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6 New Family-Related Benefits The changing composition of the work force increased numbers of em- ployees combining family and work responsibilities has made employers, unions, and elected officials more aware of the severe problems workers often face in fulfilling both job and home obligations. The majority of employers have taken little formal action to reduce this tension by means such as altered work schedules, special leave arrangements, or new types of benefits to purchase services previously provided by family members. How- ever, a small number of firms have pioneered innovative programs and are experimenting with changes in established programs. In addition, federal and state laws enacted over the last decade have created new rights, entitle- ments, and tax incentives affecting employee benefits. This chapter de- scribes these developments and reviews research assessing the availability, demand for, and impact of such programs. EMPLOYER-SPONSORED PROGRAMS Some very innovative work policies and programs designed to ease work-family tensions are the result of employers' increased attention to the problems their employees face in meeting home and job responsibilities. They are quite varied, ranging from flexible work schedules to new flexible benefits that can be tailored to individual family preferences. Table 6-1 shows the types of benefits offered today. Although the adoption of radically new policies and programs is largely limited to a relatively small number of firms, mainly in industries with severe recruitment problems (e.g., hospitals), em- ployer interest in these policies and programs is widespread. Management literature over the last decade has reflected increasing con 114

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NEW FAMILY-RELATED BENEFITS 115 TABLE 6-1 Life-Cycle Stages and the Range of Employer-Sponsored Policies and Programs Available Life-Cycle Financial Programs and Counseling and Stage Assistance Services Information Time New worker Health and dental Fitness center Wellness and Holidays insurance Employee health Vacations Disability insurance assistancepro- promotion Sick time Life insurance grams (EAPs) programs Disability leaves Pension and/or other Health risk EAPs Leaves of absence retirement programs appraisals (deathin family, Other benefits other) Marriage Spouse benefits Spouse reloca- EAPs Marriage leaves Flexible benefits lion Spouse becomes Job search assis joint annuitant in lance for pension plan spouse Pregnancy Adoption benefits Prenatal Parental leaves and adoption Medical coverage for courses of absence prenatal and post- Information Maternity disability natal care from benefits leaves Coverage for delivery manager at hospital or Use of accumu birthing center lated sick Change in beneficiary leaves Coverage for Alternative work employee benefits schedules and job arrange ments Childrearing Medical and dental On-site child care Referrals Parental leaves coverage for Family day care Seminars Flexible work dependents School-age care Support groups hours Well-baby care Sick care Handbooks Use of accumu Dependent care as- Breastfeeding EAPs lated sick sistance plans on site leaves (DCAPs) Earned time-off Vouchers' discounts policies Life insurance for Sick leave for dependents family illness Divorce Garnisheeing wages Stepchildren fees coverage in medical EAPs and dental plans Divorced spouse and dependents can con- tinue medical coverage for up to 36 months (COBRA) Prepaid legal EAPs Personal leaves of absence table continues

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116 TABLE 6-1 Continued Life-Cycle Financial Programs and Counseling and Stage Assistance Services Information Time WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE Elder care DCAPs Long-term care for dependents Respite care Adult day care Prepaid legal fees EAPs Referrals Seminars Support groups Handbooks Family leaves Flexible work hours and job arrangements Use of accumu- lated sick leave Earned time-off policies Retirement PensionsPreretirement Part time employ Retiree health andcounseling ment for retirees dental care; lifeNewsletters insurancefor retirees Long-term careTelephone 401(k) plans and otherhotlines before-tax savings plans Death Spouse and eligible EAPsGrief counsel- Funeral leaves dependents can ing through Personalleavesof continue medical EAPs absence coverage for up to 36 months Beneficiaries receive life insurance and other benefits Spouse receives at least 50~c of remaining benefits SOURCE: Friedman and Gray (1989:2-3). Reprinted by permission. corn about work and family issues. A review of the Periodicals Index found a gradual decline between 1959 and 1980 in the number of pages devoted to adversarial techniques and organizational loyalty and an in- creased number dealing with employee motivation and family life (Kanter, 1983~. Another indicator of the new concerns is the frequent addition to employer and employee surveys of questions about new benefits (U.S. Cham- ber of Commerce, 1987; Bureau of Labor Statistics, 1988b, 1989a). These surveys and the studies based on them provide the basis on which we have assessed the availability of new types of programs and the characteristics of the businesses that provide them. The programs discussed include: paid

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NEW FAMILY-RELATED BENEFITS TABLE 6-2 Family-Related Leaves Type of Leave 117 Definition Maternity Leave exclusively for women related to pregnancy, childbirth, or adoption but not tied to the actual length of pregnancy related work disability. Paternity Leave during or after childbirth or adoption for the father. Pregnancy disability Medical leave for pregnancy- and childbirth-related disabilties. Disability related to normal childbirth is typically 6 to 8 weeks. Parental or infant care Leave after childbirth or adoption for mothers and fathers for the purpose of infant care, independent of mother's disability. Family Leave for employee care of ill children, ill spouses, ill parents, or other ill or disabled family members. NOTE: Any of these leaves may either be unpaid or provide partial or total wage replace ment and may provide for continuation of some or all benefits (typically health insurance) and a right to return to the same or a comparable job. The wage replacement may be supplied by the employer or by some other source, such as employer insurance or a state fund. and unpaid leave, alternative work schedules and locations, family support services, and flexible benefit packages. Paid and Unpaid Leave As discussed in Chapter 5, paid time off is an important employee ben- efit, accounting for a major share of total compensation. It includes vaca- tions; holidays; leaves for military duty, jury duty, funerals, disability, and sickness; and, to a limited extent, personal leave. Recently, much attention has focused on a variety of family-related leave policies, defined in Table 6-2. Such leaves, paid and unpaid, are mainly intended to address the need for time off for pregnancy and childbirth as well as care for infants and sick family members (Saltford and Heck, 1989; Trzcinski, 1989; Zigler and Frank, 1988; Ross, 1990; U.S. Chamber of Commerce, 1989~. We describe below the need or demand for dependent care leave and current policies and/or programs to meet that need. This section explains the reasons for the attention this subject is receiving and considers possible new approaches to meet the perceived needs of families. Scope of the Problem On average, slightly more than 2 million employed women (2 percent of the civilian labor force) give birth to or adopt a child each year (Spalter- Roth et al., 1989~. And 51 percent (1.9 million) of all women with infants (up to age 1) were in the labor force in June 1988 (Bureau of the Census,

