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8 Findings and Conclusions This report began by outlining the dramatic changes that have occurred over the past four decades in families, the labor force, and the structure of the economy. These changes have been synergistic: increases in the pro- portion of families with all adults in the labor force have altered the level and pattern of demand for goods and services. The expansion of tradition- ally female service and clerical jobs has increased job opportunities for women. At the same time, stagnating earnings and the decline in tradition- ally male manufacturing jobs further increased the impetus for many wives to enter the labor market. Rising divorce rates and declining fertility have also propelled many women into employment who might otherwise have remained full-time homemakers. Demographic changes have also resulted in a more diverse labor force in terms of ethnic and racial composition. These changes are not likely to be reversed. More families are benefit- ing from a second income, and the economy is benefiting from a larger labor force. At the same time there are a growing number of workers with obligations to both jobs and families. Many of them are women who are the sole support for their children. With all these changes, however, families remain the basic social and economic unit for the care of dependents. And families still require a good deal of time and energy from their own mem- bers if they are to function successfully. The panel was asked to examine and synthesize the research on employer policies and working families, to evaluate policy alternatives, and to assess the needs for further research. In this report we have reviewed the trends in the labor market and the labor force; the accumulated evidence about the consequences of those trends for families and employers; how workers and employers are coping with those consequences; and the policies that gov 179

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180 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE ernments, here and abroad, have adopted to help workers and employers in the changed workplace environment. Although research on many of the relevant topics is limited, analysis of the available data and discussions with experts in the field have enabled the panel to draw several conclusions. As discussed in Chapter 1, the broader range of public policies designed to improve the quality of families' and workers' lives-including provision of economic security, equal opportunity, health care, and care for depen- dents are beyond the panel's charge. Also beyond our charge is the sub- ject of a general family policy (and the mechanisms to support it) of the kind most other industrialized nations have developed. Our findings and conclusions focus on the conflict between work and family obligations and possible ways of easing them. They were developed in the context of exist- ing policies and programs, and they are embedded in a perspective that recognizes not only the needs of workers but also the constraints faced by employers in attempting to improve their operations and maintain the finan- cial health of their organizations. This chapter contains the panel's findings and conclusions. We summa- rize below the panel's general findings in three areas: the consequences of changed employment patterns for families, the consequences of workers' increased family responsibilities for workplaces, and the responses of em- ployers and governments to these changes. We then present our conclu- sions, covering four areas: terms of employment, direct provision of ser- vices, program implementation and dissemination, and data collection and research. We conclude with a brief discussion of several public policy alternatives. GENERAL FINDINGS We estimate that about half of the U.S. work force have dependent care responsibilities, and fewer than one-third of all employees have a spouse at home. At the same time, women remain the primary caregivers for depen- dents regardless of employment status. Parents comprise the largest group of workers with dependents: 37 percent of the people in the civilian labor force have children under the age of 18. The most rapid increase in labor force participation has been among women with young children. Between 1960 and 1988, the labor force participation rate of married women with children under the age of 6 increased from 19 to 57 percent. In addition to workers who are parents, approximately 10 percent of full-time employees are active or potential caregivers for elderly relatives, usually their own parents. This group is expected to increase substantially over the next several years, as both the number of elderly and the number of employed working-age women continue to grow. We estimate that at present 2 to 3 percent of employed people are caring for disabled working

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FINDINGS AND CONCLUSIONS 181 age adults. These facts underlie the panel's findings regarding the conse- quences of combining work and family responsibilities. Consequences for Families Overall, research presented in Chapter 3 finds positive effects of com- bining work and family responsibilities for men and women and for their families. Benefits of employment include income, enhanced life satisfac- tion, and better physical and mental health. There is also evidence, how- ever, that conflicts between work and family roles increase stress and the risk of depression: for some people, such conflicts reduce satisfaction in measures of well-being. The extent to which these negative effects occur varies by the employee's racial and ethnic background, income and occupa- tion, and stage of the life cycle, as well as by relevant employer policies. Important factors that moderate the negative effects are individual employee preferences and an individual's sense of control. The research reviewed in Chapter 3 also shows some negative effects on families, particularly those with young children or elderly parents. Stress occurs in families in which both parents must work to obtain an acceptable standard of living, but satisfactory care for children, especially infants, is not available. Because poor-quality care has negative effects not only on children's well-being but also on their development, social problems and a less capable work force are likely to result over the long term. There is a compounding of economic, health, and social problems among the poor; the children of low-income families are particularly at risk of poor care and possible developmental problems. Changes in public and private policies or programs would mitigate the negative effects on families of combining work and domestic responsibili- ties. Such changes are especially needed to improve children's develop- ment and life chances and to provide adequate care for the elderly. New provisions should involve men as well as women and should offer all fami- lies flexibility in deciding how to meet their obligations. Consequences for Workplaces Although little research has been done regarding the direct impact of dual responsibilities on workers' productivity, there is some evidence that family responsibilities tend to increase absenteeism, tardiness, turnover, and workplace distractions. At the extreme, some women involuntarily leave the work force to care for infants or elderly parents because no other adequate arrangements can be found. Losing these workers may have nega- tive consequences for employers, especially those facing tight labor markets as well as for the women and their families.

