Muriel Bowser’s administration says paid family leave plan would kill business, hurt D.C.

D.C. Mayor Muriel Bowser’s administration on Thursday questioned the solvency of a D.C. Council proposal to enact 16 weeks of paid family leave for residents, saying the measure would drive out businesses and cost overruns would hurt city services.

The council held Thursday a public hearing on legislation that would require D.C. businesses to pay up to a 1 percent tax on their employees’ salaries in order to create a citywide fund that would pay for 16 weeks of paid family and medical leave for working city residents. Currently, city workers receive 16 weeks of unpaid leave.

City Administrator Rashad Young raised questions at the hearing about whether the 1 percent tax would cover the program’s costs.

He referenced a report from the Greater Washington Board of Trade that showed the program’s costs could be more than $700 million a year. That would mean the 1 percent tax, which would garner about $500 million, would cause a $200 million deficit.

A shortfall in the program’s funding could cut into public safety, education and affordable housing programs, Mr. Young said.

“We need to increase the number of jobs in the District and the unintended consequence of this bill could be stagnant or declining job growth,” he said. “The administration supports jobs with comprehensive benefits, but we must be sure we’re supporting an economic environment for businesses.”

In addition, D.C. Chief Financial Officer Jeff DeWitt said the administration has looked at different scenarios and assumptions, and has concluded that many employees would use the paid leave and rely on its payments for an extended period of time. That means the tax might not be enough to cover the program’s costs, he said.

But council Chairman Phil Mendelson referenced a separate, federally-funded report from the Institute for Women’s Policy Research that said the program could be fully funded via the 1 percent tax and would not cause a shortfall that would affect other city services.

Mr. Mendelson said the legislation could be a boon to businesses in the District because more people would be attracted to working in the city due to better benefits than those in Maryland and Virginia.

One thing became clear at Thursday’s hearing: No one can agree on how much the measure would cost or how it would affect residents and businesses in the city. Administration officials, council members, and supporter and opponents of the bill each cited different criteria for estimating the impact of the legislation.

Heidi Hartmann, president of the Institute for Women’s Policy Research, said the vast difference between the estimates stems from opposing assumptions about how many workers would participate in the program and for how long.

None of the hearing’s panelists explicitly opposed enacting some kind of paid family leave, but some said the bill would go too far and could cripple businesses and make it tougher for residents to find employment.

The 1 percent tax that would be levied on employers in the District would end up hurting those who the bill is meant to help because businesses would pass that cost onto workers through lower wages or slower wage increases, said Georgetown University professor Harry Holzer, a former chief economist for the Labor Department.

“Most employers take this out of the wage paid to employers or cut back on hiring. Very high costs reduce employment,” Mr. Holzer said, referring to data from paid leave programs in California, Rhode Island and New Jersey.

The bill also could have the unintended consequence of reducing the attractiveness of employees who live in the city, he said. Employers could choose to shy away from hiring D.C. residents because of the requirement of 16 weeks of paid leave. They also could choose not to hire women who could become pregnant and would need to use the full leave benefit, Mr. Holzer said.

“You should generate paid leave policy with more moderate costs that would be fully funded,” the economist said. “A scaled-back bill could still provide generous paid leave benefits.”

Joseph Henchman, vice president of legal and state projects for the Tax Foundation, said the bill contains few provisions help protect against fraud and make the vetting process for employees seeking paid leave more rigorous.

Mr. Henchman likened the proposal to unemployment insurance, and said the council could learn a lot from the provisions in unemployment programs, including stricter verification requirements and anti-fraud measures.

“As much as we want to trust people to do the right thing and take only what they need, that’s not been the case with just about every government program,” he said.

But supporters of the bill made the case that low wage workers need paid leave when they get sick or have to care for a family member because they don’t have the economic benefit of being able to take off time from work without pay. And if those low income workers lose their jobs due to taking an extended leave, the cost will be passed on to city through expanded use of safety net programs like unemployment and food stamps.

Those are the kinds of cost benefits that aren’t often thought of because they aren’t easy to quantify and come as long term costs, said Heather Boushey, director of the Washington Center for Equitable Growth.

“The inability to care for family or oneself will put greater burden on other D.C. services,” Ms. Boushey said.

Vicki Shabo, vice president of National Partnership for Women & Families, agreed, saying it’s not easy to see the hidden costs of failing to give paid family leave to low income workers.

“There are costs of inaction,” Ms. Shabo said. “We have to be careful about what’s being measured and what’s not being included.”

She also contended that the program wouldn’t cost as much as some think.

“Most of the types of events that happen, happen to somebody at some point, but not all at once to all of the people,” Ms. Shabo said. “People very rarely take the whole amount [of leave time] allowed to them. It’s very unlikely a program would go belly up.”