Dr. Aparna Mathur
American Enterprise Institute
You have long championed government action to increase the number of workers whose fringe benefits include paid family leave. Just yesterday you wrote that “Republican lawmakers are taking a ‘giant leap forward’” by offering “proposals to fund paid family leave.”
I’ve a question: why do you think that the amount of paid family leave currently supplied on the market is inadequate? Looking through your writings on this topic I find no credible explanation of why you presume that the market fails to deliver optimal amounts of paid family leave.
It’s true that the U.S. is the only government of an industrialized nation that does not mandate paid leave. It’s true also that many polls show that workers would like more paid leave. And it’s true that if more workers had paid leave more workers would take such leave and, thus, spend more time with their families. But these truths signal no market failure. These truths do not begin to establish an economically sound case for government action designed to increase the supply of paid family leave.
I myself can imagine no reason to suppose that on this front the market fails. While my imagination perhaps is faulty, before I and other economists accept your plea for the government to arrange for more paid leave, it is reasonable to ask you – a professional economist – to offer an explanation, based in solid economic reasoning, of why the market fails to supply optimal amounts of paid leave.
Is there a Pareto-relevant externality that prompts workers to demand too little – or employers to supply too little – paid leave? Is the labor market distorted by information asymmetries, ones that cause paid leave to be uniquely undersupplied? Or are workers generally just too ignorant to understand their own best interests?
Finally, if in America’s competitive labor markets paid leave truly is undersupplied, it must also be true that some other form of worker pay is over-supplied. Can you tell us what form of pay you believe is over-supplied? Is it take-home wages? Employer contributions to worker pensions? Worker training?
Unless you can answer these questions, very few competent economists will support your effort to promote more paid leave.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030