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182 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE The panel identified several factors associated with such productivity- related problems: terms of employment, such as the number of hours and weeks worked, and the degree of flexibility in work schedules and location; the availability of services for family members, such as supplementary care arrangements for children and elderly and handicapped family mem- bers and short-term care when regular arrangements break down or family members become ill; and the extent to which family considerations are recognized as legitimate in the workplace. As discussed in Chapter 5, many employers currently provide an extensive base of nonwage benefits, accounting on average for about 28 percent of total compensation. They include provision of some short-term protection (such as medical benefits and sick leave) as well as long-term benefits (such as life insurance and pensions). Considerably less progress has been made in offering new types of benefits particularly needed by families without full-time homemakers. Governments play a major role in determining the availability and distri- bution of benefits, primarily through the tax system and regulations. Base- line social insurance programs required by federal law since the 1930s in- clude Social Security, workers' compensation, and unemployment insurance. These programs cover all private employers, regardless of size. They have substantially enhanced the economic independence of elderly people and have improved the economic security of unemployed workers and their families. Social insurance programs are financed by employer and em- ployee payroll taxes and general revenues. Employer contributions to these plans account for approximately 9 percent of total compensation costs. Some types of benefits, such as short-term disability insurance, are not required by law, but federal and state statutes specify that certain provisions must be included if the benefit is provided. An example is the Pregnancy Discrimination Act, which prohibits discrimination in the availability of benefits for pregnancy-related disabilities. Many such regulations exclude very small firms. Both employers and employees receive tax benefits for most voluntarily provided benefits, such as health insurance, qualified pen- sion plans, and the recently introduced dependent care assistance programs. The costs of all these provisions are eventually borne in varying propor- tions by employers, consumers, employees, and taxpayers. Voluntarily and as a result of collective bargaining agreements, many employers offer both standard benefits, such as health insurance and sick leave, and some innovative programs, such as family leave and flexible

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FINDINGS AND CONCLUSIONS 183 spending accounts. As Chapters 5 and 6 show, however, the availability of voluntary benefits, which account for approximately 19 percent of total compensation, is uneven, varying by industry, occupation, unionization, and particularly by firm size. Because small firms, many of them in the retail trade and service sectors, often operate on a slender financial margin and also tend to be labor intensive, they are in many instances exempt from government regulations. They also generally pay lower wages and provide fewer voluntary benefits. And yet small firms are more likely than large firms to offer flexible part-time employment and nonstandard hours, which are of great benefit to workers trying to juggle family obliga- tions. Small firms employ over 38 percent of all workers and a large propor- tion of women and minorities, so the absence of employment-related ben- efits such as health insurance and disability leave places already-vulnerable groups at increased risk. For instance, it appears that, on the basis of the data arrayed in Chapter 6, the majority of employed women are without any paid leave for pregnancy or childbirth. Only 45 percent of employees in small firms have paid sick leave, compared with 67 percent in large firms. In retail trade, total benefits account for 13 percent of compensation, com- pared with 31 percent in manufacturing. Of the approximately 25 million people, including an estimated 12 million children without health insurance who live in families with an employed person, 39 percent are employed in firms with fewer than 25 employees. Decisions about benefits are influenced by a variety of factors. When total compensation is rising, employees tend to be more interested in receiv- ing at least some of it in the form of additional benefits than if they could obtain them only at the expense of reduced wages. Similarly, when income taxes are high, incentives are strong for employees to prefer untaxed ben- efits over taxable wages. Also, labor unions have often succeeded in bar- gaining for more benefits. Thus, if recent trends of stagnant wages, lower taxes, and declining union membership continue, this would suggest that in the short term benefits will not increase and may decline. For example, there has been a decrease in employer-provided health insurance coverage for dependents. Although employers and governments have to some extent responded to the nation's demographic and economic changes, current policies and pro- grams appear to be inadequate, especially for low-income workers and their dependents. The panel urges researchers and policy makers to break out of the unproductive cycle that has characterized discussions of how to provide important benefits to employees of marginal firms (large or small). New concepts are necessary to meet the needs of workers without destroying the economic viability of businesses. ;

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184 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE CONCLUSIONS Meeting the needs of today's diverse work force and enhancing the health of the economy are the panel's two goals in suggesting how the structure and management of the workplace should be shaped. The crucial assumption underlying the panel's conclusions is that employers should be expected to share the responsibility of making it possible for workers to do justice to both their jobs and their families. As we have seen, there is already a base of family-related employee benefits and government sup- ports; further improvements in this existing structure would bring about a better match between institutional practices and present as well as projected social and economic conditions. On the whole, we outline broad directions for policies and programs, rather than detailed prescriptions. Nor do we suggest when it is most appropriate for federal, state, or local governments to take action in cases that do require intervention. When government intervention appears indicated, action at the federal level is appropriate if competition among political subdivisions is to be avoided; however, centralization may lead to top-heavy bureaucracy. Also, other levels of government are closer to local concerns and can more readily adjust to local conditions. How to balance these considerations will differ for various programs. It is beyond the scope of this report to attempt to determine this case by case, but, in general, we believe minimum standards and regulations are most appropriately set at the national level, while their administration and the provision of services are best left to state and local governments. Our conclusions concern four broad topics: (1) terms of employment, (2) direct provision of services, (3) program development, and (4) data col- lection and research. Unfortunately, cost and benefit analyses of alternative employee benefit programs are inconclusive, and their implications are in dispute. For the most part, therefore, the panel discusses alternative policy approaches rather than presenting definitive recommendations. Because more and better information and analysis would be expected to resolve some of the issues, suggestions for collecting additional data and further research are offered. Terms of Employment Terms of employment establish the parameters of work for individual employees. They are shaped by laws, regulations, and negotiations but finally are implemented by employers, and they determine working condi- tions for employees. Research confirms that such factors as how much time people spend on the job, their work schedule, and how much discretion they have in adjusting it are important determinants of employee well-being.

