. So now we're spending even more on those folks and that's left our ability to spend on kids, like really, really constrained. And so we start to get into arguments about, well, we're, we've got, you know, a big chunk of GDP going to take care of people over 65. Are we really going to spend that much more on taking care of children? Maybe we should take from the people over 65. So there you start to see the problems. So moving more towards the 2017 report that AI and Brookings put out sort of in watching principles on the working group talk about it, both Aparna and Isabella, two co-directors of it, basically said that this was in fact a compromise because as they put it, no one on the group loved it. From all the things you just mentioned, how to pay for it, how long this should last, things of that nature. There was certainly a great deal of discussion and potentially gridlock. So first, could you talk a little bit about what that sort of compromise looked like, what it was most basically, and then some of the economic and moral principles that sort of animated that discussion. Yeah. Yeah, why not, why don't you? So, one of the issues was who are we going to cover? We did maternity and paternity leave. And for a lot of people, that was really painful to sort of leave everything else behind. And we said that we would come back and we did to talk about like a TDI and a broader parental leave program. But we were like, look, we can all agree, everybody can unite around the fact that kids are better off and there are enormous societal benefits when parents take time to bond with a newborn. You know, it's just, you know, two week old does not do well in childcare. Like they need constant attention and we know that, you know, nursing has benefits like when kids two weeks, there's not a lot of other things you can be doing in the day if you're nursing besides nursing. So there's just real benefits to a parent being able to stay home and there's real benefits to both parents bonding with the child so that the child makes that connection. And as I mentioned earlier, the health researchers really feel like it needs a full 12 weeks so that the kids get the full six months you do. You stack them, you do mom for the first three months, you do dad for three to six and the kid doesn't need outside parental care until after six months. We didn't do that. Like we said something shorter. I think we said eight weeks, although we have this like really hedgy language, like a fixed amount of time to be debated on later like eight weeks. I will say, actually, it was a debate just to put concrete recommendations in. So when we were first coming out with a report, we weren't going to put any concrete recommendations. We were to say some people think this and some people think that and I was like, you do not you're not telling me that I've wasted like a year of my life and we're not even going to like find like some narrow thread that we can agree on. And other people felt the same way. So we came up that's why we came up with a thing where everybody had to like swallow hard and say I don't like this. But at least like now we can say we've put this on the table. There is bipartisan agreement that kids should have time with their parents and their first born. There's bipartisan agreement that this needs to be funded in a budget neutral way, at least partially through a tax increase. That was our that was another part of it had to be budget neutral. So that meant we had to have a plan to pay for it, not just like money comes later, but we're going to pay for it today. And it's going to come half through cuts of some other entitlement program. That's painful for some of us. And it's going to come through raising some new revenue. That's painful for some others of us. So that's a compromise, right? And and that it know that those were the kinds of things where where we put that compromise out there. It's a basic minimal plan. Everybody would have wanted either something bigger or something smaller, but nobody objected vehemently to what we put together. I think I think it's important that the specifics went in there in the sense that if you want something Congress, you're asking them to put their jobs in the line and people in Congress value their jobs very highly. If if the think tank folks can't even who are in no danger of losing the job, if they can't even put some specifics in and come to compromise, then there's not much hope on the congressional end. But I think this is important in the sense that, you know, what you're talking about the bonding, you know, with a newborn, if you're upper middle class and above you take this for granted, you're reading all your books and doing all. I mean, when we had a child, the stuff we did was insane. And yet why shouldn't every American have the opportunity to do the same insane thing as I did? It's this stuff is important. It's not just important if you're upper middle class above. It's important for everyone. And because it's bringing benefits to everyone. So it means that, you know, we have to make certain compromises in a perfect world we wouldn't make. But we're not living in a perfect world. We're living in a world where we're trying to make some progress on things. And I think that this sort of work between, you know, AEI, which is sort of right of center and Brookings, which is a little bit left of center is a really fruitful thing in this time when generally that sort of cooperation is pretty absent. So Dr. Biggs, as you've sort of come on the working group in more recent months, when the report for 2018 was published, it tackled as Professor Stevenson said, paid medical and paid family leave. For paid family leave, there wasn't a total compromise, hence the discussion now. But they did find some sort of compromise with regard to paid medical leave. And that sort of came in the form of TDI, the temporary disability insurance. I was wondering if you could talk a little bit about that. Where else that's sort of implemented? I know some states like you said California or Hawaii in this regard have been tinkering with that a little bit. So what does this sort of look like outside of a think tank environment and more in the state's hands? California has had a