Paid birth and adoption leave is a difficult political issue to oppose. But is unemployment insurance the right way to pay for it? The issue pits family advocates against more traditional supporters of the social insurance system.

Working too much would have been inconceivable to Great

Depression laborers for whom the unemployment insurance system was created. Feeding one's family easily trumped quality time in that era of 25 percent joblessness. But "working too much" is exactly the notion driving the clinton administration's new rule allowing states to pay birth and adoption leave as unemployment compensation.

The Family and Medical Leave Act of 1993 was the first major legislative achievement of the clinton administration. Now, the president is trying to get states to enact paid parental leave. In June, the Department of Labor released a new policy to let states use unemployment compensation funds to pay up to 12 weeks unemployment benefits to employees on leave after the birth or adoption of a child.

The Birth and Adoption Unemployment Compensation "experiment," sometimes called "birth and adoption UI," would significantly change the New Deal entitlement. Advocates say the new eligibility for unemployment insurance meets the needs of today's workforce and provides needed support to parents at this critical stage of child rearing. Opponents argue that the move is an illegal use of trust fund money that must be saved to protect unemployed workers and stabilize the economy in the case of economic hard times. Birth and adoption UI now moves to the states, and the debate will go far beyond paid birth and adoption leave. Clinton's new rule opens' the door to questions about the changing nature and needs of the American workforce, government's role in parenting and challenges facing one of the nation's dearest entitlement programs.

NEW WORKFORCE, NEW CHALLENGES

The staggering increase in working women represents the most dramatic trend in the labor market over the last half century. Whereas only 34 percent of women held jobs in 1950, that number climbed to 60 percent in 1998. During the last half century, the percentage of women workers aged 25 to 34 more than doubled from 34 percent to 76 percent. Patterns for women aged 35 to 44 reflect similar changes In fact, married mothers in the 1990s twice as likely to work full-time as their co of the 1970s.

The social and economic benefits of this new work-force are numerous. The roaring economy benefits from the enhanced and diversified labor market, and economic prosperity reaches new segments of the population. Yet, two-income households and the 40-hour plus work week challenge child rearing. Parents who sacrifice time with their children leave them increasingly open to other influences. The dots seem to connect from absentee parenting to declining academic performance to decidedly more tragic headlines.

"When the unemployment trust fund was started, families had one worker in the workforce and one at home. Today, we have two in the workforce and we have nobody at home," says Massachusetts Representative Anne Paulsen.

"What we need to look at in the 21st century is how we're going to accommodate families so that we have healthy families and healthy children, and people can make enough money to raise their families."

When policymakers first tried to help parents, they looked at child care financing, focusing on making care affordable, accessible and of good quality. Now, studies increasingly show that early relationships between parents and children prove a decisive factor in child development. Infant care is also generally more costly and less available than for older children. As a result, child and family advocates have turned to promoting new ways for parents to spend more time at home, especially during the first year.

This new movement was the push behind the Family and Medical Leave Act. Several states were already granting eligible workers unpaid leave to care for a new child or a serious illness of their own or a family member. The federal law gives to workers of employers with 50 or more employees up to 26 weeks of unpaid family and medical leave. Many states have similar laws with lower thresholds for employer size. Several others in the 1990s passed pro-parent initiatives to provide unpaid leave for reasons beyond family and medical purposes, like teacher-parent conferences.

PAID PARENTAL LEAVE

Despite the federal guarantee of unpaid leave, a 1996 study by the bipartisan Commission on Leave reported that the law covers only 59.5 percent of the private workforce and 10.8 percent of private work sites. Moreover, while 16.8 percent of employees took the leave, an additional 3.4 percent did not, mostly because they couldn't afford to.

"It is more of a paper benefit than a real benefit to many workers," says Senator Jan Backus of Vermont.

In 1997, she seized on an idea mentioned in the Commission on Leave report and introduced a bill to use unemployment insurance to provide partial wage replacement benefits for family and medical leave. The idea was nixed, however, by the U.S. Department of Labor as a violation of federal law, specifically the longstanding "able and available" requirement that unemployment insurance recipients must accept suitable employment, when offered, or lose benefits.

Undeterred, Backus joined with state and national advocacy groups to push the idea. They enlisted the help of U.S. Senators Christopher Dodd of Connecticut and Edward Kennedy of Massachusetts in early 1999 and asked for a review of the federal policy. The president responded in May, directing the labor department to reinterpret the law. The proposed rule, released in December, allows states to pay up to 12 weeks of unemployment insurance for leave during the year after the birth or adoption of a child. The Department of Labor made the new policy official on June 13.

"We learn more and more about the importance for children to have nurturing, loving, unstressed parental attention and what a difference it makes literally in the way their brains get wired," says Donna R. Lenhoff of the National Partnership for Women and Families. "This is one important thing that can be done to increase children's chances of doing better."

USING UNEMPLOYMENT INSURANCE

Paid birth and adoption leave is a difficult political issue to oppose. Representative Peter Larkin of Massachusetts likens it to being against "motherhood itself." Whether unemployment insurance is the right way to pay those benefits is a different issue, one that pits children and family advocates against more traditional supporters of the social insurance system.