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FINDINGS AND CONCLUSIONS 185 They may also influence some aspects of job performance, such as absen- teeism and tardiness, particularly for workers who also have family respon sibilates. Because flexible policies and choices among a variety of programs are likely to reduce work and family tensions, openness to experimentation on the part of both managers and workers is important in solving existing problems and in meeting constantly changing conditions. Because private initiatives are frequently inadequate, government can perform an important function by providing tax incentives and other supports. Leave Policy The availability of leave is critical for workers with family responsibili- ties. As described in Chapters 4 and 6, the most obvious case is the loss of family income and benefits due to an employee's illness. For women such losses can also occur because of disability related to pregnancy and child- birth. In addition, caring for newborn or newly adopted children, or for disabled adults, is stressful for both employed women and men (although more women are affected because they continue to be primary caretakers). The difficulty of finding supplementary care arrangements, such as high- quality infant care and home health care for elderly and disabled family members, contributes to the stress. Short-term care for dependents, needed when the usual arrangements break down or in case a family member be- comes ill, is also costly and often difficult to find. Although researchers disagree on the long-term effects of nonmaternal care of infants on later development, there is consensus that poor-quality care has negative effects. Researchers also agree that employment and care arrangements consistent with parents' preferences contribute to both par- ents' and children's physical and psychological well-being. Leaving the work force to care for dependents has a particularly negative impact on low-income women and single mothers. They are most in need of the wages and benefits that employment provides, and they are least likely to have access to quality alternative care. Several recent studies suggest that leaving the work force has negative effects not only on women's current income (creating for some the need for public assistance), but also on their long-term earnings and benefits. Labor markets reward continu- ous employment. Voluntary provisions for paid leave for a worker's own illness (sick leave or short-term disability) are generally part of standard benefit pack- ages (discussed in Chapter 51. Under federal statute, when such leave is offered, it must include leave for pregnancy- and childbirth-related disabili- ties. Under this system, the majority of women working in medium and large firms can generally piece together 6 to 8 weeks of paid leave by using

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186 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE disability and sick leave, plus vacation time. At the discretion of their employers, women may be able to expand this by 3 to 4 months of unpaid leave with a job guarantee and either continued paid benefits or the option to purchase some of them. These opportunities are much more limited in small and labor-intensive firms, because providing them is likely to be a much greater burden, especially in terms of the reallocation of tasks. Men rarely are able to take any formal leave related to the birth or adoption of a child into the family. Very few women or men can take leave to care for sick family members. Research from European countries suggests that the provision of leave benefits only or chiefly to women may lead to employer . . . . . d~scr~m~nat~on against women. There is general agreement among researchers, policy makers, and inter- est groups that some form of family leave is important. Major points of disagreement are whether leave should be negotiated through the labor- management process or required by the government and what priority fam- ily leave should receive at a time when employers are concerned about rising costs of existing benefits and are, to some extent, cutting back on them. More than 20 states across the country have enacted some form of family or maternity leave legislation; the limited data and equally limited analysis of these programs as well as those in other countries (described in Chap- ters 6 and 7) informed this debate for the panel. Even without legislation, employers facing labor shortages, particularly those whose labor force is predominantly female, are likely to offer some paid or unpaid leave in order to improve recruitment and retention. Hospitals recruiting nurses are an obvious, although not the only, example. By contrast, businesses facing severe economic constraints, as is frequently the case for small business- es, are unlikely to offer such leave. The result is that low-wage workers in greatest need of income and benefits and with the least bargaining power are least likely to have family leave; many do not have sick leave. Neither federal nor state laws guarantee leave, however, and there are compliance problems. Requiring employers to expand existing leave policies to include infant care and care for other family members in case of illness or breakdown of the usual care arrangements would be an incremental change for many large employers and unlikely to cause serious dislocation. It would, however, impose substantial additional costs on many others. The fact that many large firms and a few small firms already provide such leave voluntarily suggests that the provision of paid leave is nonetheless feasible. The lim- ited data from states with short-term disability programs or required leave policies (described in Chapters 5 and 6) also indicate that such programs are economically feasible. Analyses of economic performance and quality- of-life indicators in West European countries with extensive family benefits