paid leave for about 15 years or so. But more and I think there's some interesting results there from the research on how that has affected families in a positive way. Most the states they're doing are using a payroll tax to finance it. They're not, as Betsy said, imposing a requirement on employers, although I think Hawaii may be going in that direction. But you have Connecticut has implemented it. And so it's a positive thing in the sense you're seeing experimentation at the state level. And yet there are limits to that given the mobility we see. But it's often run at the states through many states have state level disability programs in addition to the federal disability program. They're often run through the state disability office. Some states don't have that say the state of Washington is is establishing a paid leave program. They don't have a disability office. So they're going to go through their unemployment insurance office. A lot of this is just the mechanics of how do you have data about people and their jobs and the employers that they work for. And so you want to piggyback on the existing programs as much as you can. But in most the cases it's been a payroll surtax they're using to finance it. So as Andrew mentioned, there's a handful of states that have these temporary disability insurance systems. Those have been the states, as you mentioned, that have been found an easiest to get a paid parental leave implemented because they just added on. It says if it counts as a temporary disability. And Washington state passed their paid family leave a long time ago but they haven't been able to do it because they don't have a TDI so they didn't sort of know how to mechanically do it. But this issue of temporary disability insurance, a lot of states have it and it works pretty well in those states. They've had it for a long time. This isn't like a bunch of states have recently passed it. It's decades of having a temporary disability insurance system. So how does that work? It's not for a sick day missing one day, but it's not for a long term disability. It's for a short term disability. So the idea is that you get something that's like an unemployment insurance payment, but it's a disability insurance payment if you need to miss, you know, if you need to work, miss work for reasons that are sort of FMLA-ish, right? So you have some medical reason that you need to be out of work for three weeks. You can apply for the TDI program. And there's been a significant amount of academic research on whether TDI reduces the likelihood that you ever go on long term disability. Now what we see is in states where there are TDI programs, there is a lower likelihood of people going into permanent disability, but it's been very hard to establish how causal that relationship is. And therefore, how big is the positive effect of reducing D.I. is a sinkhole. You go on D.I. and you're never coming off. That's the problem. So the idea is if you can go on TDI for six weeks, and then you go back to work. And that's it. Maybe you go on TDI again in four years for six weeks. That's still very, very little amount of spending compared to going on D.I. and being on there for 10 years. So you don't need big effects if we're preventing people from applying for D.I. You can have small effects. But because those people stay on for forever, they could end up having big cost savings. So there is suggestive evidence in the research that a TDI system essentially pays for itself by reducing people's applications to D.I. I think that you have to say that cautiously again because the research isn't completely clear, but that's one of the reasons why we were able to get to agreement on TDI. As people do see that in a world where we didn't have D.I., maybe we wouldn't have been able to get to agreement on TDI. But we do have D.I. And so if we can start to pull people off this permanent system, give them some temporary support where we try to figure out how to get them in a better situation so that they can stay attached to the labor force, that's a compromise worth doing. That's why we could get there. Now what about the broader set of leave? I'll tell you where we got caught up is the baby boomers. They're getting older and they need care. And it could be really expensive if we all of a sudden start letting a whole bunch of people in their fifties take time off to care for their, you know, my seven-year-old dad was in the hospital for a week last week with our problems. And like, you know, do you have, like should I have taken, should I have been there for the whole week? That's a personal issue. But like you have this issue. Now imagine I have a job where you know, I'm either at my in my office or my employer is paying me to not do any work. Do you give me paid time off to go and spend that every time it happens? I don't think it's going to be the last time that happens, right? And that's the problem with these sort of age-related problems. They are not short duration. They are long duration and they can last a really long time. And so what that means is it made it really hard for us to figure out what the cost estimate was going to be that created a lot of anxiety in people who worry about the government spending too much. And so that was just it made it really hard for us to say, well, you can care for anybody except for your aging parents. That's sort of that sounds problematic. And you know, the Republicans don't want to get people over 65 that upset. So like everyone's like, let's just not let's listen, I'm not talking about this one. But I think that that's going to be a big problem. And frankly, there is this whole sandwich generation, you know, these people who had kids later in life. So they're trying to take care of their kids. And then they got these parents who are in their 70s and 80s. And so one, you know, I'm not was like last week, my dad's in the hospital with a heart condition and both of my kids have the flu and I have the flu and we're all running 103 degree fevers. So like, what do you do? That's the sandwich generation. How much support do we provide them? I mean, this gets a little bit at what Betsy was saying before about sort of a higher income employees tend to these very job specific