San Francisco just became the first city in the US to ensure 100% paid leave for new parents. This covers both mothers and/or fathers. This new rule is effective January 1, 2017 for employers with more than 50 employees. Companies with between 20 and 49 employees have until January 1, 2018. While this is a great thing, is it just another reason to avoid hiring Millennials? Perhaps this is all a conspiracy to improve the long-term retention of baby boomers. 55% of parental pay was already covered by a statewide initiative. Companies will be responsible for covering the other 45% of pay. In other words, companies will pay 45% of 11.5% staff members who become parents. For a person who makes $50,000, the company will need to cover about $2,600 for work not actually performed while the person is on leave.
Potential unintended consequences
People who wish to get pregnant will move in droves to the most expensive city in the US for the opportunity to get less than a month’s worth of rent in extra pay. (Seems highly unlikely)
Companies make an effort to hire more people who have no intention or ability to have children. (Also, seems unlikely)
Some employees may start to have four or five kids every year to get 24 weeks off and an extra $10,000. (Not biologically possible)
Companies who have the ability may move out of the city altogether. (This might actually happen)
Potential realistic consequences
Let’s start with the fact that six-weeks doesn’t cover enough time for a baby to become fully independent and begin to fend for itself. (Although as a parent of a toddler, I am pretty sure my son was ready to go out on his own before he turned two months old.) My guess is that this will simply lessen the initial burden of parenthood in a land where nearly every family is a “two-job” family. The cost to large companies won’t be more than a blip on their radar. Smaller companies working at the razors edge of subsistence may find this to be the final straw for existing in San Francisco.
Parents may find it possible to have the time and money to rearrange their lives to accommodate a new child and then return to work invigorated with a new sense of purpose.
Small companies may find it difficult to cover San Francisco’s unique health care requirement, parental leave requirement, high taxes and famously high real estate costs. The real question is whether the increasingly well paid tech workers living in the city will be willing to pay the extra cost of keeping small businesses local.
Of course, there is also the possibility that the tech bubble bursts and the well-paid workers evacuate to the cheaper suburbs, leaving San Francisco with an unbearable problem for businesses that cannot leave easily.
To be a bit more expansive
It is kind of ironic that US companies constantly complain that more taxes, more regulation, more pay and more just about anything, will make them less competitive in the global marketplace, because the US is at the bottom when it comes to taking care of parents. In fact, many high tech companies provide impressive parental benefits in addition to great pay, equity compensation and fantastic work environments. It will surprise no one that our most competitive (and usually dominating) companies are also the companies who provide truly “world class” pay and benefits.
So, short of hiring people who will not have children and making sure that they do not hire two individuals that may co-parent a future child (doubling the company cost) San Francisco businesses will be forced to pass this additional cost on to their customers.
Is it worth it to you as a consumer, to help fund the cost of this or is this simply another way of making today’s businesses less competitive?