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FINDINGS AND CONCLUSIONS 187 (discussed in Chapter 7) further indicate that such policies are not related to poor economic performance. The costs of unpaid leave with job assurances and access to health ben- efits are obviously lower than those for paid leave, but they would still be a significant burden for many small firms. Unpaid leave offers more parental choice than no leave, but it is of less value to low-income families that cannot afford to lose a parent's earnings, although some may be able to combine unpaid leave with part-time work. Nevertheless, the alternative to giving up earnings often becomes placing a child or an elderly or disabled relative in inadequate care. It is critical to note that requiring firms to provide leave need not mean that the entire cost must be absorbed by employers. Not only may busi- nesses compensate to some degree by raising the prices of their products or by keeping wages lower than they otherwise might have been, but also the costs can be covered in a variety of other ways. Several different models, involving employee, employer, and government contributions, are current- ly being used in the United States and Europe to finance work-related ben- efit programs. For example, payroll taxes are used to fund existing state disability insurance programs. And in Germany small employers are pro- vided a direct government subsidy. The panel concludes that, for the economic, physical, and psychological well-being of employees and their dependents, some form of paid sick leave, including paid leave for medical disabilities related to pregnancy and childbirth, and some form of family leave, to care for infants and ill family members, are essential. The panel urges policy makers to ex- plore various approaches to financing and phasing in such benefits so as to minimize economic disruption, spread costs equitably among the community at large, and prevent discrimination against those who use such leave. Part-Time Work Businesses have always hired some part-time workers and have been doing so increasingly in recent years: the number of part-time employees more than tripled between 1955 and 1987, from 6 million to 19 million. According to employer surveys, scheduling and workload variations are the primary reasons for hiring part-time workers, usually to do very restricted or routine tasks; most managerial positions are explicitly excluded. Also, part-time employees tend to receive lower wages and particularly lower benefits. Currently, 27 percent of employed women and 11 percent of employed men work part time, the latter including mainly students and older workers.

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188 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE While the number of involuntary part-time employees is growing, the ma- jority who work part time do so by choice. Women many of them with young children and, increasingly, those caring for elderly relatives ac- count for almost two-thirds of the part-time work force. Reduced work hours clearly help them meet their family responsibilities. But this ap- proach is possible only for families that can afford the diminished income. Recent research suggests that, when all differences between workers are taken into account, part-time employees may not be at as much of a disad- vantage as previously thought. But the evidence also shows that part-time jobs usually pay less and provide fewer benefits than comparable full-time jobs, particularly for low-wage employees in clerical, sales, service, and operative occupations. Managers and professionals are more likely to be at a disadvantage because of limited job choices and fewer opportunities for promotion. The panel finds that employers and employees are only beginning to explore the possibilities of using part-time work as a transition into or out of the labor market during different stages of the life cycle. Temporary reductions in work time could be particularly helpful when workers have young children, when they have elderly parents to care for, or when their retirement is near. Especially in light of the finding that part-time workers do not lack commitment to their jobs, part-time work should be considered a legitimate option and not be penalized. Providing prorated wages for part- time employees and prorated benefits to those who want them would eliminate existing inequities and reduce the incentive to substitute part-time workers for full-time workers as a way of reducing wage rates and benefit costs. The panel concludes that increasing part-time work options for those who want them is highly desirable for both hourly and salaried employ- ees. Wages proportional to hours worked and, when feasible, equiva- lent promotion opportunities and prorated benefits are appropriate. Statutes governing the hours of work, such as the Fair Labor Standards Act (discussed in Chapter 6), although they safeguard workers against some kinds of exploitation, may impede flexibility by reinforcing distinctions between full-time and part-time work. Federal and state governments, in consultation with employers, employees, and unions, should be encouraged to review the wage and hour laws with a view toward modifications that would permit desired changes while maintaining necessary protection for workers. Flexible Schedules Lack of flexibility and unpredictability in work schedules are document- ed sources of work and family conflict. One solution is flextime, which can

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FINDINGS AND CONCLUSIONS 189 vary from permitting small alterations in starting and stopping times each day, to contracting for total time per week, per year, or even over an employee's career. Formal policies of flexible scheduling have made relatively little headway in the United States: it is estimated that in the mid-1980s only 13 percent of full-time workers had such options, although the proportion may have increased somewhat since then. Interestingly, small firms appear to offer this benefit more often than do large firms. Limited evidence on flextime shows modest positive effects on perfor- mance-related factors such as recruitment and absenteeism, as well as em- ployee satisfaction. There is evidence that more flexible schedules often ease the stress felt by those combining work and family obligations, and they are desired by a wide range of employees regardless of family status. Flexible schedules also contribute to an atmosphere that suggests that em- ployee concerns about family are legitimate. However, research also shows that some flexible schedules, particularly when they are not very extensive, provide little help to employees. And many people are simply short of time, no matter how a fixed number of hours is adjusted over a week or even a year. Employers report some problems in managing and administer- ing flextime programs and, occasionally, increased costs, but there is some evidence of overall savings due to factors such as reduced overtime costs. What degree of flexibility is feasible will vary among different establish- ments as well as for various jobs. The same kinds of regulations and tradi- tional thinking that have constrained opportunities for part-time workers also appear to have inhibited the spread of flextime. In a number of Euro- pean nations, a far more substantial proportion of workers now have the opportunity to choose their own schedules, albeit within limits (discussed in Chapter 7~. Expansion of flextime may have been influenced by such stud- ies as one by a German firm that found a majority of jobs studied were amenable to flexible arrangements. The same study also found that flexible schedules work best when there are a variety of options rather than only one model. The panel concludes that policies that seem to work well elsewhere, with modest benefits for both employers and employees, are at least worthy of serious consideration here. Large and medium firms, follow- ing the experience of both European employers and of smaller firms in this country, should consider initiating more flexible schedule arrange- ments for their workers. Government review of the relevant regula- tions, as was discussed for part-time work, is also appropriate here. Flexible Locations Flexibility in location is also thought to be a way to reduce work and family conflict for employees, and it has at times been used by employers to

