GOP plan to reduce social security to compensate for paid parental leave would weaken retirement security – Raw Story

Two recently introduced bills allowing workers to exchange part of their future Social Security pension benefits for parental leave benefits after the birth or adoption of a child would undermine the benefits and structure of Social Security which would weaken the retirement security offered to workers. The United States needs paid leave, but it should not be funded by a reduction in social security benefits.

In the United States, most workers will at some point experience a major event in their life or an emergency requiring them to be away from work, such as a serious illness, the birth of a child, or an accident. child or the responsibilities of an elderly parent. A comprehensive, responsibly-funded national policy on paid family leave would provide workers with much-needed economic support during this period and ensure equitable access to paid leave for low-income people and people of color who often do not benefit from significant paid leave. their employers.

However, two recent proposals for paid leave – the new parents' legislation for Senators Marco Rubio and Mitt Romney and the CRADLE Act for Senators Joni Ernst and Mike Lee – do not meet this standard significantly:

• Unlike the paid holiday programs of several pioneer states (and the Federal Family and Medical Leave Act, which provides for unpaid paid leave), both invoices provide for paid leave only for parents caring for newborns or adoptees, excluding workers who have to deal with their own or serious health problems. a member of the family.
• Rather than pooling risks and resources across all staff, as do other family-leave and state-paid medical leave programs, these bills would require parents to bear the cost. parental leave by reducing Social Security pension benefits. they would receive decades later. This would weaken the almost universal protection of social security from social security by treating the guaranteed benefits of the program as a private account on which individuals could draw. The two bills essentially ask parents to choose between their current care needs and their future retirement security.

The use of Social Security in part as a piggy bank rather than an insurance policy is essential to the design of these proposals. Carrie Lukas, president of the Independent Women's Forum – who initially developed this approach – wrote that making workers think of social security as a "usable now or retired" asset is a first step towards the partial privatization of social security. social Security.

In addition, under both bills, parents opting for parental leave would be subject to permanent reductions in their social security pension benefits. exceed their parental leave. The reductions would be equivalent to parental leave plus interest, as well as an additional reduction to cover the cost of parental benefits paid to other deceased parents who become disabled before retirement and can not repay their own leave entitlements. For example, moderate-income parents will receive an average of about $ 5,300 per month of parental leave and then lose about $ 15,100 in lifetime retirement benefits for each three-month leave, after adjusting for # 39; inflation. at the Urban Institute. In total, this is equivalent to losing about 3-4% of lifetime social security pension benefits for each three-month leave, which means that parents taking three periods of parental leave (after three births or adoptions) would lose about one-tenth of their income. lifetime retirement benefits from social security.

In both bills, parental leave benefits would essentially be treated as loans that earn interest. For a typical worker who has his first child at age 26 and applies for Social Security pension benefits at age 65, interest would accrue for about 40 years. Over such a long period, the amount of interest would ultimately exceed the amount of the benefit; in fact, the Urban Institute estimates that holiday takers would eventually pay back almost four times more as they received on leave, on average. These cuts would weaken retirement security and place the greatest hardship on women and workers of color, who are already facing a less secure retirement than others.

At a time when many workers face fragile finances in retirement, policymakers should not weaken social security, which is the only source of guaranteed retirement income for most workers. Decision makers can grant paid leave without ask parents to sacrifice some of their retirement security. In fact, this is what all existing state programs do, funding benefits with modest contributions to the payroll. This is also what the vast majority of workers prefer: when asked what was the best mechanism for funding a national policy of paid family and medical leave, only 3% of voters preferred to rely on the Social Security Trust Funds.

Future proposals should not force workers to choose between the paid leave they need and the security of their hard-earned retirement, but would rather fund a national program of paid family and medical leave with modest contributions to payroll or other sources of income. A broad-based funding mechanism would recognize that paid leave programs are an asset not only for those taking leave but also for society in general.

Bills would reduce future social security benefits linked to compensated parental leave

The Rubio-Romney and Ernst-Lee bills are inspired by a proposal from the Conservative Independent Women's Forum. In both bills, eligible parents could take up to three months of paid leave when they have a new child. Their benefits during this period would be calculated using the same progressive formula as Social Security disability benefits, based on the worker's previous earnings. Benefits would replace about 44% of the earnings of a typical moderate-income parent.

To offset the cost of a worker's parental leave benefits, both bills would increase the retirement age and Social Security advance eligibility by two months for each month of parental leave by two months. Raising the retirement age would mean a greater reduction in monthly retirement benefits (compared to the law in force) or lower monthly bonuses, regardless of the age at which workers chose to start retirement. receive pension benefits.

Workers could not avoid a reduction in lifetime retirement benefits by delaying the start of these benefits. For example, if a worker with three months of parental leave had planned to claim Social Security pension benefits at age 65 but delayed her six-month claim, monthly The amount of benefits would be about the same as it would have been at the age of 65 in the absence of parental leave benefits – but she would receive six months of reduced retirement benefits in her lifetime.

