Family Leave Expansion Is Good for Business, Improving Retention and Reducing Labor Costs

Testimony from NJPP Senior Policy Analyst Peter Chen in support of expanding New Jersey's Paid Family Leave protection.

Published on Feb 6, 2024 in Economic Justice

Good morning, Chair and thank you to the committee for allowing me to testify today. Despite lobbyist claims to the contrary, family leave expansion is good for business, improving retention and reducing labor costs.

1) When family leave and job protection expand, businesses show no negative effects and report slightly positive impact on employer ability to deal with employee absences. Two large studies on employers in states with paid leave show that the vast majority of businesses show no negative impact on their business operations. Most employers report positive or “no effect” on business outcomes. Smaller businesses were actually less likely to report negative effects.

New Jersey-specific research from the initial implementation of paid leave showed similar results, showing minimal impact on profitability, productivity, or turnover after paid leave

2) Most businesses support, rather than oppose, expansions in family leave protection. Despite business interest group opposition to paid leave expansion, surveys of actual businesses routinely show majority support for increasing paid family leave. In one poll from 2017, surveyed small business owners (who were disproportionately white, male, and Republican) showed 71% support for expanding job protection to smaller businesses.

3) Family leave use helps, rather than hurts, small businesses. Research from other states shows that small firms experience a reduction in labor costs when workers use paid leave.

As prior testimony and legislator statements made clear, turnover at small firms can be much more damaging than at large firms where employees are more easily replaced. But this actually militates in favor of family leave job protection at small firms, because encouraging paid leave lowers turnover and increases retention of employees. When leave was implemented, wage costs did not go up, while turnover rates went down, with no effect on firm closure.

The doomsday scenarios painted by the business lobby have not come to pass in previous family leave and job protection expansion, nor in states without New Jersey’s onerous job protection restrictions.

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