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FINDINGS AND CONCLUSIONS 191 instances, employers can either efficiently provide services or support them indirectly when they are provided by governments, community organiza- tions, and for-profit establishments. Employers can also offer indirect sup- port for services through a flexible benefits system, thus increasing employee choices. Information and Counseling In several surveys, as described in Chapter 4, a substantial number of workers report that child care is hard to find, particularly for infants and for children during school vacations and holidays. They also express inter- est in having more information about the availability and the quality of care for their children and elderly family members. When employees can- not find or afford dependent care services of acceptable quality, absentee- ism and tardiness increase. Employers could alleviate these problems by providing resource and referral programs, either using their own staff, join- ing with other businesses, or contracting with community organizations that offer such services. Employer-supported programs could incorporate or en- courage the spread of publicly available quality ratings of care services, which in turn may improve the supply, competitiveness, and quality of services. In a 1988 survey, 4 percent of small firms and 14 percent of large firms reported providing resource and referral services. Although the evidence is mainly anecdotal, these services appear to help employees find programs that meet their economic circumstances and cultural goals, generally for modest costs. To the extent that employer practices encourage the develop- ment and expansion of information services, they are also likely to be helpful in increasing the supply and improving the quality of care available. Caution must be exercised, however, to ensure that dependent care services meet existing state regulations, at a minimum, and that liability issues are resolved (discussed in Chapter 6~. We have already noted the need for consideration of improved standards and regulations. Providing dependent care information may be part of more comprehen- sive counseling and education services or employee assistance programs. More than one-third of the U.S. work force in the private sector now has access to employee assistance programs, which have in many instances expanded their original focus on alcohol problems to include family-related issues. Additional resources and training may be needed to support this expanded role. Information and counseling services contribute to a family-friendly envi- ronment and also tend to generate goodwill toward employers. The fact that a growing number of companies now provide these services suggests that they are cost-effective.

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92 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE The panel encourages employers to support development and expansion of resource and referral programs for both child care and elder care or, when necessary, to initiate them. Whenever possible, employers can build on present employee assistance programs to provide counseling and education dealing with work and family issues, adding the addi- tional resources necessary to extend the services. Dependent Care Affordable, adequate care for children, particularly infants and children with disabilities, is generally difficult to find, especially for low- income families and workers with nonstandard hours. The severity of the child care problem varies by community. The difficulty of arranging child care, as well as the need to look after adult dependents, often makes it difficult for primary caretakers, most often women, to enter and to remain in the labor force. Those who are employed often experience stress and generally have higher rates of tardiness and absenteeism. Given the grow- ing number of elderly people in the United States and the continuing rise in women's labor force participation, dependent-care-related problems are likely to become more numerous in the future. To address employees' needs for child care services, especially when recruitment and retention are problems and the resources in the community inadequate, employers have for some years experimented with establishing on- or near-site child care centers. One employer recently initiated an intergenerational center to care for both elderly people and children. The costs of providing a center are high, particularly for companies that underwrite start-up costs and subsidize operating expenses. Liability insur- ance costs are also a frequently cited concern. In addition, unlike flexible schedules, such centers benefit only a small group of employees. Even though the costs may be treated as normal business expenses for tax pur- poses, there are today few centers except in establishments that employ large numbers of women and experience difficulties in recruiting and re . . tanning them. Direct employee subsidies are an alternative when the problem is the cost of care rather than its availability. Other approaches include employer contributions to existing centers in return for guaranteed or preferential admissions for their employees, possibly at a reduced price. A few employ- ers are also experimenting with services for sick children and for after- school times, vacations, and snow days. Available evidence suggests that such programs reduce turnover and improve recruitment to some extent, but it is less conclusive on absenteeism. Employers and employees report that users of employer-supported centers experience improved morale, and em- ployees believe that their productivity is improved.

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FINDINGS AND CONCLUSIONS 193 The panel concludes that insofar as economic considerations permit, employers and unions should be encouraged to continue to provide and expand various types of assistance for the care of children and disabled and elderly family members, particularly when community resources are inadequate. In addition, it is important that governments collect and disseminate information about successful employer- and union-sponsored dependent care programs. Health Insurance Employer-based health insurance is a major benefit available to the ma- jority of American workers and their dependents, covering approximately 148 million people, or 61 percent of the population. However, it is least available in some of the areas of high job growth, namely, among small firms in the retail sales and service sectors. Many workers and families without insurance are among the most needy, including a large proportion of single-adult and minority families. More than 12 million children lack public or private insurance protection. The cost of health insurance has risen from one-fourth of voluntary bene- fits in 1960 to almost one-half today. Health insurance, the most rapidly increasing cost component of benefit packages, now accounts for almost 6 percent of total compensation and slightly exceeds the cost of pensions. Pre- miums are increasing at a rate in excess of 20 percent annually, making cost containment a high priority for employers. One method of reducing employer costs is to increase employee copayments and deductibles, particularly for dependent coverage. Because of the nature of the health insurance system in the United States, small firms face higher premium costs than large ones; high premiums are the major reason given by small firms for not providing this benefit. Alternative proposals to meet the health care needs of employed uninsured workers and their families include changes in Medicaid to cover more low-wage workers, a universal system of national health insurance, and mandating expansions in employer health insurance coverage. The panel concludes that employer-provided health insurance, includ- ing dependent coverage, is critical to family well-being and that re- cently observed cutbacks in dependent coverage pose a serious threat to family security. While reorganizing the need for cost containment, we strongly encourage employers who currently provide health insurance for workers and their dependents to maintain coverage. Employers of- fering very minimal health coverage are encouraged to improve it when possible. Employers and unions are encouraged to support efforts to improve the current health care system, including the public health system, so as to better meet the needs of all workers and their families.