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118 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE 1989a). Women working full time in medium- and large-sized private firms and in government are usually able to piece together 2 to 4 months of paid leave for pregnancy and childbirth (with access to some benefits) by using combinations of vacation time and sick, disability, maternity, and personal leaves. As we saw in Chapter 5, however, approximately 60 percent of full- time employees are not covered by short-term disability insurance in me- dium- and large-sized firms, and in small firms 54 percent do not have sick leave. In 1989, about 40 percent of women in larger firms had access specifi- cally to maternity leave (others, as noted above, use combinations of vaca- tion and sick leave). Only 3 percent of mothers, however, are entitled to paid maternity leave the remaining 37 percent use unpaid leave (Table 6- 3~. An analysis of 1981-1985 data from the Survey of Income and Program Participation found that almost 47 percent of employed women who had first births reported having some type of paid sick leave or unpaid maternity leave that included a job guarantee, compared with 16 percent in 1961-1965 (O'Connell, 1990~. Despite this increase, of the 54 percent without formal leave, 28 percent quit their jobs, 20 percent had informal unpaid leave but no job guarantee, 2 percent never stopped working, and 4 percent said they lost their job. From these diverse sources, combined with data on women's concentration in part-time jobs, in small firms, and in industries less likely to have benefits (also discussed in Chapters 2 and 5), we estimate that the majority of women (approximately 60 percent) do not have paid leave for pregnancy and childbirth. Many women may not have access to unpaid leave or a job guarantee, but we cannot estimate the proportion on the basis of the available data. This problem is being addressed in some states by legislation. There are no national legal requirements for employers to offer any kind of leave to any of their employees, not even sick leave; some employ- ers offer none and others offer very minimal leave. However, voluntarily provided benefits are regulated by state and federal laws. According to the current interpretation of the federal Pregnancy Discrimination Act (PDA) of 1978, passed as an amendment to Title VII of the Civil Rights Act of 1964, if employers with 15 or more employees have a sick leave or disabil- ity program, then physical problems related to pregnancy and childbirth must be covered like any other sickness or disability. In addition, some city and county jurisdictions have fair employment laws similar to the PDA governing family leave provisions. In some states, fair employment prac- tice laws extend PDA-type requirements to employers of five or more em- ployees (e.g., California). In Puerto Rico and the five states that have short-term disability laws, all employers are covered (Spalter-Roth et al., 1989), although all do not require the employer to guarantee the em- ployee's job. About one-quarter of U.S. workers live in these jurisdictions.

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NEW FAMILY-RELATED BENEFITS 119 TABLE 6-3 Family-Related Benefit Programs for Selected Full-Time Employees (percent eligible), 1989 Private Medium- and Large-Sized Firms All Professional/ Technical/ Production/ Program Employees Administrative Clerical Service Leave Vacation 97 98 99 95 Personal leave 22 28 30 14 Sick leave 68 93 87 44 Maternity leavea Paid 3 4 2 3 Unpaid 37 39 37 35 Paternity leavea Paid 1 2 1 1 Unpaid 18 20 17 17 Sickness and accident insurance 43 29 29 58 Family benefits Employer assistance for child care 5 6 6 3 Adoption financial assistance 5 8 6 3 Elder care 4 2 Long-term care insurance 3 3 3 2 Health promotion programs In-house infirmary 36 40 35 34 Wellness programs 23 30 25 19 Employee assistance programs 49 57 50 44 Flexible benefit plansb 9 14 15 3 Reimbursement accountsC 23 36 31 11 aPaid or unpaid leave provided to new mothers or fathers for the specific purpose of caring for their child during the early days of infancy. This plan is separate from any sick leave, annual leave, vacation, personal leave, or short-term disability plan that the employee may take. bFlexible benefit plans, also known as flexible compensation and cafeteria plans, allow employees to choose between two or more benefits or benefit options, including cash, in determining their individual benefit packages. CReimbursement (flexible spending) accounts, which are used to finance benefits or ex- penses unpaid by insurance or benefit plans, may be part of a flexible benefits program or stand alone (free-standing accounts). These accounts may be financed by the employer, em- ployee, or both. The employee contribution is made through a salary reduction arrangement. SOURCE: Bureau of Labor Statistics (199Oa:Tables 1 and 2).