Under the Rubio-Romney bill, beneficiaries would have the opportunity to take a larger reduction in benefits during the first five years of retirement, after which their benefits would return to the level of current legislation. But whether or not they chose this accelerated program, the lifetime the reduction in pension benefits would be the same, on average.

Under the Ernst-Lee Bill, many parents who wish to take federal parental leave and who also receive parental leave from other sources (such as employer or state programs) have their federal benefits reduced. Yet, they would face the even Social Security cut as if they had received all the federal benefits. As a result, social security actuaries believe that few, if any, parents facing these offsets would receive federal benefits under the Ernst-Lee bill.

Bills would weaken retirement security for parents on leave

As noted, the Rubio-Romney and Ernst-Lee bills would weaken the retirement security of parents opting for parental leave. An analysis by the Urban Institute shows how reducing social security to compensate for parental leave benefits would undermine the safety of retired workers. A middle-income worker (earning around $ 48,000 in 2018) would receive $ 5,300 in paid leave if she took three months of parental leave. His retirement benefits would then be reduced by approximately $ 15,100, after adjusting for inflation. (See Figure 1.) This reduction in pension benefits is about 3-4% of lifetime pension benefits per parental leave, which means that parents taking three leaves would lose about one-tenth of their lives. retirement benefits from Social Security.

In both bills, parental leave benefits would essentially be treated as loans that earn interest. For a typical worker who has his first child at age 26 and applies for Social Security pension benefits at age 65, interest would accrue for about 40 years. Over such a long period, the amount of interest would ultimately exceed the amount of the benefit; In fact, the Urban Institute estimates that, overall, leave takers (and not just those with modest incomes) would eventually pay back almost four times more as they received in leave benefits. Few consumers would think that taking a $ 5,000 private loan and then letting interest accrue for 40 years before paying them back for perhaps another 20 years was a wise financial decision.

The bills would require pensioners who take parental leave not only to repay their own leave with interest, but also to cover the costs of parents who can not repay their leave because they die or become disabled before reaching the retirement age. About a quarter of people on leave may not be able to repay their leave, according to the Urban Institute, which would greatly increase social security cuts for those who must cover their costs.

For participants on leave, the two bills would not only increase the retirement age of Social Security, but also its early age of eligibility, prohibiting these people from claiming social security benefits at the age of 62. Many young workers hope to continue working longer than that, it is impossible to predict whether an individual worker will be able to do it. In fact, nearly 4 out of 10 older workers are retiring earlier than expected, usually because of health problems, a job loss or the move of an elderly parent.

Apart from any proposed family and medical leave, some lawmakers – among them Senators Romney, Rubio and Lee, all sponsoring these bills – have also proposed to reduce the long-term funding gap of social security by raising the age at which current young workers are eligible. for full pension benefits, which would reduce benefits for future retirees. Senator Lee, for example, proposed raising the maximum age of retirement to 70, a three-year increase for young workers, which would be equivalent to a total reduction of almost 20% in benefits. social security for life, on average. . If his solvency proposal became law in conjunction with In his proposed paid leave, a typical parent of two children taking two paid parental leave of three months would lose more than a quarter of his social security benefits in his lifetime.

Retirement cuts would disproportionately affect women and workers of color

Nowadays, many older people have trouble getting out, especially women and colored workers. Seniors of tomorrow may face even greater challenges in terms of retirement security, as they are less likely to be offered traditional pensions than workers of previous generations and many have saved little for their retirement. If current trends persist, gender and race disparities in retirement security will continue for future retirees. These cuts to social security in the Rubio-Romney and Ernst-Lee bills would cause even greater difficulties for these groups.

Currently, few fathers take parental leave of a month or more (the minimum required to qualify for parental leave benefits in the bills), while most mothers do. The bills would do little to change this imbalance; Independent analyzes suggest that mothers are about twice as likely as fathers to take time off. This would leave mothers with a disproportionate share of cuts in social security benefits.

Women are already paying the price of their entire lives to provide the bulk of child care: not only do they give up wages when they take time off, but they also face a "maternity penalty" consisting of to reduce lifetime earnings and social security benefits. The Rubio-Romney and Ernst-Lee bills would add to this penalty by reducing retiring women's retirement benefits, which would primarily fund the new paid leave benefit. Unmarried women during their retirement (including those divorced or whose spouse is deceased) would be the most affected, as their poverty rate among seniors is much higher than that of married women and unmarried men.

If it is well designed, a paid family leave program would especially help families of color. The gap in racial wealth leaves them with fewer resources to absentee from work to care for a family member. In addition, African-American and Latin-American mothers are more likely than white mothers to be the primary or sole breadwinner in the family, in addition to their care responsibilities. And colored workers are less likely to be offered paid vacation programs in the workplace. A paid holiday policy can potentially reduce these racial disparities.

However, the Rubio-Romney and Ernst-Lee proposals offer paid holidays with a reduction in retirement that would disproportionately affect colored workers. These workers are overrepresented in low-wage jobs that offer low savings margins and are less likely to access a pension or retirement savings plan. As a result, people of color tend to rely more on social security for their retirement income. While nearly two-thirds of older white Americans have higher retirement incomes than social security, fewer former elites are: approximately 55% of black retirees, 38% of Asian retirees and 37% of Hispanic retirees .