skills, so that their employer doesn't want to get rid of them. And so that means, you know, if I call a bee eye and say, oh, I have to take a week off to care for my wife or my son or whatever, they're gonna be say, fine, because they don't want to spend the time finding another me. But if you're somebody who has to be in the job nine to five, they retail or something, they that's a disruption, they don't want to deal with it often they can't afford to deal with. And so it's trying to find ways to facilitate this. And I think a lot of it is going to be working folks for the real beneficiaries here of giving them the same sort of option as the higher income people already have. So moving a little bit more towards what federal compromise might look like, I'd like to talk a little bit about what some of the plans out there are saying what they're proposing and sort of what your thoughts on those are. So firstly, I'd like to talk a little bit, Dr. Biggs about a proposal that you've testified on that you've written a little bit on. And that is in regard to having people claim a temporary social security benefit. It's something that seems relatively similar to Senator Rubio's plan back a couple of months and more recently, Senators Lee and Ernst's plan. I was wondering, initially, could you talk a little bit about what that plan is? And then you can sort of flesh out the differences between that. This is about a year ago, I wrote a piece for the Wall Street Journal and I'm primarily a social security pensions guy. So often I think in terms of social security. And what occurred to me is, you know, treating parental leave at least as a sort of a temporary period of disability, and such that social security already they know your earnings, progressive benefit formula. So it will be a greater advantage to lower income people into high earners. But the idea was that through social security, you could claim a parental leave benefit for a period. But then there's a question of how you pay for it. And knowing that that people don't want to just take money out of social security because it's already underfunded, knowing that Republicans don't want to raise taxes. What I, my author or my co-author Christian Shapiro talked about was that people who chose to take the paid leave benefit would agree to delay their retirement age from social security by a period in order to sort of make up for it. So if you took one month of paid leave, you'd essentially agree to take about a two month increase in your social security retirement age. That would cut your social security benefit, I don't know about one and a half percent. So it's not a massive difference. For whatever reason this got a lot of interest. Senator Rubio, last year, sponsored a bill based on this idea. I've had discussions with the White House about it just in the past week or so. Senator Lee and Senator Ernest have a bill based on this. And it's sort of controversial in the sense of some people like it, some people don't. From my perspective, it was throwing an idea out there and sort of seeing where it goes. But I think there's been a real advantage in the sense of even if somebody doesn't like the way it's financed, what it does is gets people in the tent of saying, we think paid parental leave is a good idea. And then we can start talking about all the compromises that are needed to make it happen. But once you get people in that tent and they're arguing for the policy and the results it brings to people, I think it gets you closer to a solution, even if what I outlined is the way it eventually goes. So speaking more to the proposal, Professor Stevenson, could you talk a little bit about evaluating that, what you think some of the potential concerns you have are the implications? And then we can move to an alternative policy after that. So I think the thing people are most concerned about is whether people have appropriate savings for retirement and whether this is just solving a problem today by creating a problem in the future. So I think that there's some people for whom this isn't going to cause any kind of problem, which are higher-income people who are probably going to retire at a slightly higher age anyhow. The thing is those are the people who are already getting access to paid leave through their employer. So what about the person who's doing more manual labor or working retail or lower-income workers working minimum wage for a lot of their career? They are relying on social security to eat. And it's also harder for them to extend their retirement by another two months. So that's the concern with that kind of proposal is that the person who needs it most for when they have a child is also the people who need it most at the time of retirement. So could we use social security to think about how to reform a safety net which provides us support when we have a temporary need like parental leave? Yes. But could it be mechanically quite that way? I think no. I think it, you know, if we're going to use social security, we need to make sure that we're also, you know, readjusting benefits in a way so that we're supporting the most vulnerable, lowest income workers a little bit more in retirement and also making sure that they're getting the coverage they need from family leave. So my concern is not don't touch social security. I think we absolutely should have a conversation about, you know, how does a paid family leave program fit in with our overall social security system? But I do think we need to be really careful that, you know, we're not making adjustments that end up hurting, you know, the workers who need it most. And the other way to think about it is these lowest paid workers are also the ones who tend to get the smallest amount of social security benefits, not just because they paid in less, but they have a shorter life expectancy. So, you know, someone, you know, if my demographic has got a much higher life expectancy, I'm going to get decades of social security payments with any luck. And that means that I get a bigger benefit than someone who might have a life expectancy of, say, only 70, cutting in two months into their short life expectancy is a lot. So those are the kinds of things we need to think about. So thinking more