Why Americans Are Losing Out on $28.9 Billion in Wages Due to a Lack of Paid Leave

American families are losing money because of a lack of access to affordable childcare. (Photo: Getty Images)

A new report out by the progressive think tank the Center for American Progress (CAP) shows that America can’t afford to continue its abysmal lack of paid leave policies for working families — literally.

As the report points out, the only current federal law pertaining to leave-taking is the Family Medical Leave Act (FMLA), which was signed into law by President Bill Clinton in 1993. FMLA guarantees certain workers at certain-size companies unpaid leave (up to 12 weeks in a 12-month period). The FMLA was a big step forward in ensuring that people didn’t lose their jobs if they needed to take off work due to an illness, welcoming a new child, or caring for an aging relative. Still, there is a lot left to be desired when it comes to shoring up the security of the American economy via steady wages for the workforce, regardless of the circumstances that people face in their lifetime. About a quarter of American workers who take FMLA do so because of the arrival of a new child, and another 18 percent do so to care for a parent, spouse, or child. Nearly 92 percent of all workers who take family and medical leave ultimately return to work.

According to the CAP report, working families in the U.S. lost out on at least $28.9 billion in wages due to lack of access to affordable childcare (which would allow parents to remain in the workforce instead of being forced out due to their wages not being able to cover their childcare costs) as well as paid family and medical leave.

In most American families, all the adults in the household work, and most children live in homes with working parents. Two-thirds of all children who are younger than kindergarten age live in households where all available parents work. Most families don’t have an adult available to provide constant care for young children and aging parents, and are also coming up short when it comes to making the realities of modern life add up at the end of the month.

Plus, childcare costs are only growing, despite wages staying the same. The average annual cost of center-based care for an infant in the U.S. is $10,000, and families that have both an infant and preschool age child in a childcare center pay more for childcare than the median rent in every single state in the country. So American families are losing no matter how you cut it: Either one adult in the household drops out of the workforce — thus facing diminished lifetime potential earnings — to care for children because of these staggering costs, or, as is more often the case for many low-income families, all available parents remain in the workforce and face huge costs as a result. They wind up losing even more of their wages should they need to take time off to take care of a sick child or parent.

CAP developed an interactive calculator that lets workers see the lifetime wages lost due to time out of the workforce because of childcare needs and expenses. The calculator figures that the average 26-year-old first-time mother who first joined the workforce upon graduating from college at the age of 22, earning $40,000 annually at the time of giving birth, will lose out on approximately $642,000 over the course of her career thanks to lost wages, depressed future wage growth, and lost retirement savings if she takes five years off to care for her child, as opposed to paying someone else to do it. CAP also calculates that American workers between the ages of 18 and 64 lose out on $8.2 billion in wages annually due to a lack of affordable childcare and paid family leave. Even families who see a parent take on part-time work to help lessen the cost of childcare lose out on $522 million annually, the group says. And 96 percent of those who work part-time due to childcare, unsurprisingly, are women.

But wait, there’s more — American families also lose out on $1.7 billion in wages annually because of unpaid parental leave and $3.8 billion in partially paid wages as a result of only 13 percent of all American workers having access to paid family leave. And the lost wages of parents who become unemployed as a result of a lack of paid parental leave is a staggering $73 million each year.

But of course, caring for children isn’t the only reason that American workers need time off from work. Thanks to the large population of aging baby boomers, the amount of adults needing long-term care services is expected to double from 12 million Americans in 2010 to 27 million Americans in 2050. Yet the number of available adult caregivers is expected to decrease by more than half in that same period, from seven adults between the ages of 45 to 64 for every adult over the age of 80 in 2010 to three adults between the ages of 45 to 64 for every adult over the age of 80 in 2040. All of this translates into more adults in the workforce needing to care for aging parents.

And it isn’t just women who are impacted by these wage losses, especially since the majority of workers who take unpaid leave to care for a parent or ill family member are men. The lost wages of men alone needing to take just 1.2 weeks of leave to care for an ailing family member amounts to close to $552 million in lost wages each year. For both men and women workers, the U.S. sees more than $1.7 billion in lost wages each year because of those needing time off to care for a family member like a sick parent or spouse.

In other words, most Americans who need time to care for a child or other relative are also Americans who work — and want and do continue to work after taking time off. According to the CAP report, people of color, workers in the service industry, low-wage workers, and young workers are all less likely to have access to any form of paid leave or job flexibility that allows them to stay employed while juggling care-taking responsibilities for their families. And so without a real plan for paid family leave in place — and one that accounts for all workers, and not just women in need of maternity leave after physically giving birth to a child — the American economy will only be stifled. Bringing more people more paid leave, however, will only unlock huge economic opportunity and stimulus, better benefiting us all.

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