Our unemployment insurance system needs to be reformed. Although most employers pay a payroll tax on all their workers for the purpose, only 38% of the unemployed get benefits. Furthermore, the system is subject to abuse, and economists agree that the benefits encourage the jobless to stay unemployed longer.
But rather than reform the unemployment insurance system to fix these problems, the Clinton administration wants to put it in the family leave business. The president wants to let parents of newborn or newly adopted children draw unemployment insurance benefits while they're on leave.
Under the Family and Medical Leave Act (FMLA), workers in businesses with 50 or more employees can take up to 12 weeks of unpaid leave a year to care for newborn or newly adopted children, to help care for a family member with a serious health condition, or to care for their own serious health condition. They are guaranteed to get their job back when they return.
President Clinton has proposed allowing states to pay unemployment insurance benefits to parents – in effect making the leave paid if it's for the birth of a baby or adoption of a child. The president ordered the Labor Department to write regulations and propose model legislation for the states. States could authorize the payment of benefits to employees of any size business who take family leave, but there would be no guarantee that those in businesses with fewer than 50 employees would get their jobs back.
Thus far states haven't shown much interest in authorizing the payments, but that could change with money and votes at stake.
At first glance, unemployment benefits for new parents may sound like an attractive idea, but it has the potential of causing all sorts of mischief without doing much good.
Paying people for something they know is going to happen – the birth or adoption of a child – has little to do with insurance, which is supposed to protect against the risk of an unexpected or involuntary event like losing your job, or having a car wreck or fire. And why limit the benefits to new parents? What about those who are on leave to care for a sick parent or themselves?
In a 1996 report, the Commission on Family and Medical Leave estimated that about one out of every six workers had taken family or medical leave in the 18-month period beginning in January 1994. Eighty percent of them had taken leave for medical reasons, so they wouldn't qualify for unemployment insurance benefits under the Clinton proposal.
The Clinton proposal would create a new entitlement for a large number of people to take care of a small problem affecting a limited number. Referring to the commission's study, President Clinton said in a memorandum, "lost pay was the most significant barrier to parents taking advantage of unpaid leave after the birth or adoption of a child." True, as far as it goes. But only a few parents who wanted to take leave reported any barriers at all to doing so.
According to the findings, about 0.18% of the nation's entire workforce of more than 131 million – that works out to about 240,000 people – reported that they wanted to take leave for a new child but couldn't afford it. It does not diminish their importance to observe that it is not good public policy to create a new entitlement for millions to solve a problem affecting a relative few.
Unemployment insurance is a joint federal-state program financed by payroll taxes on employers, and is intended for use in case of involuntary unemployment. The Labor Department, which interprets federal statutes on unemployment insurance, has always required that states require that workers be "able and available" to work in order to draw benefits. However, to comply with Clinton's orders, the Labor Department says it has revised the 60-plus-year-old interpretation of the requirement so that it applies to parents of newborn or newly adopted children.
The American Institute for Full Employment devised a welfare reform plan, adopted by 14 states, that provides a state-subsidized job as a backstop for welfare recipients who can't find work. The institute has proposed abolishing unemployment insurance and replacing it with a similar program for the unemployed, which it says would actually help more jobless people while reducing the unemployment insurance tax rates significantly.
That approach appears to be workable. Certainly it's preferable to adding more baggage to the current system in the form of a new entitlement that is so questionable the Labor Department is having to stretch the language to justify it.
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The National Center for Policy Analysis is a public policy research institute founded in 1983 and internationally known for its studies on public policy issues. The NCPA is headquartered in Dallas, Texas, with an office in Washington, D.C.