Editor’s Note: The following testimony opposing paid leave was delivered to the State House by AIM today. The testimony was provided to the Joint Committee on Labor and Workforce Development regarding HB 2172 and SB 1048.
My name is John R. Regan, Executive Vice President of Government Affairs for Associated Industries of Massachusetts (AIM.); the state’s largest nonprofit, nonpartisan association of Massachusetts’ employers.
With thousands of members employing nearly one out of every five workers in Massachusetts, AIM’s mission is to promote the well-being of its members and the prosperity of the Commonwealth of Massachusetts by improving the economic climate, proactively advocating fair and equitable public policy, and providing relevant, reliable information and excellent services.
Thank you for the opportunity to present our testimony today.
We respectfully ask that HB 2172, SB 1048, and any similar bills receive adverse reports from this Committee.
We agree with the proponents of these bills that Massachusetts’ citizens need to balance the needs of work and family. In fact, according to the 2016 AIM Benefit Survey, 87% of responding companies offer short-term disability to their employees with benefits ranging from 51 to 70% salary replacement; 79% offer long-term disability insurance and 59% have a leave of absence policy, all in addition to the leave benefits under FMLA.
However, we do not agree, and do not believe, that the legislation before you is a reasonable, manageable, or affordable approach to address those needs, either from an employee or employer perspective.
Last session, we asked a series of questions that we would like to ask this Committee again.
We strongly believe that the Committee should have answers to each of these questions before any bill can be reasonably released from your consideration. (For this portion of our testimony, we will be using section references to the language of Senate 1048. Similar language and concepts are found in the House bill as well.)
- Section 2, of the proposed new Chapter 175M, creates a new office within the Executive Office of Labor will be created to administer the new leave program for the Commonwealth; does the Committee know the costs associated with this new office?1
- Sections 3 & 4 creates the benefit durations and levels of wage replacement for the leave program; does the Committee know what the estimated take-up rate is for individuals taking both the maternity leave and disability leave? For cost estimating purposes, take-up rates per program are critical to know.
- Further, what is the Committee’s estimate of the total program costs incurred by employers and the Commonwealth for administering this program and providing these new benefits?2
- In Section 8, the director of the fund is charged with “assessing” the tax to fund this new program. Is this Committee aware of any precedent for the creation of this type program as well as the power to set and raise revenue by a non-elected individual? Are we sure that this is constitutional?
- The director will become responsible for numerous operational duties in managing the funds related to this bill. Is there a cost estimate for this function?
- In addition, has anyone determined what the tax assessment per employee might be for this program and, if so, could we see that analysis?3
- Lastly, the bill requires that claims for family and medical leave benefits shall be filed with the department and handled under the procedures prescribed in sections 1, 10, 11, 12, 14, 15, and 16 of chapter 30A. Is there an estimate of the number of claims to be adjudicated and the costs for that process?4
The terms of this legislation are far-reaching. Although the initial implementation in January of 2019 would require 50% salary replacement levels, that level is increased to 90% by January of 2021 and the average weekly wage is then tied to the Consumer Price Index for the Boston-Cambridge-Quincy consolidated metropolitan statistical area. Not only is this an extraordinarily high rate of compensation, but it also derives the wage rate from on the area of the Commonwealth with the most expensive cost of living. This will not accurately reflect the economic complexity of different areas in Massachusetts, placing an undue burden on employers and employees living in less costly areas.
Of late, many have wondered why with a recovered economy and lower unemployment rates Massachusetts own-source revenue continues to fall below even relatively conservative benchmark levels. One reason cited by our members is lack of wage growth.
According to the Pew Charitable Trust, personal income growth in Massachusetts has only grown by 2.0% since Q4 of 2007.5 Employers in the Commonwealth are faced with considerable non-wage job costs for health care, unemployment insurance, workers compensation insurance, and other Massachusetts-only high costs, like electricity rates. Combine these with higher than average base wage costs, and you restrict employers’ ability to raise wages in a manner similar to other post-recessionary recovery periods.
Inevitably and necessarily, this lack of wage growth affects tax revenue growth for Massachusetts.
A new, and expensive paid family and medical leave program, as envisioned by these bills, will contribute to a diminished pool from which to fund additional jobs and additional wage growth.