of an alternative approach that's been proposed recently by Senator Gil Ren from New York, the Family Act, sort of thinking about that idea of whether or not to look at social security at all. Could you talk both a little bit about your sort of thoughts on the Family Act, firstly sort of outlining what it says and what it's proposing, and then similarly what sort of concerns you have regarding it? Well, the Family Act is legislation in Congress. It will provide both for parental leave, but also take caregiver leave, taking leave in case you need to care for a family member. So it's a more comprehensive benefit than sort of what I talked about, which is strictly parental leave. So it's a bigger set of benefits. It would be financed with a new payroll tax on both the employer and the employee of, I believe, 0.2 percent. So it would be a 0.4 percent payroll tax in combination. In theory, I'm not opposed to the benefits. I think the political end of getting that through one difficulty of levying the payroll tax on employers is they're probably going to take it out of the employee's wages. But there's also the larger issue of, I mean, I was in Washington, D.C., last week testifying of a social security form, and there's other proposals to raise the social security payroll tax by a pretty significant amount just for solvency purposes. So at some point, things start to add up. But so I think the issue there would be more on the size of the benefit, but also how it's financed in terms of trying to get to an agreement. So the family act, as you mentioned, is it's the full. It's the TDI. Take time off for your family. It's not just parental leave. So basically, everybody will benefit from it. Everybody will at some point take some kind of paid leave through it. It is the tax, the .4 percent. I agree. We actually see all payroll taxes land. The incidence is almost, as you learned in class, incidences on the worker. So the workers pay for it. It's OK. The workers want it. And so I don't mind that. The question is, first of all, is the estimate right? So .4 percent paid family leave doesn't sound that bad. It's about two bucks a week for a typical worker. This isn't a burden, but it folds into our already pretty high social security taxes. Those are .4 percent. Those are 12.4 percent. So the question is, can we reform social security without raising social security taxes? You know, if our overall reform was to have a paid parental leave program like the Family Act, solve social security solvency. And we did that all with only raising payroll taxes by .4 percent. I think we should all declare that a victory and be very excited about it. I think the concern comes from if we don't do this together, can we put this payroll tax on while talking about raising these other sets of payroll taxes? And it's very hard to get Congress to think comprehensively in this way, like what should overall payroll taxes be and how do we therefore want to allocate them, right? Ideally, it's a policy want. That's what I want them to do. Getting them to do that's a tough job. One thing I'll say in favor of the Family Act in terms of having the full package of benefits is that in a sense, it makes the politics a little bit easier. If you were levying a new tax only to pay for parental leave benefits, it could be that people who were over childbearing age would not look as kindly on that. But if it's offering more comprehensive benefit of caring for an aging parent or giving yourself some leave when you need sick time off of work, that's something where they would see the benefit themselves. So there's no free lunch there, but it will be a way of broadening the coalition that might support it. So Democrats are nervous about new payroll taxes too. And so we polled the idea of a paid family policy like this, including this is what it's gonna take out of your paycheck. And we still got the majority of people saying it sounds good, but it included your own benefits, not just paid maternity leave and paternity leave. And I agree with you, when we then asked people what if it only covered paid maternity and paternity leave, they're less enthusiastic, not surprisingly, right? There's a lot of people who were like, yeah, I would take this benefit. But the paid payroll is really tough. You know, when Hillary Clinton ran for president, she wouldn't sign onto it, much to my chagrin. Like she did not want a payroll tax attached to it. She said, I'm going to pass a paid parental leave policy and we're gonna pay for it out of general revenue. Like general revenue is not a magic money tree, right? So like, where is the funding gonna come from? But it made her very nervous to say, and we're gonna raise taxes this much in order to cover it. So my last sort of question before we turn to questions from the audience is sort of related to Wieluson and the feasibility of this all. Wieluson at Michigan is obviously a student argue that brings people together for discussion on contentious issues. And I think, although the contention might not be, the motions might not be super high on paid family leave, it's still something where there's a lot of disagreement. And why I bring that up is at the end of most sessions, students, participants generally say, all right, this was pretty nice. This was a great discussion. But what does this all mean? So when AEI and Brookings published a report, that's all well and good. And I think it's really great. And it's really spectacular that legislation is being proposed on this policy now. All that considered though, what do you think the political feasibility of these sort of proposals are? Professor Stevenson, as you mentioned, 2009, we probably wouldn't be having this conversation at all. So in the next couple of years, as Dean Barr mentioned, as we're getting to the 2020 election, as we're sort of immersed in the cycle now, what do you think as the title of this lecture says, the future legislatively looks like in this respect? Well, look at it this way. I mean, in today's political environment, something that's proposed and supported by Donald Trump is usually not getting much democratic support and vice versa. But President Trump in the State of the Union stated his support for paid parental leave. You