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194 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE Although the panel considers the problem of ensuring all Americans access to health insurance and health care services to be an urgent national priority, we do not recommend specific policy approaches. Several national commissions have recently, or will shortly, provide detailed analyses of this subject and offer recommendations for action. The panel limits its comments to urging that policy makers place this problem high on the national agenda. Flexible Benefits In addition to flexible terms of employment and specific family-related services, some employers offer a variety of other benefits, from discounts for purchases of household items and van pools to free legal services and subsidized education. Clearly, not all such benefits are equally valuable to all workers, due to differences in incomes, family circumstances, and per- sonal tastes. Furthermore, in families that have more than one wage earner, some benefits may be duplicated. Offering employees a choice is one good solution. "Cafeteria plans" and dependent care assistance plans that include flexible spending accounts are gradually being made available by more employers. Currently, approximately 13 percent of employees in medium- and lar~e-sized firms are offered flexible benefit glans. usually including ~ . , .' ~ airs . ~ ~ ~ ~ . ~ an option for dependent care. Wh~te-collar workers are more likely to be offered such plans than production workers. The majority of flexible ben- efit plans include an option for dependent care. Cafeteria plans are of limited utility if they include only benefits ur- gently needed by almost everyone. Employees are confronted with an un- happy choice, particularly difficult for those with low incomes who can- not afford to purchase substitutes on their own. If, however, cafeteria plans offer what are considered luxury options, they amount mainly to a tax advantage for the well-to-do. Cafeteria plans are therefore most useful when the included benefits are important for some but not all employees: for example, child care and elder care. No matter what items are included, however, some workers will find the choice difficult, while others may not need any of the options very much. Nevertheless, since those who must forgo some needed benefit will be no worse off than if employers or governments determined which programs to offer, and if the majority of employees benefit from having choices, the programs seem worthwhile. Preliminary evidence suggests that eligible em- ployees are only beginning to utilize flexible benefit plans but that em p~oyee satisfaction with benefits improves when plans are available. Reducing the overall costs of benefits is a major reason given by em- ployers for introducing cafeteria plans. At the same time, however, the most common reason given by employers for not offering cafeteria plans

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FINDINGS AND CONCLUSIONS 195 is that such plans often involve increased administrative expenses. There may also be increased costs related to adverse selection of benefits (dis- cussed in Chapter 6~. One exception is a dependent care assistance plan that allows employees to spend pretax dollars on a variety of services, such as child care or additional health insurance. This type of plan involves only minor administrative costs and may save money because employee contri- butions to the account are exempted from payroll taxes. Evidence suggests that increasing employee choices among existing benefits is a useful but limited strategy for employers and employees. However, the larger ques- tion of the tax-free status of most benefits deserves further attention from policy makers because of the large drain on tax revenues, estimated to reach $171 billion in 1993. There is also some concern about the smaller value that tax-free benefits have for the poor. The panel encourages employers to review the structure of their cur- rent benefit systems, on the basis of needs assessments of current em- ployees and an examination of utilization data on existing benefits. Employers should consider adopting flexible benefit packages, carefully balancing the need for core benefits against the advantages of more choice. Em- ployers should also develop programs to educate employees about new plans. Program Development, Implementation, and Dissemination Throughout this report we have emphasized the diversity of the present work force, the positive as well as the negative consequences of combining work and family responsibilities, and the variation in benefits that employ- ees receive depending on size of firm, degree of unionization, and occupa- tion. Considerable differences in the availability of community resources also influence the need for and the costs of programs that employers might provide. Beyond that, as we have discussed, the terms of employment and the services offered by employers have been determined in part by the culture of the workplace, which includes assumptions about families. Employers and unions are encouraged to reexamine the structure of the current benefit system, and its underlying assumptions, by assessing the needs of current employees, examining the extent to which they use existing benefits, and developing estimates of the short- and long-term costs and benefits of possible new programs. Research has shown that, even when a new program has been adopted, there are often barriers to implementation, as well as sources of support. Among the barriers are usually inertia, igno- rance about innovative new policies, and the heavy weight of traditions that developed when conditions were quite different. Employees report that supervisors and peers who are unsympathetic to

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196 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE family issues contribute to work and family stress. Even when family- supportive policies are in place, a well-understood if unspoken workplace culture suggests that family problems should be left at home. Such nega- tive attitudes tend to inhibit the use of family-related programs. There is evidence in both the United States and Europe that this problem is particu- larly acute for men. Women are more likely to encounter discrimination in hiring, promotions, and training when policies and programs are available only to or utilized only by them. Because changes in an established organization, no matter how useful, are likely to meet with resistance, special efforts are necessary. There is a need for education and training workshops, particularly for top manage- ment and union leaders, whose active participation in developing and imple- menting new programs is crucial for their success. These activities can be facilitated by appointing specifically designated "managers of work and family issues." Universities with extensive facilities for education and training can play a constructive role in developing and staffing such workshops, in dissemi- nating information, especially to students who will be business and union leaders. Business schools in particular could train the next generation of managers to become knowledgeable about family benefits and their impor- tance for a more diverse work force. Land grant institutions, with a long tradition of successful service to agriculture and, more recently, to other sectors, would find this a logical adaptation of their original mission. Em- ployers may become increasingly interested in such assistance if the pre- dicted labor shortage materializes. The panel encourages employers and unions, large and small, to con- duct assessments of employees' needs and opinions to identify problems and desired solutions, to continue to develop innovative programs as needed, and to facilitate program implementation through training programs for managers and education programs for workers. Family- related benefit programs deserve greater priority in collective bargain- ing negotiations. The panel recognizes that some worthwhile programs may be so novel, so high risk, or so expensive to initiate that few firms or unions can under- take them. Examples might be resource and referral services that include quality evaluations of child care and elder care facilities, centers for sick children, or combined centers for children and elderly people. Exhortations and pointing out long-run benefits alone are not likely to prove sufficient incentives to start new programs. The panel encourages federal, state, and local governments to either implement model programs for their own employees or to help finance

