NOTE: This is an advance summary of NJPP’s forthcoming report on how to improve New Jersey’s Family Leave Insurance program.
In 2008, New Jersey became the second state to adopt a paid family leave policy. Nearly a decade into the Family Leave Insurance (FLI) program, it’s a clear success, having covered millions in lost wages for tens of thousands of New Jerseyans who needed to take time off to be with a newborn or sick family member.
Yet too many New Jerseyans are missing out on the benefits of paid family leave.
For many, the wage replacement level is so low that even with the program, families can’t afford to take time off. This is especially true for workers at the bottom of pay scale, though middle and even upper middle class families are affected in high-cost New Jersey. Meanwhile, many people don’t participate because they simply haven’t been made aware that they are eligible. The result: many workers are not taking time they need time to care for newborns or sick family members, with detrimental consequences for workers, their loved ones, their employers and the economy.
With relatively modest tweaks, New Jersey lawmakers could make the state’s trailblazing paid family leave policy work even better for the state’s working families, enabling more New Jerseyans to fulfill urgent caregiving needs without slipping deeper into financial hardship.
Key Findings
From mid 2009 through 2015, more than 200,000 FLI claims were approved, paying out $507.1 million in benefits. Most claims (81%) have been for bonding with a new child. Just 18% have been used to care for an ill family member.
New Jersey’s wage replacement levels put many workers below the poverty level during their leaves, and push people already living in poverty deeper into poverty. This structure punishes workers at the bottom of the pay scale, for whom every dollar counts. It also makes paid family leave unaffordable even for many workers in the middle or upper-middle range, who are often still living paycheck to paycheck in high-cost New Jersey. Because of the low cap on wages, workers currently earning more than $922.50 a week – or about $48,000 a year – who need time off face the prospect of having less than two-thirds of their wages replaced. New Jersey’s cap is far lower than that in the other states with functioning paid family leave programs. In California and Rhode Island – also expensive states to live in – the weekly cap is $1,129 and $795 respectively – both well above New Jersey’s cap of $615.
Participation in New Jersey’s Family Leave Insurance program is very low, in large part because so many workers can’t afford to take it. The estimated usage rate of New Jersey Family Leave Insurance for bonding with a newborn or newly adopted child is 12%. This is lower than in California (17%) and Rhode Island (13%). What’s more, while participation in those states has grown over time as more people become aware of the program, in New Jersey participation has stagnated.
Few men are taking paid family leave in New Jersey, particularly for bonding with a child. While this can be attributed to factors including cultural norms, lack of awareness, and absence of job protection, New Jersey’s inadequate wage replacements play a clear role. With men earning $12,000 a year more on average than women in New Jersey, many working men stand to lose larger chunks of their take-home pay by taking paid family leave. Put another way, men face a disproportionate disincentive to take paid time off to care for newborns or sick loved ones, reinforcing a norm in which caregiving responsibility is disproportionately assumed by women – and which contributes to long-term pay disparities between working mothers and working fathers. Overall, men comprise just 14% of paid leave claims in New Jersey – far lower than in California (31%) and Rhode Island (32%).
Recommendations
New Jersey must increase its wage replacement rate and wage cap. The cap needs to be raised to at least the amount a single adult and one child needs to get by in New Jersey. To do this, the cap needs to be set at 90% of the preceding two-year average weekly wage. For example, the cap in 2017 would be $1,073, 90% of the average weekly salary in 2015. Workers making on average less than the adjusted cap per week would receive 100% of their incomes for the weeks they are on leave. Workers making on average more than the adjusted cap would receive 90% of their incomes up to the adjusted cap.
The expansion of paid leave could easily be paid for by very modestly expanding the small contributions that are deducted from New Jersey workers’ paychecks. In 2016, each worker contributes 0.08% of his or her weekly salary only on the first $32,600 a year. The most any worker can pay into the program is currently $26.08 a year – about 50 cents a week. If usage soars to 20% and workers took all six weeks of leave, the increased cost would be approximately $180 million per year. This could be covered by lifting the taxable wage ceiling to $51,250 a year and increasing the payroll tax rate to 0.11%. The most that would come out of workers’ paychecks would be $56.38 a year – or about $1 a week.
Even after adjusting the worker contributions, New Jersey workers would still be paying in far less than workers in other states.
In addition, New Jersey can improve its paid leave program by:
- Ensuring paid leave is job protected
- Barring employers from forcing workers to use vacation and sick time before paid leave
- Increasing outreach so more workers know about, and understand, the program
- Increasing the number of weeks workers can take to 12 from 6
