The Daily News of Los Angeles
August 21, 2002 Wednesday, Valley Edition


BYLINE: Shirley Svorny, Local View

CONCERNED about family members who must care for sick relatives or a new child, California state Sen. Sheila Kuehl has proposed state-mandated insurance that would fund up to 12 weeks of paid leave annually for private-sector workers.

Senate Bill 1661 has passed the Senate and is being considered by the state Assembly.

Not surprising, business owners oppose the legislation. It's hard to keep things running smoothly if employees take weeks off from work. They fear the loss in efficiency would make it hard for California firms to compete in world markets. Other nasty side effects include lower wages, discrimination against women in hiring and job loss.

With only a doctor's signature required to verify a serious illness, experience tells us that this benefit will be sorely abused.

Most individuals have the ability to deal with family emergencies without government assistance. They can set aside the equivalent of several months' income, just in case.

Even with the new paid leave program, many workers will be reluctant to take time off. It is risky to miss a lot of work, legal or not. Promotions and coveted job assignments don't go to unreliable workers, no matter what the reason.

One rallying point for those behind this legislation is that many other developed nations mandate paid leave. However, legislation of this sort is not good for an economy.

To some extent, the strength of the U.S. economy can be attributed to our unwillingness to buy into programs of this sort that are costly and subject to abuse.

Economists attribute the lack of job creation in Europe over the last 20 years to excessive regulation of labor markets.

We don't want to follow in those footsteps.

Although the legislation mandates that payments be split between employers and employees, workers would bear the lion's share of the costs.

The insurance premium is effectively a payroll tax. Researchers have found that a large share of payroll taxes come out of workers' wages over time.

If the legislation passes, new or growing firms, thinking about locating in California, will have second thoughts. Leading the country with costly labor legislation is not the best way to attract firms to the state.

Both job creation and wage growth will be adversely affected. Women shouldn't be too quick to support this legislation. Firms may be unwilling to hire women who are more likely to take time off to care for a sick relative or new child.

MIT economist Jonathan Gruber studied the effect of mandates that required health insurance plans to cover childbearing. He found the wages of the targeted group to be negatively affected by the health care mandates.

Despite the best of intentions, the reality is that this program would work against working women, who generally tend to sick family members and care for children.

Mandated benefits and job security sound good until you consider the consequences - fraud, production inefficiencies, lower wages, discrimination in hiring, and lagging job creation.

For most people, heeding the advice of financial planners, who suggest a cushion of several months' pay in a savings account, should be sufficient to pull them through tough times.

For those who encounter major disruption in their lives, or for those who can't afford to save, there are other assistance programs - both private and public - to help.

Shirley Svorny is a professor of economics at California State University, Northridge.