"Unemployment insurance is designed for people who are unemployed because employers do not have work for them," said Eric Oxfeld of UWC Strategic Services, a national business research and lobbying group specializing in unemployment and workers' compensation. "Using unemployment insurance to provide benefits to people who take leave when employers have jobs for them is turning the program on its head."

Moreover, Oxfeld says the birth and adoption UI is illegal, just as the labor department suggested to Vermont in 1997.

Proponents argue that the new rule allows states greater flexibility to address the needs of the new workforce. "It is a change that needs to be made," says Backus. "Employment law must recognize the importance of family and the importance of keeping people connected to their jobs when they have a child. It's time to modernize the unemployment insurance trust fund that has been churning along since the 1930s when life was different."

Maurice Emsellem of the National Employment Law Project says birth and adoption leave is not unlike other leave that the labor department allows under the "able and available" requirement. It's similar to worker training, illness, jury duty or temporary layoffs, he says. All of these cases are exceptions to the general rule that a worker on unemployment must accept suitable work, if it's offered, or lose benefits.

Oxfeld argues that the exceptions cited by proponents are recognized in federal statute as sound work-related reasons and if employees fail to show up for approved training or report to work when recalled from a temporary layoff, they lose benefits. "It is preposterous to think that 'available for work' can mean available three months from now," he says.

TAPPING UI TRUST FUNDS

Proponents of paid birth and adoption UI are eyeing state unemployment insurance trust funds because they are relatively healthy right now. The strong economy and record low unemployment has driven 31 state funds above the federally recommended minimum level.

Yet, the strength remains uneven. Vermont could pay the current level of benefits for six years without going broke; Minnesota's fund, over a third short of the recommended level, would not last two years. Other states seriously considering birth and adoption UI in 2000 remain somewhere in the middle. Maryland is just below, Washington just at and Massachusetts just above the federal standard, which takes into account high benefits paid out during recessions over the last 20 years.

The memory of the last recession makes some lawmakers cautious to add new unemployment insurance eligibility. "We've lived through the nightmare of the 1990s when we had to cut benefits, raise rates and borrow money when we were thought to have a very flush surplus," said Larkin.

Eight states continue to levy special surtaxes to pay debt acquired when trust funds ran dry in the early 1990s. A number of states also committed general funds to meet shortfalls.

Business interests fear that the new rule could endanger trust fund solvency, but proponents of birth and adoption benefits say these claims are hypocritical. Employers in 25 states have secured unemployment tax cuts in recent years, according to Emsellem.

But business interests argue that their opponents misunderstand the insurance nature of the system, which charges more to employers who use it more. Oxfeld compares rate reductions in unemployment insurance to lowering auto insurance premiums when people are having fewer accidents.

"Business can't have it both ways," he says. "They can't have huge tax cuts and then claim that we can't afford relatively smaller levels of expansion to cover family leave and other UI reform."

Emsellem points out that states during the recessions of the early 1980s and 1990s reduced unemployed worker benefits and tightened eligibility standards, which in most cases have yet to be restored.

However, this is exactly the argument made by some lawmakers who would rather use surpluses to address other challenges of the new economy, such as underemployed, under-skilled, temporary or contingent workers.

"What we're finding out--what I call the stratification of the haves and the havenots--is that there's a gulf between workers with skills and those without," says Larkin. He would rather use the unemployment insurance system to help those lacking work skills and pursue paid birth and adoption leave through another vehicle.

PAID LEAVE IN THE STATES

Lawmakers in 15 states introduced bills this year to grant some form of paid family leave. However, with the new unemployment insurance eligibility ruling not officially released until June, nothing was enacted.

The proposals do show considerable innovation. For example, Minnesota Senator Ellen Anderson proposed to fund a paid birth and adoption leave program with an unemployment insurance surtax offset by a corresponding cut in the unemployment insurance tax rate.

Also in Minnesota, Senator Jerry Janezich introduced a bill to establish a pilot program to partially reimburse employers providing birth and adoption leave with funds appropriated annually from the general fund.

Anderson said that employers do not necessarily have to pick up the bill, but someone must, especially in Minnesota, which has the highest percentage of working women of any state. "If you support family values, you should support this," she said. "The problem is that people want free family values, not those that cost money."

Vermont Senate President Peter Shumlin worked out a compromise that would restrict the benefits to lower-wage employees and end benefits if the solvency of the unemployment insurance trust fund was threatened. The compromise bill passed the Vermont Senate with a 15-15 tie broken by the lieutenant governor. But the state was later informed that exempting certain employees from eligibility violated federal standards. The Vermont House considered alternative funding proposals, but they failed to pass.

Massachusetts lawmakers at the last minute attached a birth and adoption UI provision to the appropriations bill. The governor vetoed the measure, recommending that the legislature instead pass tax incentives for employers to establish voluntary paid parental leave programs.