also have support from Democrats in Congress. You also now have support from some Republicans in the Senate. Now, they're not all coming at it from precisely the same way, but you gotta take your wins or you can get them. And these days, there's not that many issues on which there seems to be at least agreement on goals. And so I see that as a positive in a time in which there are not too many positives to be had. And I think the AEI Brookings Working Group is also just an example of trying to keep the center strong and saying, well, where are the things we can agree on so that stuff simply doesn't fall apart in the Washington, DC mud slinging match. So we've moved generally to a place where there's an embracement, the ideas being embraced by both sides. Tax Cut and Jobs Act included money for paid family leave, right? I think that the problem is that they're seeing that it didn't increase the amount, it didn't increase access to paid leave, did cost a lot of money. So it's a policy idea that's been tried. It doesn't seem to be satisfying the Republican base that they've really done something on paid family leave. So I think the good news is, that'll automatically sunset and I don't know, like maybe I'm just Pollyanna is here, but I'm hoping that that idea just doesn't work and it costs a lot of money. So I'm hoping that that's why we're seeing this set of social security proposals that's at least moving on to understanding tax incentives to businesses isn't gonna solve this problem. So I see that as optimism. I'm seeing real proposals that will involve like the social security administration, that's progress. And who knows whether they, I don't see how they pass anything before 2020, but I think the 2020 election, people are gonna have to have a position on how they feel about paid leave. And I think we're seeing bills coming out. People are gonna be proposing things and we're gonna see increased debate about the nitty gritty of the policy, not whether we should have one, but what kind of one we should have. And that is progress. You're getting in, you may not be very apparent, but within the Republican party, you are getting kind of a rethinking among policy folks of how do we develop policy in a way that is not just small government tax cuts, but saying how do we address the problems that people face today. And so something like paid leave is addressing a problem that people have and it's trying to find a way that we can do it that is cost effective that's paid for. But I think again, it's a positive sort of thing of people within my own party rethinking how they do this, but trying to find shared goals. Well, thank you so much. I think now at this time, we're going to transition to questions from the audience. So that further ado. All right, thank you so much. We're going to start Q and A session to begin. My name is Kim Myra and I'm a junior at the LSA School of Studying International Studies. And I'm a member of the AEI Executive Council here at Michigan. And my name is Talia Katz. I'm a senior at the Ford School. I'm also on AEI's Executive Council. I actually was introduced to AEI because of Professor Stevenson from her economics class. So I just want to say thank you for that. All right, so to start it off, our first question from the audience is, when approaching these seemingly bipartisan policies, what roadblocks do you face from Congress that impede an issue both sides largely support? I would see a lot of it on the financing end that if you go to Congress, there's many of them, most of them who sign these pledges saying, I will never under any circumstances raise taxes. And I'm not a tax raiser myself, but if you find something that is a worthy project that people want and in which they are willing to finance with a dedicated tax, to me, that makes sense. But these are often, Congress and politics work on these broad rules of I will always do this or I will never do this. And sometimes the subtlety gets lost there. Yeah, I think the financing, that's always the biggest issue with Congress is how are we going to pay for something? And what you see is largely the answer is sometimes they just get over it and then they run up the deficit and that grows. They usually don't find a way to fund it if they're gonna. So I think that will really be the big sticking point, but I also, I think the real challenge is going to be thinking about the different constituents that are being served by the policy and who's gonna be in order to figure out sort of who's gonna be supporting what kind of policy. All right, so the next question we have is you mentioned a long time coming this bipartisan support for paid family leave. When do you think that time will come for bipartisan support for social security reform? And how is paid family leave proposals contingent on social security insolvency? Well, I do a lot of work on social security reform. There was bipartisan, or there were a number of bipartisan bills in the late 1990s. Since then, things have sort of gone downhill and separated quite a bit on that issue. I work on it a lot. You always hope that the two sides will come together because it's better to solve a problem like that sooner rather than later, but Congress is a little bit like a teenager with their homework and they often don't do things until they absolutely need to do them. Social Security's Trust Fund is projected to run out in the early 2030s. I wouldn't be shocked if they leave it to them. That's a bad outcome, but Congress has not shown itself a particularly good steward of that program. Yeah, I think on, Social Security is a time, is an issue whose bipartisan time came and went when nothing really happening. And that is really unfortunate. And we're now in this really difficult position which is that most Social Security beneficiaries vote Republican. Republicans have always traditionally been the most willing to trim back the program. Now they're like, maybe not so fast, right? These are our, you know, our core constituents so they don't wanna cut it. And Democrats are like, you know, like why would we cut it? Like we're happy with this big social safety net. So then you end up with a kick the can down the road. And I think, I'm an optimist and I think that what we