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FINDINGS AND CONCLUSIONS 197 them in the private sector. In some instances, large establishments, perhaps with encouragement and cooperation from labor unions, may be able to bear most of the cost, with only modest contributions from government. Because businesses do not always communicate with each other, governments can also play a part in disseminating informa- tion about successful programs. Data Collection and Research In the course of our study, the panel reviewed a broad array of primary and secondary data sets, quantitative and qualitative research, and program and policy evaluation reports. In drawing on those sources in this report, we have noted when the evidence is weak or contradictory and when more information is needed. We found many instances in which additional work would be useful. Rather than develop too ambitious an agenda, however, we urge collection and analysis of additional data only when they are neces- sary for formulating policies and when they are most likely to be cost- effective. A more detailed discussion of data needs appears in Appendix B. Too often the fact that good research requires good data does not re- ceive adequate attention, nor is it always recognized that research is needed to generate better data. On the basis of our review, it is clear that the federal government could improve data collection in two areas in particu- lar. First, the federal government should institutionalize the current longi- tudinal panel studies of households, which have proven useful for much policy research but are currently subject to uncertain funding. Their useful- ness would be enhanced by developing better measures of time use and addi- tional measures of employee benefits and working conditions. Second, more systematic federal data collection procedures by establishment would be helpful, with greater emphasis on small firms and a focus on benefit utilization as well as availability. Developing appropriate confidentiality safeguards is necessary to ensure employer and union participation. In addition, the panel urges researchers and those who fund research to include more work on the following topics: the long-term effects of various approaches to child care on children's development and the extent to which this is an advantage to employers and the community; the use of unpaid family care arrangements for elderly people and people with disabilities; the changing roles of men both at home and at work; the effects of family responsibilities on work performance, including the development of objective measures, rather than only subjective percep- tions, of performance;

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198 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE evaluation of new programs, whether voluntary or legally required, and of demonstration projects, focusing on factors that affect their development and implementation as well as the costs and benefits that result from their adoption; family-oriented policies and programs as well as their outcomes in other industrialized countries; differences in the availability of benefits by occupation, with emphasis on low-income workers; and similarities and differences in work and family issues for members of different ethnic and racial minority groups. Such a diverse but complementary set of data collection and research activities is necessary if satisfactory progress is to be made. For the most part, it is important to build on what has already proven to be fruitful; in that way, the payoff should be high in relation to the relatively modest costs of the activities. In our view, cutting spending for data collection and research is a false economy; the costs of shaping policies without ad- equate information are likely to greatly exceed any short-term savings. ALTERNATIVE PUBLIC POLICIES Although the research base on family and work interaction is not strong, the panel was persuaded over the course of the study that facilitating the combination of work and family increases the well-being of workers and their dependents. It is likely to improve the labor force by increasing employees' commitment and sense of responsibility to their employer and quite possibly their productivity. To the extent that children get a better start, they are expected to become not only better adjusted, more successful individuals rather than misfits, but also more skilled and productive work- ers rather than dropouts, and more reliable citizens rather than a burden on the community. Hence, introducing programs that make it easier for work- ers to do justice both to their job and to their household responsibilities will benefit business and society as well as families. There will, of course, be costs as well. Evaluating public policies for family-related benefits raises broad ques- tions related to tax and regulatory policies. For example, the tax-free status of most benefits is an issue needing further analysis and consideration. Although the panel encourages voluntary programs, we note the important role for government regulations and standards, particularly of dependent care programs, and for some terms of employment. The argument for regulation of dependent care programs (discussed in Chapter 4) is that the recipients of such care are frequently not in a position to judge quality. Although family members responsible for children, eld