A Washington state proposal to provide five weeks of birth and adoption UI died in Ways and Means after receiving a favorable report from the Senate labor committee. The concern was that the bill sponsored by Senator Lisa Brown would have a significant fiscal impact on state government because of Washington's status as a reimbursable employer that doesn't pay unemployment insurance taxes, but reimburses the trust fund as benefits are charged.

A number of states also are looking at temporary disability insurance programs like those in five states and Puerto Rico that pay short-term disability and illness benefits, including maternity leave and are funded through employee contributions.

Larkin, who chairs the House Committee on Commerce and Labor in Massachusetts, prefers an employee-funded temporary disability insurance approach. "It really comes down to who pays," he says. "I have a belief that you have respect for that for which you share the cost."

California, New Jersey and New York lawmakers are looking at expanding their temporary disability insurance programs to cover benefits beyond maternity leave.

LOOKING FORWARD

What may happen with birth and adoption UI hinges on who wins in November. Texas Governor George W. Bush opposes the new eligibility, and Vice President Al Gore supports it. Without a clear legal mandate in statute, the new federal rule also faces a court challenge from the U.S. Chamber of Commerce and other business interests.

Still, the issue of paid family leave has been moved to the front line of state legislative politics. It will not go away.

Lawmakers will continue to examine the merits of using unemployment compensation, temporary disability insurance and other vehicles. They will have to measure the virtues of employer vs. employee contributions, benefits, eligibility and different types of leave--whether maternity, paternity, parental, family or medical.

"When you ask people about it," says Backus, "they just say, 'yes, yes.' It reflects the fact that the workforce has really changed and that the world of work has really changed."

Even more traditional labor committee chairs like Larkin and Delegate Mike Gordon of Maryland recognize the potential of paid parental leave, even if they remain reluctant to use unemployment insurance.

"This is an issue of this century," says Gordon, who chairs the House Economic Matters Committee. "It's going to pass in some form eventually." As for the specifics, he defers to the legislative process.

Cheye Calvo is NCSL's expert on employment and insuronce issues.

KEEPING PARENTS CONNECTED TO THE WORKFORCE

With the new rule allowing states to pay for birth and adoption leave as unemployment compensation, the U.S. Labor Department hopes to promote a stronger connection to the workforce among parents by allowing them to provide initial care for a new baby, form a strong parental bond with their child and establish a secure system of child care.

According to the Labor Department, research in the United States and around the world demonstrates the value of family leave policies to employers, as well as their workers. Studies cited by the department show that access to maternity benefits is strongly associated with the probability that a new mother will return to work within six months of giving birth.

Women with access to paid leave tend to work later into pregnancy and return to work sooner after their baby is at least two months old. Research shows that the effect of paid leave on a mother's continuity with her employer is stronger for women with less education.

Jennifer Jones, NCSL

UNEMPLOYMENT INSURANCE: A SHORT HISTORY

Since its inception during the Great Depression, the unemployment compensation system provides partial wage replacement for workers who lose their jobs when there is no longer work for them.

The unique partnership between states and the federal government was initiated in 1935 the Federal Unemployment Tax Act. it was designed to accumulate and hold significant funds during good economic times, pay out benefits when business cut back in hard times and simultaneously stimulate a stagnant economy

The law encourage states to establish unemployment insurance programs and provides broad guidelines. States levy taxes on employers and ship the money to the federal treasury, which theoretically holds the funds in "trust" until it's needed to pay benefits. Employers pay different rates based on how much their employees have collected from the system. Employers are also required to pay a 6.2 percent federal unemployment tax on all wages, but receive a 5.4 percent rebate if their state has an approved program. (The difference of .8 percent pays for federal administration of the trust fund.)

State laws must meet minimum requirements for federal program certification, but this can be adjusted to allow for differences in eligibility requirements benefit duration and amounts. The key federal guideline is the "able and available" rule. Inferred from the original legislation, this rule requires individuals receiving unemployment benefits to look for work. Recipients must accept suitable work, when offered, or lose benefits.

Under certain mitiagating circumstances such as worker training, sickness jury duty and temporary layoffs, the U.S. Department of Labor allows states to decide whether to allow or deny benefits to individuals unable or unavailable for working these limited times.

PAID PARENTAL LEAVE COMMON IN OTHER COUNTRIES

The United States lags behind the rest of the world as one of the few countries that has yet to find a way to provide some form of paid leave, according to a recent study in the Journal of the American Medical Women's Association.

The survey of 158 countries (both industrialized and. nonindustrialized) found that 92 percent provide some paid leave for mothers. Most European nations, including Britain, France and Spain have some form of paid leave for new parents. Countries with no maternity or parental leave policies include Saudi Arabia, Ghana, Jordan and Kuwait.

Only the United States, Australia, New Zealand and Ethiopia require employers to provide maternity or parental leave without requiring that it be paid. Funding for paid leave varies among countries. Many countries pay for new parent leave through a combination of employee, employer and government contributions. In Canada, new parent leave is an unemployment benefit, as would be allowed by the Clinton administration's new rule. Whereas few countries provide paid paternity leave, the new rule encourages states to provide unemployment benefits to fathers as well as mothers.

Jennifer Jones, NCSL