really need is someone to say we can't do, like pay parental leave without thinking through this whole system and really trying to force it together because I think you can't just take things from people. You have to have a set of policy reforms that are reforms, not pure set of givies, give me's, you know, not just we're gonna give you paid parental leave, not a pure set of cuts. We're gonna make you work till you're even older. You gotta have something that says, we're gonna give you a little bit of this, we're gonna take a little bit of that. And that I think is the most effective way to get it done. It's just gonna be whether Congress has the will to actually do that. Back in the late 1990s, there was a number of little mini policies on social security, which were seen as sweeteners that could be used to make the more difficult policy decisions go down a little bit easier. Congress ultimately gave those sweeteners away without doing the reform. So it's not always encouraging, but hope springs eternal. So our next question is, do you think that a policy change towards paid family leave could adversely impact small businesses? So I'm really glad you asked that question because we didn't talk about one of the most important issues, which is not about the leave. It's actually about the job guarantee. So first of all, it's important to realize that employers today already bear most of the cost of paid family leave because they are required to give people unpaid leave. So the cost to employers is when people are gone from their job for the duration of the leave. They are by law already required to do that. Now, not all small businesses are. The question is, will the take up be higher? So more of them are facing these absences. I think that's pretty small. The bigger issue is how long do employers have to hold the job open for? And how small will the business be that we require? So it's not a burden on small businesses if I go on my paid parental leave and they are free to replace me and I cannot come back to my job. But I don't know how good that leave is when I don't get job protection. And that was actually one of the things we spent a lot of time debating in the AEI Brookings Working Group is, okay, it's easy to tell a 500 or 1,000 person firm you can keep a job open for 12 weeks. It's harder to tell that to a 10 person firm. And the longer the number of weeks are, the bigger the burden is. I think most, I don't know that it's so much of an issue of small employers versus like what kind of employer it is, how easy it is to sub in. But I think that's where the burden comes not from the fact that the person's getting paid leave, not from the costs of paid leave. It comes from the fact that who's gonna do the work while you're gone and do you have enough staffing and options to be able to do that? And so how small does a business or how big does a business have to be before we put that requirement on them was a big part of our discussion and we didn't really reach a good conclusion on that. Because it really is hard to think about what paid parental leave is when it's really a severance pay. All right, so the next question is what are your opinions on a government funded or subsidized flexible spending account model where employees can use their money for childcare or put it towards retirement savings? On the parental leave front, there have been some proposals that have taken that model. And the concern I had was given the age at which most people have kids and given they're coming into that, having paid off student loans or similarly, they may not have enough time or resource to really build up that kind of account in order to cover a paid leave. It's just the timing is not right in terms of the time of their life. When I thought about the social security-based proposal, in a sense I was saying at a time in somebody's life when their income is very low, they're able to essentially borrow from their income in the future. Usually somebody's income when they're their childbearing age in real terms is half what it is when they're in their mid 50s. So it was the idea of not just getting income there but getting it in there at a time when they can use it. So I'm not really opposed to the idea. I'm just not sure it's sufficient for the job. So I hate flexible savings account plans. I cannot stand that. She is opposed to it. I'm very opposed to it and I wish we could get bipartisan agreement on being opposed to it. So let me explain why I'm opposed to it. First of all, it is a lot of administrative burden to get the money back. Second of all, the only benefit of it comes from the fact that you're paying taxes in the first place. So we've gone, it doesn't get you out of your payroll taxes, only your income taxes. So that means these accounts are only for people at the top half of the income distribution and they're disproportionately going to people in the top 5% of the income distribution. So if you're paying a hefty 35% marginal tax rate, flexible spending is an excellent option because you're gonna get to really reduce your tax burden. Guess what? Those guys already get paid parental leave through their employer. They didn't need the help in the first place. So we're gonna put together a very regressive policy that doesn't help anyone who actually doesn't have access to paid parental leave. And we're gonna do it in one of the most administratively costly, wasteful ways we can. And then put that together and I think it's just a horrible policy idea. I understand that we want people to save more. I'm happy to give them incentives to save more. But saying this is a solution to paid family leave is just completely false. It does not offer any solution to the problem. After that description, I'm now ready to predict Congress will pass. Okay, our next question from the audience is how would enactment of universal health care impact funding issues for paid family leave? Well, I mean, this is something, I mean, when I've been on Capitol Hill I've talked to Democrats who are folks who favor the Family Act, which has a big benefit package to payroll tax added to it. But to fund it, I've also said to them, well, you also favor social security expansion where you wanna have a two and a half percentage