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120 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE Additional leave to care for an infant, sick child, or other ill family members was rarely available in the past, although some employers have made informal arrangements to grant such leave on a case-by-case basis. Recently, 15 states have passed some form of parental or family leave laws for men and women; these laws generally exempt small employers, however (see Table 6-4~. The probable impact of a mandatory leave entitlement has been a matter of considerable controversy. The General Accounting Office (1989) esti TABLE 6-4 Family Leave Legislation Since 1987 Weeks per 1 2-Month Employers State Period Purpose and Eligibility Covered Other Provisions CT 24 max. Birth, adoption, Public-sector Health coverage medical disability, employees continuous ill child/spouse/parent 16a (as above) Private sector, (as above) 75+ employees ME 8a max. Birth, adoption, Private sector, Health coverage seriously ill 25+; city, town, continuous but at employee/child/ municipal agency, employee's spouse/parent 25+; all other expense public sectors MD 12 max. Birth, adoption, State employees Health coverage foster child, ill child/ of executive suspended unless spouse/parent/dependent branch employee pays MN 6 Birth, adoption 21+ Health coverage (mothers and fathers employees continuous can use concurrently) ND avg. Birth, adoption, or State employees Health insurance b foster child, child/parent/ continuous at spouse with serious employee's health condition expense NJ 12a Birth, adoption, 100+ for first year, Health insurance seriously ill child/ 75+ for second continuous spouse/parent and third years, 50+ for fourth year OK c Birth, adoption, terminally or critically ill child/dependent adult OR 12 State employees Birth, adoption 25+ employees Health coverage continuous

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NEW FAMILY-RELATED BENEFITS TABLE 6-4 Continued 121 Weeks per 1 2-Month Employers State Period Purpose and Eligibility Covered Other Provisions PA 18,a26max. Birth, adoption, 10+ employees Health insurance serious health condition continuous of any family member RI 13 Birth, adoption, Private sector, 50+ Health coverage ill child employees; public continuous sector, 30+ employees TN 16 Birth, adoption 100+ employees Continuous benefits (women only) not required VT 12 max. Maternity (birth only), Private sector, Health coverage ill employee 10+ employees continuous WA 12a Birth, adoption, Private sector, Continuous benefits terminal illness 100+; local not required of child government 100+ employees WV 12 max. Birth, adoption, ill child/ spouse/parent State employees and county school board employees Health insurance continuous WI 6 max. Birth, adoption 50+ employees Health coverage continuous 2d Ill child/spouse/parent 50+ employees (as above) aIn a 24-month period. Length of leave based on hours worked; 16 weeks on average for full-time employees. CAnnual leave, enforced leave, leave without pay, sick leave due to pregnancy. dAny 2-week period during the year. SOURCE: Adapted from Institute for American Values (1989, 1990). mates that in one year 6O,000 employees in firms of 50 or more employees may need time off to care for a seriously ill child, 165,000 for a seriously ill parent, and 676,000 for a seriously ill spouse; few at present have such leave. An estimated 610,000 employees may have a serious illness, and 60 percent do not have short-term disability protection. The numbers would be significantly larger if smaller firms were included. Even in states in which family leave entitlements are established by law, there are problems in their use. The Equal Employment Opportunity Commission (EEOC), the agency responsible for enforcing the Pregnancy Discrimination Act, reports that during the last 3 years they received a yearly average of 3,400 charges of employer discrimination related to

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22 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE maternity. Of the average 2,500 maternity cases closed each year during this period, 25 percent were settled without a finding of discrimination but usually resulted in some relief granted to the employee. In about 3 percent of cases, the EEOC found reasonable cause to believe the employer dis- criminated. Although this represents only a little over a quarter of the cases, it demonstrates significant compliance problems. Also, formal complaints are likely to represent only a fraction of the instances in which discrimination may have occurred, since many employees may not have adequate knowledge of the law, may fear reprisal, or may not want to make the effort to bring a complaint. The EEOC also takes maternity cases to litigation: for example, one Title VII suit alleged discriminatory layoffs and discharges for female employees due to pregnancy. In another, a court action was filed against an employer for not reinstating female employees wanting to return to work after pregnancy (Equal Employment Opportun ity Commission, 1985~. There is other evidence of compliance problems. O'Connell (1990), using SIPP data that included over 5,000 women and covered the years between 1981 and 1985, found that over4 percent of the women reported that they were let go from their jobs because of pregnancy. According to another survey, this one of 200 small establishments in two Northeast communi- ties, one-fifth of firms with fewer than five employees did not provide statutory benefits such as Social Security and unemployment insurance (Kamerman and Kahn, 1987~. Trzcinski (1989) found that among 600 Connecticut firms a substantial number offered no maternity or parental leave, despite a state maternity leave statute; no follow-up questions were pursued, however, to clarify what appeared to be violations of the law. Such lack of compliance warrants further study. The availability of family leave affects men as well as women. An esti- mated 3.2 million employed men have wives who give birth or adopt a child each year. Approximately 19 percent of men in medium- and large- sized firms have access to paternity or parental leave, but only 1 percent have paid leave specifically for these purposes (see Table 6-3~. Leaves for fathers are more common for state employees (Makuen, 1988; Pleck, 1988, 1989~. Among New York state employees, for example, all parents are entitled to unpaid infant care leave for up to 7 months, and they may re- ceive up to 2 years at the discretion of the supervisor (Makuen, 1988; Cook, 1989~. The use of leave by fathers even when it is available also appears to be rare. One study found that, among 119 firms that offered unpaid leaves, only nine claimed that any fathers used them (Catalyst, 1986~. The reason that men do not use such leaves more frequently appears to be related to the often negative attitude of supervisors (reviewed in Chapter 3~. A small number of fathers who feel strongly about using their leave entitle

