Americans need paid leave throughout their working lives to ensure they can pay their bills when a serious health need strikes, a new child arrives, or military deployment looms. Recognizing this, states across the country are looking to start their own paid leave programs or build upon programs that already exist—even as work continues in the fight for paid leave at the federal level. Yet it is also important to recognize, particularly as some congressional Republicans such as the House Republican Study Committee discuss cuts to Medicare and Social Security, that paid leave’s positive effects on economic security go far beyond individuals’ immediate periods of need. Paid leave helps working families—and particularly women—stay on track for secure and prosperous retirements.
Paid leave keeps people in the workforce
Paid leave is a proven tool to keep workers connected to the workforce throughout their lives. When women have access to paid leave after giving birth, they are more likely to be working a year after the birth and continue to have greater labor force participation down the line. Paid leave can also increase labor force participation for those caring for seriously ill loved ones, especially for women caregivers. And paid leave can help people with serious health conditions such as cancer keep their jobs; this need is especially acute given that nearly 1 in 3 people with serious illnesses report having lost a job or needing to change jobs as a result of their health condition.
Moreover, paid leave can help workers avoid unwanted and unplanned early retirement. Significant changes in workers’ health or their health’s impact on their ability to work are the biggest drivers of early retirement. Similarly, 1 in 10 caregivers report having to retire early or give up work altogether due to caregiving responsibilities—something that is particularly concerning given the overrepresentation of women and Black people among caregivers, as these populations have lower levels of wealth overall. By giving workers more options through which to balance work with health and caregiving responsibilities, paid leave can reduce early retirements for those who wish to keep working.
Paid leave not only supports more time in the workforce but also earnings while working. Women who take paid leave to give birth are more likely to report wage increases in the year after giving birth. More broadly, those who take time out of the workforce, including for health and caregiving needs, face reduced earnings when they return; this is particularly true for women. Paid leave can help workers avoid these lasting earnings penalties.
More time in the workforce means higher Social Security benefits
Greater labor force attachment, in turn, improves economic security in retirement by increasing workers’ Social Security retirement benefits. These benefits are calculated based on how much workers earn and how many years they work, meaning that workers receive higher benefits when they work longer and when they earn more while working. Because paid leave enables workers to take necessary time off and then return to work, it gives them a better chance to accumulate additional years of work and higher earnings in those years, and thus receive higher Social Security benefits when they choose to retire. Retiring later can also lead to higher Social Security benefits, compounding the positive impact of enhancing workers’ ability to work until their preferred retirement date.
Increasing Social Security retirement benefits would have a direct and profound impact on retirees’ economic security. For millions of current retirees—especially Black and Hispanic retirees, and Black and Hispanic women in particular, Social Security benefits are the primary or sole source of income. And Social Security will be no less critical for future retirees. According to Center for American Progress calculations using data from the Federal Reserve’s Survey of Consumer Finances, half of all women and 42 percent of all men have no private retirement savings.
Universal access to paid leave could particularly benefit those who most need robust Social Security benefits. Today, women—and especially women of color—are more likely than men to rely on Social Security as their sole source of retirement income, yet they receive less in benefits. The established benefits of paid leave for women’s labor force participation, particularly when it comes to childbirth and caregiving, could translate directly into much-needed higher Social Security retirement benefits.
Paid leave can support and protect private retirement savings
Outside of Social Security, paid leave can help workers save for retirement by keeping them in the labor force. When people are able to take the leave they need and then return to work, they have more opportunities to save for retirement. Moreover, paid leave can reduce financial strains that make it difficult to save. For example, paid leave may help reduce some of the negative financial impacts of caregiving and, by extension, mitigate the negative impacts of caregiving on retirement savings. This is especially important for gender equity: Among people with some private retirement savings, women’s savings lag far behind those of men.
Paid leave also protects the savings that workers have already accumulated. In times of financial stress, workers without sufficient other savings to rely upon may be forced to draw upon their retirement savings for nonretirement needs, with potentially detrimental long-term financial effects. Paid leave can be most beneficial in some of the situations that are especially likely to result in early withdrawals. For example, 21 percent of primary caregivers report having taken early withdrawal from retirement savings as a result of caregiving; having a sick or disabled spouse corresponds to a much greater likelihood of having loans against one’s 401(k) retirement savings. Poor health also often contributes to early withdrawals or loans from retirement savings. Income through paid leave offers an alternative to these actions, protecting workers’ long-term financial security.
In addition, when workers must retire earlier than planned and thus have less time to build their savings, they must stretch those reduced savings over a longer period of time. By empowering more workers to continue working if they wish to, paid leave supports a more comfortable and secure retirement. This can be especially important for women, who live longer than men, on average, and therefore, must make smaller savings last longer.
Conclusion
Paid leave for all workers would be a unique and powerful investment in Americans’ economic security throughout their lifetimes, especially for women. Despite what some dangerous recent proposals suggest, paid leave and retirement security are not and should not be in conflict. On the contrary, paid leave reinforces and supports retirement security. For this and so many other reasons, universal paid leave is a critical bridge to a stronger and more just economy.
The author would like to thank Beth Almeida, Maggie Jo Buchanan, Lynn Conell-Price, Amina Khalique, and Alex List for their assistance with this column.
This article was published by the Center for American Progress.
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