point increase in the social security payroll tax to pay for that. You also favor Medicare for all, which like it or not will be funded by some tax that would impact lowering of people. It's not all gonna come from the rich. Economics is about scarcity and policy making is about scarcity. It's saying how do we balance these different priorities? And so I think that's an important thing to think about that you can only go to the well so often on the financing side. How it would affect things from the beneficiaries point of view, I don't know, I don't think there would be too much interaction but the financing side is where the trouble comes. The problem with a Medicare for all or is that it's going to require huge amount of taxes. Now on the plus side, we won't be paying for private health insurance and just like workers bear all the burden when their employers are paying taxes on their behalf, they're also bearing all the burden when their employer is paying health insurance costs on their behalf. So people's taxes will go up but their wages should go up a lot because their employers can pay them what they were paying in wages. I mean, what they were paying in health insurance they can pay in wages. So the hope is that the massive administrative costs associated with US healthcare provides a big enough cushion that one could raise revenue to provide a universal healthcare plan in a way that didn't leave families with less income for non health related things at the end of the day. That's great in theory, but I think when people see the actual payroll tax required to adopt this kind of program, it's gonna be tough and putting that and then saying, oh yeah, we're also gonna do this other 0.4%. I mean, that's gonna be like rounding error when it comes to healthcare. I mean, the good news is they'll be like, let's go with this little one instead. So I think that the healthcare, I think the healthcare challenge is that's its own challenge. It's big. I doubt it crowds out paid family leave, but it certainly will raise big questions about how big we want the safety net to be. Okay, next question here is, fathers often do not take parental leave to which they are entitled to. So should a parental leave policy encourage fathers to take that time off and how so? In some of the Scandinavian countries, haven't they talked about requiring the father to take a parental leave? They use it or lose it policies. Yes. And actually Norway did debate whether or not, not allowing men to go to work for a month. Like, it's not just use it or lose it, you're not allowed to show up. They didn't go that far, but it is use it or lose it. The guys have, they have leave and they use it or lose it, but that's the problem. There's a lot of guys in the U.S. who have leave. Sure. Then they lose it. If you spent a couple of weeks in Newborn, returning to work doesn't seem nearly as bad as he thought it was. But that it is, there's a societal pressure and there is, I've read reports from employers themselves, particularly law firms, consulting firms, where if they offer a paternity leave, but often the men who take it are frowned upon. So I think it's, there's legal and there's societal issues there as well of employers not penalizing people, formally or informally, if the fathers take it. And that may be a tough nut to crack because it's not just passing a benefit, it's thinking about how the whole workforce interacts. So I think in the U.S. we're not considering the kinds of policies they have in many European countries. The policies in the European countries are family-based. So the family decides how they're gonna split their leave up. So you might get access to 12 months and it used to be the dad can take 12 months of it, the mom can take 12 months of it, the dad can take six months, the mom can take six months. And what you found in a country like Sweden was the mom took the whole thing, the dad took nothing. And then when they said, okay, well, no, we're not gonna do that anymore. Now it's gonna be like, it's gonna be 13 months, but only if the dad takes at least one month, otherwise it's only 12 months. And then all of a sudden there was this huge increase in dads taking it because, well, otherwise we would lose it. U.S. policy, we're talking about a policy for men that's separate for a policy for women. So by default, that's use it or lose it if the guy doesn't take it, he doesn't get it. I'm more optimistic that the cultural change is already happening. I talk to men, like young men who are students here. I talk to men in their early 30s. I look at survey data. That's just a different attitude towards parenting today. And most guys wanna be there and want to get to know their kid and wanna participate. And they're not like, oh yeah, that every once in a while I babysit my kids, right? That is not a very modern approach to fathering. And fathers are three times as likely as moms to say that they're struggling with work-life balance. I mean, I think that's cause they need to get a grip. But it's partially because they do feel a little bit more pressure in the workplace. But you're just seeing an increasing number of dads who are like, no, I can't do a meeting at six o'clock. I have to pick my kid up from daycare. And I think that that change has really started to happen. And you've mentioned a law firm. My brother's a lawyer and in his law firm, he told me when he took his first paternity leave. His senior partner was like, we had it when I had kids and I didn't take it. My brother's like, yeah, my generation takes it. And there's some things they do for each other. So like, one time I was busy, my brother and he said, oh yeah, I'm covering for this guy who covered for me when I was on paternity leave. So the guys find each other. They're sort of the same age. And it's like, can you cover for me this time when I'm gonna be out, I'll cover for you. So I think that you do need a whole cohort to change because if you're covering for each other, it doesn't feel like a burden anymore. It's not like I'm taking on your work cause you're staying home with your baby, but I'm gonna take on your work and you're gonna take on my work. Yeah, so it's no longer a free rider. And so it's no longer feels like a free