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FINDINGS AND CONCLUSIONS 199 erly people, or adults with disabilities may attempt to evaluate institution or program quality, they may lack adequate knowledge and right of entry, just as customers in a restaurant lack the expertise and the right of access of the health inspector. Also, they may have few or no alternatives for care arrangements. Thus, it is not surprising that most states have regulations for minimum standards for nursing homes and child care programs. The argument for regulating terms of employment (discussed in Chapters 5 and 6) has been that governments should be responsible for safeguarding the rights of those with insufficient bargaining power. Thus, wage and hour laws have long set minimum standards for compensation and regulated the schedule and location of work. More recently, discrimination in employ- ment, including the provision of benefits, has been prohibited, as has work at home in some industries. Reaching agreement on appropriate regulatory policies, however, is a very difficult task. There are serious questions about to what extent regula- tors can remain independent of the industry they are regulating. Equally important is the question of who should make decisions with respect to cost and quality trade-offs. Decisions to improve standards must be tem- pered by the additional costs to institutions in meeting higher standards. It does little good to make standards so high that the resulting cost of the product or service is priced beyond the reach of those who need it. Nonetheless, regulations are often considered necessary- for example, other studies have proposed national minimum standards for child care, including required ratios of staff to children and specified amounts of train- ing for caretakers, with actual regulation and enforcement to be done at the state level. Care should be exercised that such regulations do not be- come obstacles to desired flexibility. This may have happened, for ex- ample, with some aspects of the wage and hour laws, as noted in Chapters 5 and 6. The panel did not evaluate all types of government regulations relevant to family-related benefits; we did indicate throughout, however, when review of existing regulations or consideration of new standards is likely to be particularly valuable for policy development. Federal, state, or local governments may require employers to provide certain benefits, for example, leave plans. We are aware that such legally required or mandated programs are controversial (see Chapters 1, 5 and 6~. Opponents take the view that programs advantageous for businesses, or at least not harmful to them, will generally be provided either voluntarily or as a result of employee demands. They further argue that very costly regulations are likely to result in hardships, bankruptcies, less competition, and higher unemployment and therefore ultimately may not be good for anyone. Critics also point out that even when all employers are required to offer the same benefits, so that the playing field seems level, this is not really the case. Small businesses that employ more labor rela

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200 WORK AND FAMILY: POLICIES FOR A CHANGING WORK FORCE live to other resources, and often employ low-skilled workers, are likely to find the same programs far more burdensome than large, more capital- intensive businesses. Small firms have been the source of a large share of new Jobs in recent years. These objections should not be taken lightly, but neither should the value of required programs be ignored. Proponents emphasize that legally re- quired benefits either directly provided through government programs or mandated for private purchase are the only way to ensure that all workers will be covered. In the case of Social Security and unemployment insur- ance, the need to cover all workers is considered more important than the negative effects of requiring participation. Legally required programs pro- tect workers who may not be able to negotiate on equal terms with employ- ers. The decline in union representation since the 1960s means that the proportion of workers with a formal means of pursuing their demands independently has declined. It has also been suggested that firms that cannot afford to pay basic benefits may be poorly managed and inefficient. Thus, the economy might benefit if such firms go out of business and release resources for use in more efficient firms. Finally, it is argued that legally established programs do level the playing field to some extent: they at least ensure that all domes- tic competitors have to offer the same benefits. If the advantages of a legally required program outweigh its disadvantages, it deserves favorable consideration. The evidence from other industrialized countries suggests that they have found a way to support generous benefits without destroy- ing economic competitiveness or healthy growth. One way of avoiding some of these difficulties is to impose mandates but permit exemptions. This approach is part of recent legislation that extended health insurance coverage to former employees and their dependents but excluded employers with fewer than 20 employees; it is also part of most current family-related legislative proposals. But a mandate with exemp- tions does not achieve one of its main purposes: to ensure that everyone in the relevant group is covered. This flaw is particularly serious in the area of work and family benefits, because it is small firms that are usually ex- empted, and they are most likely to pay low wages and offer few benefits. Therefore, the neediest workers would tend to be left out. It is important to emphasize that there are various ways of financing required programs. As previously noted, legal requirements do not mean that employers have to bear all the costs, nor do individual employers have to bear the actuarial cost of funding benefits for their employees. Social Security is paid for by worker and employer taxes: the costs are spread across the entire work force and are not made firm specific. Workers' compensation and unemployment insurance distribute the costs among employers, workers, and taxpayers. Each of the five states with disability

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FINDINGS AND CONCLUSIONS 201 laws that provide all workers with wage replacement does so with a differ- ent funding mechanism; two of them require no employer contribution (see Chapters 4 and 5~. There is little agreement on how to weigh the various arguments for and against mandates and regulations, except for the fact that legal require- ments should not be imposed lightly, and possible negative effects should be carefully weighed. We believe that mandates should be instituted only when uniform coverage is viewed as crucial. Ultimately, if society believes that every worker should receive some minimum benefit, such as workers' compensation, society must be willing to pay for that benefit, if necessary by providing subsidies to some firms and workers. In the absence of clear evidence pointing toward a best option, the panel has not made recommen- dations in this area. SUMMARY The panel has used available information to determine how best to meet the needs of workers and their families while promoting a healthy economy. We have also suggested where additional information would be particularly useful in helping to make future policy decisions. Taken as a whole, our study offers an ambitious agenda for employers and suggests the need for additional public policies. We note, however, that some employers, par- ticularly large firms, are already doing more than is suggested in this report. New programs would nevertheless increase costs for other firms, especially small and labor-intensive ones, as well as for taxpayers and, most likely, consumers. In return, however, the large and growing propor- tion of people with dual responsibilities to work and family would be helped to do justice to both. Greater awareness on the part of all interested parties workers, employ- ers, governments, and the larger community of the extent to which their interests coincide is crucial in meeting workplace challenges. Employers need a productive labor force now, which is possible only if workers are able to cope successfully with dual responsibilities to their families and their jobs. Employers will similarly need a productive, educated future work force, which requires that children be adequately cared for today. Workers need jobs, which can be generated only by firms that are success- ful and competitive. The community is dependent on a healthy economy, which requires government policies that enable it to function both effi- ciently and equitably. Conflicts are inevitable, but there are also enough common interests that much can be achieved by relying not only on altru- ism, but also on the far-sighted self-interest of all the parties involved.