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NEW FAMILY-RELATED BENEFITS 123 meets have filed administrative complaints of discrimination when denied leave (fleck, 1989~. Data on women's use of leave for pregnancy and childbirth are scant. Use is likely to be determined by availability but also by job demands, attitudes of other employees and managers, and whether the leave is paid or unpaid. According to analysis of SIPP data, 47 percent of pregnant workers reported using leave, with either pay or a job guarantee, for a first pregnancy (O'Connell, 19901. Workers using leave were relatively older, college-educated, full-time employees who worked until their last trimester of pregnancy. Women are less likely to be entitled to maternity benefits for second or subsequent pregnancies because, at that stage of their work life, mothers are more likely to be working in part-time and temporary positions than are women without children, and such positions are less likely to pro- vide maternity benefits. Available evidence suggests that having leave- either paid or with a return job guarantee increases the likelihood of an early return to work following childbirth (O'Connell, 1990~. Low-income women, however, find it very difficult to utilize unpaid leave especially if critical benefits such as health insurance are discontinued. Without the guarantee of a position at the end of maternity leave, women are faced with the choice of returning to work earlier than they would like to or than is advisable or dropping out of the labor force. Dropping out of the labor force is the preferred choice for some women and their families. However, the economic costs of a break in employment are high. Using projections from the Panel Study of Income Dynamics ~ 1979- 1984), Spalter-Roth and Hartmann (1990) estimate that childbirth and adoptions cost women $31 billion in foregone wages annually. In addition, women terminating employment generally forfeit health insurance and reduce their opportunity to earn pension benefits (Spalter-Roth and Hartmann, 1990; Trzcinski, 1988b); the latter exposes them to greater risk of poverty and the need for public assistance in old age. Both lower wages and job loss result in larger numbers of women in need of public assistance and, consequently, in higher costs for income assistance programs. Spalter-Roth and Hartmann (1990) estimate public assistance costs of $108 million annu- ally for employed women who quit work due to lack of maternity leave. Impact on Employers Little research has been done in this country to learn how employers manage when they offer maternity or parental leaves. Available evidence suggests that clerical workers are most often replaced by temporary hires, while the tasks of production workers are generally covered by others working overtime. In the case of managers in larger firms, colleagues tend to take on extra work (General Accounting Office, 1987a; Trzcinski, 1989~.

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24 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE Small firms often claim to experience difficulties, for example, not hav- ing enough people to share the work of someone who is absent. In a study of 30 small firms in three states, Butler and Wasserman (1988) found that they had financial and operational problems, as well as difficulties with client relationships. The severity of the problems faced by small employers relates to the length of leave used by an employee. Costs for various types of leave may include wage replacement, contin- ued benefits for workers taking leave, wages and overtime pay for replace- ment workers, and perhaps reduced productivity. Very few data are avail- able on the costs of current voluntary leave programs beyond those noted in Chapter 5, although there is some information from states that require paid short-term disability leaves (Berman, 1987~. Wage replacements in these states are covered from an insurance fund. In two of the states, em- ployers are not required to contribute to the fund, and in all states there is at least a small employee contribution. In 1985, pregnancy-related disability claims ranged from 11 to 19 per- cent of total claims, and the average length of leave was about 10 weeks (Berman, 1987~. In New York and New Jersey, average total disability benefits paid were lower for women than for men. In New Jersey, women took 3 more days of leave than men, but benefits went primarily to women in lower-wage jobs. Only 3 percent of women taking leave earned $25,000 or more a year. Governor Kean concluded that the New Jersey program is not a major hardship on employers and "fosters economic survival for low and middle income women who wish to have children" (Keen, 1988~. The data and the studies are far too fragmentary to reach firm conclu- sions about the impact that mandatory unpaid leave would have on employ- ers and on labor markets. Many large employers already provide paid and unpaid leave. Assuming that the length of job-protected leave required does not exceed current norms (6 months or less), there is unlikely to be an adverse impact on larger firms. In smaller firms, or even mid-sized firms primarily employing women, the effects are less easy to predict. Limited research on existing programs that include small firms suggests that such policies are feasible; however, the impact has not been fully explored. Alternative Schedules and Locations Time and space that is, when, how much, and where people work- provides a basic framework for employment and family life. Most employ- ees in industrial economies have traditionally been expected to work for a particular period, usually 9 am to 5 pm, Monday through Friday. As of 1985, however, only 46 percent of women and 42 percent of men in nonagricultural occupations were found to work a 35- to 40-hour, 5-day week. Some 31 percent of women and 14 percent of men worked fewer

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44 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE have not expanded significantly since the 1970s. In an analysis based on U.S. Income and Product Accounts data, Woodbury (1989) found that vol- untary benefits grew rapidly between 1968 and 1975 at an annual rate of 5.9 percent. However, the rate of growth fell to 3.1 percent in the late 1970s and actually declined at an annual rate of 1.2 percent between 1980 and 1985. Some firms have devised innovative types of benefits and expanded the total nonwage package they offer to employees. This does not reflect the general national picture, and in the near term it appears unlikely that these new types of benefits will be widely adopted. Two major initiatives deserve attention. In 1988 IBM announced an extension of its unpaid personal leave of absence to 3 years (IBM, 1988a, 1988b). This leave may be taken for any number of personal reasons but was designed to be particularly helpful in meeting family needs. In addi- tion, the IBM sickness and accident program provides 6 to 8 weeks of paid leave for childbirth. In 1989, AT&T, the Communication Workers of America, and the International Brotherhood of Electrical Workers an- nounced a ground-breaking collective bargaining agreement that extends the newborn child leave for mother or father from 6 months to a year and creates a similar leave program for employees who need time off to care for seriously ill family members. The leave is unpaid, but premiums for health care benefits are paid by the employer for the first 6 months and by the employee for the rest of the time; the company also pays the premium on basic group life insurance for the entire leave (Bureau of National Affairs, 1989~. Recruitment is the primary reason given by employers for offering both standard and new types of benefits. Benefits are particularly important in tight labor markets and in industries competing for highly skilled employ- ees. In one study of 204 employers, more of them ranked attracting talented employees first or second among five reasons for providing child care than any other (Magic, 19831. Retaining valued employees is also a consider . . a. . . atlon In benetlt decisions. Costs and administrative complications are the most frequently cited reasons for not offering benefits (Magic, 1983; Burud et al., 1984; Axel, 1985; Auerbach, 1988; Kamerman and Kahn, 1987~. In a survey of over 2,000 employers, for example, complexities of administration (37 percent) and higher costs (22 percent) were the most often identified reasons for not adopting flexible benefit plans (Wyatt Company, 1988~. Equity con- cerns were also mentioned when benefits are limited to one group. This suggests that a general leave policy might be more acceptable than parental leave, for example. Business organizations (e.g., the U.S. Chamber of Commerce, 1987) and government agencies (e.g., the General Accounting Office, 1987a, 1989) have attempted to estimate the costs of selected new programs, but efforts