Probable budgetary impact of bills higher than announced

The bills only provide for temporary paid leave benefits: the Rubio-Romney bill for 11 years, the Ernst-Lee bill for five years. Due to these artificial sunsets, the official cost estimates of the Social Security Administration's bill are significantly lower than those that were granted if benefits were permanently allowed, as are all other social security benefits. . The drafters of the bill have provided no political justification for terminating the benefits of paid holidays after a few years and do not seem to have mentioned sunsets in a public statement or press interview. Sunsets hide the real cost of the proposals.

The billers also claimed that the bills would not increase deficits or debt. In fact, the two bills would worsen deficits and indebtedness in the decades between the receipt of parental leave benefits and the reduction of Social Security pension benefits. The cost of benefits provided by the Rubio-Romney bill would eventually reach about $ 8 billion a year, adding $ 85 billion (including interest) to public debt at sunset, according to security actuaries social. The annual cost of Ernst-Lee would reach about $ 5 billion a year, which would ultimately add $ 24 billion to the debt held by the public at the time of termination of its benefits. The reduction in pension benefits would only begin to significantly offset parental leave benefits at least 30 years after the first parental leave benefits were paid. The Ernst-Lee bill would temporarily shift general revenues to the Social Security Trust Funds, but that would not pay the benefits and would not reduce the overall impact on the deficit and debt; he would simply move money from one part of the budget to another.

The bills would weaken social security protection

Almost all workers contribute to social security by pooling their resources and risks to provide benefits to any eligible claimant who retires, dies or becomes disabled, as well as to his or her dependents. The pooling of resources in the labor market and the various risks faced by families makes social insurance protection affordable by spreading the costs widely. Workers can die before their children grow up, face a life-changing diagnosis or live up to 100 years; it is difficult for individuals to prepare for all possibilities. But they know that social security will protect them and their families in all these situations.

The Rubio-Romney and Ernst-Lee bills would defeat this promise. Instead of all workers helping to ensure that any worker who needs a paid parental leave can get it, parents taken individually pay the cost of their parental leave benefits – and even part of it. these advantages.

In addition, social security recipients have never been obliged to repay a program benefit, even if they receive it several times in their lifetime, as many do. For example, a child may receive a benefit when her father dies, and then again when she retires. She has no debt to social security; both circumstances are insured events covered by the program. Forcing parents to borrow to cover their future retirement benefits would defeat this concept. Treating insurance payments as debt would also be unthinkable in the private insurance market.

The Rubio-Romney and Ernst-Lee bills are not the first proposals to reduce future social security benefits for workers in order to avoid rising incomes to pay a new benefit. Other, equally problematic proposals would reduce pension benefits in exchange for tuition assistance for education or training during a career or a partial student loan forgiveness. Policymakers should fund their ideas responsibly, not weaken social security, or ask workers to sacrifice some of the security of their retirement.

Better funding options exist for paid family and medical leave

As noted above, the funding mechanisms of the New Parents Act and the CRADLE Act have major structural flaws. Better alternatives exist. The United States can and must put in place a nationally responsible paid family and medical leave policy, with no substantial reduction in workers' social security benefits. Instead of requiring workers to choose between paid leave and retirement security, federal decision-makers should follow existing programs and fund a national policy on paid leave through a slight increase in mass salary or new sources of income.

Research on existing state paid vacation programs argues in favor of such a national policy, showing that access to paid leave provides a host of benefits to workers and their families. For example, mothers with access to paid parental leave are more likely to return to the labor market and less likely to experience poverty the year after the birth of a child. Paid parental leave is also closely associated with positive outcomes in child development, including lower infant mortality rates, reduced low birth weight, and improved child health outcomes in children. beginning of primary school. Paid leave can also alleviate the considerable financial and psychological strain of caring for elderly or seriously ill family members – a scenario that is likely to become more common in the coming years as the population ages.

Even those who never take paid time off work would benefit from a national policy on family leave and sick leave, in many respects. For example, studies show that paid vacation policies can increase business productivity by improving employee morale and retaining skilled workers. Women who take paid leave after the birth of a child have higher activity rates after discharge than women who do not, which helps the whole of the family. ;economy. Better health for infants and young children reduces public and private health expenditures and can improve children's long-term education and health trajectories, helping them reach their full potential and contribute more economy as a whole.

In addition, a system of paid holidays covering not only new parents but also the time off workers need to take care of their health problems or those of a family member would benefit a greater number of workers. . And all workers would benefit from the knowledge that they are covered if they need it.

The funding mechanism for a national paid family and family leave program should reflect the benefits of paid leave policies for the whole of society. A modest increase in social charges based on the contributions of all workers (irrespective of whether they take a leave) or another widely shared source of income would guarantee all workers access to paid leave for work. take care of themselves or a member of their family.