rider. So you do need sort of nobody does it for everybody does it, but I'm starting to see this swap at more companies this flip from nobody doing it to everybody doing it. Okay, our next question is, could job security be a suitable backup to possible family leave without pay for extended time off? I don't totally understand a question, so I'll let you answer. So you mean just giving the job protection with unpaid leave? Yes, I believe that's what the person is trying to ask. So the FMLA already gives you some job protection. So then the question is, does this mean expanding beyond the FMLA? So FMLA has some problems in terms of it doesn't cover everybody, but they're, and so that's the small business issue. I think what, if you wanna get the benefits of keeping people attached to the labor force, it's really the paid parental leave that makes the difference. And I think it's because people feel like I am still at work. I've made a commitment to go back. I'm getting paid during this period. I have, I'm making a transition plan to go back to work. And that's why you see greater return to work after paid leave than after unpaid leave. When people are thinking, look, it's unpaid, I'm just gonna quit and I'm gonna deal with it because I don't know whether I want eight weeks or 12 weeks or 16 weeks or 20. It doesn't make a difference whether I quit or don't, yeah, I could go back to my job, but there's lots of jobs I could get. And that's why we see too many people quitting. And then it turns out that a lot of people do feel like it's exhausting being home with a kid and it would be better just to go back to work. But if you don't have a job, the idea of finding a job becomes overwhelming. And so you end up with this problem that then, you know, it's three years later and they're just thinking about trying to go back to work. So I don't, I mean, the sheriff just, no, I don't think job protection's enough. And I think job protection is actually the stickiest wicket for us to address when it comes to very small businesses. Okay, I think we have time for one more question. So Professor Stevenson mentioned that it was financially made sense for Google to provide some sort of paid family leave for that kind of employment. But for more low-skilled jobs that might be eventually replaced with automation, how do you think the paid family leave policy might affect those workers? Or do you think that there's just gonna be less of a need for a publicly funded program like that? So I think the, I think it's sort of odd to mix this in with like sort of automation, although just, you know, if you wanna say, well, you know, as workers become cost more and more, then maybe I should just, you know, deepen my capital investment to make sure my workers are more productive and use fewer workers. Some of that, I think that's a debate for a different discussion. But I think the big issue here is what is this cost employers? And for employers, we've already discussed it. If it's paid through for payroll tax, this is coming out of the workers' wages. Now, the one exception to that is minimum wage workers. So if you're making the minimum wage, they can't really lower your wage because they're paying another tax on your behalf. But I think there's a big body of literature right there that says that the current minimum wages we have right now, there aren't big negative employment effects from sort of raising compensation costs. So I'm not very concerned there. I think that the way to think about the cost of paid parental leave to businesses is it's mostly the cost associated with that job guarantee and with somebody stepping away from the workplace for however many weeks it's gonna be. Because we're not talking about forcing the employer to pay for it. We're talking about paying for it through a payroll tax, which is the incidence of which falls on workers. So then the question is, which workers are we talking about that we're most concerned about? I'm not worried about the ones who can be replaced by automation. A lot of those are big companies. They're not, their workers are easy for them to hire, having a gap where somebody steps away for 12 weeks and then comes back isn't that costly for them. I am more worried about a company that relies on 12 workers and they don't really know how to get through the period of leave without hiring somebody else but they can't really afford to hold on to 13 people. So do they have to go through a temp agency? How do they manage that? What are the training costs of getting somebody up to speed or can they really share the burden? I think a lot of businesses do work that out practically every single day because if you work with 12 people they're kind of like a family and it's kind of hard to look at somebody when you only work with 12 people and be like, I know you just had a baby but you get your butt back into work. So even though it's hard for me as an economist to figure out how they work it out, actually when you talk to small businesses those are the ones who are working it out the most because of the fact that they sort of have to based on the interpersonal relationships. So I don't think we need to worry that somehow paid family leave is gonna bring on the robot revolution. Yeah, I think in this, I do a lot of work in Puerto Rico where they have eight weeks of maternity leave paid for by the employer. And I just know, I'm just pulling government stats out of my head but for the government employees I think it's at any given times maybe one in 500 employees is out on maternity leave which doesn't mean it can't have any effect but there's probably a lot of other things that are more important in terms of the employer's choice of whether you try to automate a task or not. So I suspect it'd be kind of a marginal effect. All right, well with that I think that ends our conversation for today. Thank you both so much for spending the time on this really great discussion and thanks to all of you for joining us this afternoon. I know after this, outside in the Great Hall we'll be having a short little reception so I hope all of you join us there. And before we end, please just help me thanking Professor Stevenson and Dr. Biggs one last time. Thank you. Thank you for organizing this.