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NEW FAMILY-RELATED BENEFITS 145 to estimate the benefits have been left almost entirely to private research- ers. So far, the results of both efforts have been quite limited. Child care and flextime have received the most attention. A small num- ber of studies that investigated the effects of employer-provided child care (e.g., Milkovich and Gomez, 1976; Youngblood and Chambers-Cook, 1984; Ransom and Burud, 1986J found that absenteeism and turnover were lower among parents who used centers than those who did not. Ransom and Burud (1986) also reported a significant effect on job performance, but Krug et al. (1972) and Miller (1984) observed no significant differences between the two groups based on management ratings of workers. Fried- man (1989b) reviewed 17 studies of employer-supported child care and concluded that it is almost impossible to prove any direct effect of employer-provided child care on productivity but found some positive effects on related factors. For flextime, a preponderance of the evidence points toward improved job performance, but some studies find no effects. In a survey of the early literature, Nollen (1979) reports that improvement in various productivity- related behaviors ranged from 0 to 45 percent. In later studies, Harrick et al. (1986) found that workers on flextime used less leave and reported increased satisfaction with their schedules. However, the only study that controlled for workers' demographic characteristics found no effect of true flextime on absenteeism (McGuire and Liro, 1987~. It is interesting to note, however, that reports by managers in German and Swedish firms, where they have had years of experience with family-oriented benefits, tend to be more consistently positive than the research results mentioned above (Galinsky, 1989a). NEW GOVERNMENT PROGRAMS Government policies are important not only for what they accomplish directly, but also for their symbolic effect, which influences the general climate in the country. Efforts of federal and state governments to establish and promote programs to help families in general, and families in which all the adults are in the labor force in particular, are therefore noteworthy. Since the 1940s, federal and most state tax policies have subsidized fami- lies, especially traditional families. This has been accomplished by pro- viding some tax relief to employed persons for each dependent, including full-time homemakers, through personal income tax exemptions and by permitting income splitting. Aid to Families with Dependent Children (AFDC), the main form of public support for the poor, in earlier years enabled poor women with very young children to stay home. More re- cently, new tax policies such as the earned income tax credit encourage poor heads of households to work.

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146 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE Tax Credits and Incentives Federal tax policy recognizes dependent care as a necessary expense of employment and permits a proportion of the costs of purchased care to be deducted from personal income taxes under the Dependent Care Credit (DCC): 30 percent of actual expenses up to $2,400 for one child and $4,800 for two or more children up to maximum credits of $720 and $1,440, re- spectively. The remaining costs are borne by workers. Use of the DCC increased dramatically along with mothers' employment: from 2.7 million people in 1976 to 8.4 million in 1985. Although no estimates are available of the tax losses of states, losses of the federal government were estimated at $4 billion per year (Besharov and Tramontozzi, 1988~. However, to the extent that additional people are in the labor force because of these credits, tax collections will also be larger. There has been a general policy thrust in the 1980s toward putting more money into the hands of individuals so that they can make their own deci- sions on how to spend it. Therefore, tax deduction and credit policies are more prevalent, and fewer tax dollars are put into the direct purchase of services. For example, the amount of federal dollars for child care in- creased from $1 billion in fiscal 1972 to almost $7 billion in 1987, virtually all of it in tax credits (Besharov and Tramontozzi, 1988; Robins, 1988~. Neither the federal tax exemption nor the credit are refundable; thus, they benefit moderate and higher-income workers, but provide no support to the working poor, who do not have an income tax liability (Marr, 1988; Robins, 19881. Only 3 percent of the dependent care tax credit goes to families in the bottom 30 percent of the income distribution. If the credit were refundable to those who work but do not earn enough to pay income taxes, the share going to the bottom 30 percent would increase to 17 percent (Barnes and Giannarelli, 1988~. Employer-Based Tax Incentives Several initiatives have also been undertaken to encourage more em- ployer involvement in the provision of services, particularly those related to child care. One was an educational campaign. Between 1983 and 1985 the White House sponsored 33 breakfasts for corporate chief executive officers to educate them about child care (Freidman and Gray, 1989~. Another was tax incentives for employers. By establishing Dependent Care Assistance Plans (discussed above), employers can shield up to $5,000 of employees' income from taxation. Conservative estimates put the loss of tax dollars for DCAPs at $40 million in fiscal 1987 and $65 million in 1988; a rise to $150 million for 1989 was estimated because of the expanding use of tax credits (Besharov and Tramontozzi, 19881.

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NEW FAMILY-RELATED BENEFITS 147 Employers can also take tax deductions for child care expenses, such as on-site child care centers, voucher programs, and resource and referral pro- grams. They can make contributions to qualified tax-exempt child care centers, information and referral agencies, and similar organizations and deduct them as charitable contributions. Finally, under Internal Revenue Code Section 502(C)~9), there are tax benefits for money given to child care centers in which employees' children are served and employees have financial responsibility for the program. Munnell (1989) estimated the pre- sent revenue loss from income and payroll taxes because of employer- provided child care at $0.3 billion in 1989; she expects it to rise to $1.4 billion in 1993. A number of states also offer tax incentives for employers, but the amount is relatively small. Although helpful, such credits do not appear to play a major role in employers' decisions to provide services. Proposed Legislative Initiatives At this writing there are several modest legislative proposals to further increase tax incentives for employers to provide child care support. One calls for annual grants of $25 million (for 3 years) to assist businesses in providing child care services for employees and, when possible, the com- munity. Businesses receiving the grants would have to spend three times the amount of the grant for services; priority would be given to businesses with fewer than 100 employees (Stephen and Stewart, 1989~. There are also proposals for federal programs with universal coverage, such as child allowances, publicly available child care (similar to the pub- lic school system), and national health care, and several states are consider- ing paying family members who stay home and care for the elderly (see Linsk et al., 1988~. Fuchs (1988), for example, favors universal programs such as the child allowance programs used in Europe and Canada, which are not tied to employment or poverty status. He estimates the cost of provid- ing all families an allowance of $2,000 per child under the age of 12 at $83 billion annually. The net costs to the federal government would be consid- erably less than this, however, since the allowance would replace the cur- rent personal income tax exemption for children, as well as programs such as AFDC, the Dependent Care Credit, and the Earned Income Tax Credit. Fuchs points out that if the program were financed by a proportional tax levied on all nonpoverty households, the net effect would be to increase women's economic well-being and sharply reduce the proportion of chil- dren living in poverty. Under current budget constraints, such a proposal is not likely to be adopted. Hill and Morgan (1990) believe that what is needed is a "child security system" similar to the Social Security system, funded separately by a small income surtax on every parent for 35 years after each birth. The funds

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148 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE would cover health care (or insurance) for all children from prenatal care through adolescence; there might also be some payments to whoever is raising the children. For intact middle-income families, this system would simply ease the money crunch when the children are young but would not reduce lifetime costs of childrearing. One-parent or low-income families would receive a subsidy. Equal Employment Opportunity and Family Leave To the extent that the federal government's equal employment opportu- nity policies are concerned with the treatment of pregnancy and childbirth, they are important for families. The Pregnancy Discrimination Act (PDA) of 1978, discussed earlier, forms the basis of the equal treatment approach, which views pregnancy-related disability the same as other disabilities. At least in part, then, because of passage of the PDA, the five states (Cali- fornia, Hawaii, New Jersey, New York, and Rhode Island) and Puerto Rico that have established state-run, short-term disability programs or mandate that private employers establish such programs do include pregnancy- and childbirth-related disabilities with their coverage. In addition, 11 states now require employers to provide leave in connection with pregnancy, childbirth, and parenting for mothers and fathers (Ross, 1990~. According to the National Association of Working Women, 21 state governments provide some parental leave for their employees. Some states, however, favor policies that treat pregnancy and childbirth differently from other disabilities, on the assumption that special treatment is required in order to afford women equal opportunity. (For a full discus- sion of the two approaches, see Williams, 1985; Trzcinski, 1989; Piccirillo, 1988; Ross, 1990.) As of 1990, 12 states required employers to provide leave only for pregnancy and childbirth and not for other disabilities. A state's right to pass such laws was upheld by the Supreme Court in 1987, and a wide variety of leave legislation has been passed since then (see Table 6-41. As a result, families face very different policies, depend- ing on where they live. Broader family leave policies and programs, including mandated leave, are being considered by the federal government. In 1990 there were five bills in Congress that included both parental leave and maternity leave (Gladstone, 1990~. A family and medical leave act recently passed by Con- gress and subsequently vetoed by the President provided unpaid leave- with a job guarantee and continued health benefits for workers who need time off to care for newborn, newly adopted, or ill children and for seri- ously ill parents or spouses unable to care for themselves, and unpaid tem- porary leave for all workers for their own illnesses, including those that are pregnancy related. Employers with fewer than 50 employees were exempt.

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NEW FAMILY-RELATED BENEFITS 149 Many private groups have also made recommendations regarding paren- tal leaves. For example, the Yale Bush Center Advisory Committee on Infant Care Leave recommends a 6-month leave to care for new infants, with replacement of 75 percent of salaries up to some maximum for 3 months. Alternative financing mechanisms suggested include a federally or state-managed insurance fund modeled on the New York and New Jersey short-term disability programs and employer-selected private insurance programs such as that required by Hawaii's disability law (Zigler and Frank, 1988~. The National Research Council's Panel on Child Care Policy, while recognizing problems for small employers, nonetheless recommends up to 1 year of unpaid leave with job guarantees and health benefits, but offers no recommendations on implementation. This panel was primarily concerned with the healthy development of children and therefore dis- turbed by the lack of affordable out-of-home care of adequate quality for infants (Hayes et al., 1990~. The potential costs of implementing various family leave proposals to employers, employees, and governments vary depending on such factors as whether the leave is paid or unpaid, how expenditures are financed, and employer coverage. Costs also depend on the extent to which employees use such leaves. The General Accounting Office (GAO) (1987a, 1989) has projected the costs of mandating up to 10 weeks of unpaid leave with con- tinued health benefits for the care of new infants and for illnesses of children, parents, or the employees themselves. Assuming some restrictions on eligibility and coverage such as minimum tenure in the firm of 1 year and exemption of firms with less than 35 workers, the additional cost to employers would be approximately $300 million annually. One critical assumption in preparing estimates is how employers orga- nize work to cover an employee's absence. The General Accounting Office (1987a) examined the practices of 80 firms in two cities. They reported that overall about 30 percent of workers were replaced with little overtime or loss of output. Clerical workers were most frequently replaced, while man- agement and professional women were seldom replaced. When replace- ments were hired, the cost was similar to or less than the cost of the work- ers on leave. The GAO concluded that the only major cost was for continued health benefits for employees on leave. The U.S. Chamber of Commerce (1987) estimates the costs of the parental leave portion of similar legislation at over $2 billion, in part because it includes what employers are already paying and in part because of its high estimates of worker replacement costs. It assumes that all workers on leave take the maximum time allowed, that they are replaced, that replacement workers are somewhat less produc- tive, and that they receive wages 18 percent higher than the workers on leave. Frank (1988) estimates a range from $1.25 billion for 3 months' leave at 50 percent of wages to slightly over $5 billion for 6 months' leave

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150 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE with full salary (1983 dollars). The U.S. Chamber of Commerce, however, estimates the costs of parental leave at full pay at $75 billion annually. Very little cost analysis is available on the short-term disability available in the five states that provide it, and there appear to be no cost estimates for instituting these programs on the national level. The cost of parental leave to employers depends very much on how the plan is structured. If the total cost of leave is borne by the individual employer, the burden could be significant, depending on whether the leave is paid or unpaid, the size of the firm, the composition of the work force, the number of employees who elect to use the leave, and the expense and difficulty of providing coverage during an employee's absence. Most of these costs can be mitigated by using broadly based insurance pools (e.g., social insurance, state disability insurance pools) and providing special exemptions for small employers. As discussed in the next chapter, Euro- pean countries have devised various leave arrangements that are extremely valuable to families and that have proved acceptable to employers. All rely on social insurance funding to spread the costs and avoid disproportionate burdens on individual employers. Critics agree that family leave is important but argue that it should be provided only on a voluntary basis (U.S. Chamber of Commerce, 1987~. In his veto message of the Family and Medical Leave Act of 1990, President Bush said, "I want to emphasize my belief that time off for a child's birth or adoption or for family illness is an important benefit for employers to offer employees. I strongly object, however, to the Federal Government mandating leave policies for America's employers and work force." Critics further argue that mandated leave would be costly for employers, no matter how it is financed, and some combination of higher prices and lower wages would result, possibly accompanied by higher unemployment and discrimination against employees who are more likely to take such leave. Policies for the Working Poor As mentioned earlier, public policy has shifted recently from AFDC to programs that encourage, or even require, participants to seek employment. Work incentive programs are based on research showing that prolonged absence from the work force significantly reduces the likelihood that an individual will reenter the labor market. Thus, for instance, the 1988 Fam- ily Assistance Act provides for support for services such as child care and requires women with children over age 3 (or, at the discretion of the state, over age 1) to take a job or participate in 20 hours of training per week. Refundable tax schemes and mandated employer health care, which are also being considered, are similarly tied to labor force participation. The minimum wage is also an important policy intended primarily to

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NEW FAMILY-RELATED BENEFITS 151 help working people to earn enough to avoid poverty. It has not been suc- cessful, however, in meeting that objective, as shown by the fact that 44 percent of the heads of poor households (6 million) were in the labor force, about one-eighth of them full time, year round (Hendrickson and Sawhill, 1989~. At the same time, a large proportion of people receiving the mini- mum wage, many of them teenagers, live in households with incomes above the poverty level (Ehrenberg and Smith, 1982~. It is further argued that gains to those who receive higher wages may be more than offset by pos- sible losses for workers unable to find jobs. Hence, the minimum wage remains controversial. However, there is no consensus on the alternatives to a minimum wage in preventing poverty or on the degree to which the minimum wage should be relied on to provide an income floor for full-time employment. "The failure of work to provide an escape from poverty is inconsistent with the belief that any family that makes a reasonable effort to support itself should not be poor" (Hendrickson and Sawhill, 1989: 1~. Expansion of the earned income tax credit (EITC) is one alternative to the minimum wage. Under the recently passed Omnibus Budget Reconcili- ation Act of 1990 (P.L. 101-508), the EITC provides a credit of 23 percent of earnings up to $6,810 (up from 14 percent in prior legislation) for fami- lies with one child. For eligible families with more than one child, the credit will be 25 percent. There is an additional 5 percent credit for a child under age 1 and a 6 percent credit for taxpayers purchasing qualified health insurance for their children. The effect is to raise the earnings of people in low-income households with children generally thought to de- serve the highest priority among poor households and negative employ- ment effects are expected to be minimal (Burkhauser and Finegan, 1989~. However, the benefit is small and not sufficient to bring most eligible fami- lies above the poverty line. At the same time, the EITC is costly. In 1987, for example, 7.4 million families claimed the credit, on average $433 per family, which reduced federal tax collections by $3.3 billion (Hendrick- son and Sawhill, 1989~. It has been estimated that the reductions will amount to $18.3 billion over 5 years (1991-1995) (Stewart, 19901. Costs are also a major barrier to the introduction of general family or child allowances. Unlike the EITC, they might also reduce work incentives, although less so than welfare programs, because payments continue as earn- ings rise. Family or child allowances are standard throughout Europe and in Canada. Their universality appears to make them more popular and more acceptable politically than benefits narrowly targeted on the needy (Wilensky et al., 1985~. In addition, people are not stigmatized as welfare recipients, and administration is far simpler since proof of need is not re- quired. In the United States, however, government programs for children are

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152 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE directed to the poor, including the new child care legislation, P.L. 101-508, which authorized $4 billion over 5 years. Under the new child care devel- opment block grant program, eligible families must have incomes less than 75 percent of the state median income. Under Title IV-A child care grants, they must need child care to enable them to take a job in order to escape poverty (Stewart, 1990~. Health insurance is a matter of particular concern to the working poor and their employers. As discussed earlier, many employers offer health insurance to their employees, and Medicaid covers some of the poor, but more than 30 million people do not have health insurance, the majority in families that include an employed person. One proposal, the Minimum Health Benefits for All Workers Act (Gordon, 1988), attempts to deal with this situation by mandating health insurance coverage by employers. All employers would be required to provide a minimum level of health insur- ance for all employees who work 17.5 or more hours per week and to include spouses and dependents unless they are covered by another employ- ment-based plan. This would reduce the number of uninsured substantially. Gordon estimates that the bill would affect 58 percent of employees work- ing in firms with less than 25 employees and 19 percent of those in larger firms. At the same time, Gordon suggests that employment might be re duced, and some full-time jobs might be recast into jobs of 17 hours a week or less, especially in low-wage industries. The additional costs for insurance premiums are estimated at $22 billion annually for employers and $3 billion for employees. A slight decrease in the costs of Medicare, Medicaid, and other government health benefit pro- grams would be expected, but so would a decline of $2.1 billion in personal income taxes and $2.6 billion in Social Security and Medicare payroll taxes, leading to a slight increase of $300 million in the federal deficit. There would also be some loss to states, because employer contributions for health benefits are tax deductible. States have enacted a wide variety of mandated health coverage laws, 645 between 1968 and 1986. If employers offer health insurance, they may be subject to requirements about services, benefits, time periods, and people covered. More recently, however, states have been developing objective criteria to measure the social and financial impact of new mandates, mind- ful of the effects many of the requirements are likely to have on costs; Washington, Arizona, Oregon, and Pennsylvania have enacted some form of impact statement (Employee Benefit Notes, June 1987~. CONCLUSIONS Employers and governments (federal, state, and local), separately and in partnership, have undertaken a number of new initiatives to address the dual

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NEW FAMILY-RELATED BENEFITS 153 responsibilities to family and job of an increasingly diverse work force. New types of programs are being considered. In addition to the standard benefits (discussed in Chapter 5), the newer employer programs include several types of family leave, flexible schedules and locations, assistance with dependent care, and increased choice among benefits through flexible benefit programs. Some of these programs, such as traditional part-time work and home-based work, as well as flexible schedules, also respond to employer needs to meet workload variations, to operate at nonstandard hours, and to reduce other costs as well. To some extent, employers are also assisting employees in finding and paying for dependent care services, some by providing the services direct- ly, others by subsidizing community programs and offering information and counseling services. Flexible benefit plans increase choice among vari- ous options, which is often helpful for dual-earner families. Nevertheless, many unmet needs remain. For instance, although a sub stantial proportion of women are able to obtain unpaid maternity leave, the majority of employed women do not have access to paid leave for pregnancy and childbirth-related disabilities, and only a small minority of fathers have paid paternity leave. Furthermore, most workers are not en- titled to any leave to care for children or ill family members, and a minority of workers lack even sick leave or disability leave for their own illness. As is true for standard benefits, family leave, direct services, and flexible benefit programs are least likely to be available to those employed in the low-wage service sector, in small firms, to nonunionized workers, and to those working part time. More flexible schedule arrangements are equally likely to be available to employees in small and large organizations, and traditional part-time work is more often provided by small employers and in the service sector. Unions have traditionally been opposed to such ar- rangements. New programs have been initiated more often in firms that employ substantial numbers of women. Development and implementation of new programs by employers and unions, as well as utilization of programs by employees, are affected by individual leadership and the informal workplace culture, in addition to cost considerations. There is tentative evidence that new family programs mod- estly improve recruitment and reduce absenteeism and turnover, all of which reduce labor costs for employers. There is little evidence, however, relating these programs directly to productivity. Lack of better information about the effects of new programs on productivity and costs is frequently reported by employers as a major barrier to new benefit programs. Con- cerns about liability are mentioned as an additional obstacle for provision ~ . at some services. Employer initiatives are also influenced by governments. For instance, equal employment opportunity laws, such as the federal Pregnancy Dis

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154 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE crimination Act, as well as emerging state and local family leave laws, have increased leave availability. Federal and state tax incentives have encour- aged the provision of various dependent care assistance and flexible benefit programs, albeit at a substantial cost to the governments in lost revenues. In contrast, regulations such as the wage and hour laws, while providing protection for vulnerable workers, have inhibited the development of more flexible schedules and locations. Family leaves are helpful to workers with household responsibilities. For example, there is some evidence that family leave policies increase women's labor force participation and reduce the need for expensive out- of-home infant care. Both paid and unpaid leave have economic advantages for families. However, unpaid leaves are of limited benefit for low-income and one-parent families, who in many cases cannot afford to forfeit in- come for even 3 or 4 months. These are also the families who experience the greatest difficulty in finding adequate infant care. Based on such information as is available on both current and proposed policies, the panel concludes that providing short-term paid leave related to childbirth and somewhat longer unpaid leave for family care would be very helpful and need not be unduly burdensome for many employers. It is important that alternative ways of sharing costs continue to be explored to find ways of allocating them equitably among employers, employees, and the community. There is similarly a need to explore various ways to share the costs of other employee benefits, including public and private insurance pools, social insurance, and direct government subsidies. It must be ex- pected, however, that the larger the share of costs to be borne by individual employers, the more the business community is likely to resist expanding or even maintaining the present level of benefits and less likely that a majority of workers will have access to benefits that appear very promising for families.