The Allegheny County, PA Council is considering an ordinance that would institute a drastic paid parental leave mandate for local employers.
Labor leaders and other activists say it’s going to grow the county economy and “strengthen” the county’s workforce at a “minimal cost.” New EPI analysis shows it could come with higher-than-expected costs and negative job impacts. Local employers are already planning to downsize or expand outside the county if the proposal takes effect.
To understand the impact of this proposal on employers and workers in Allegheny County, EPI analyzed six years of U.S. Census Bureau data to determine who would be eligible for this new policy compared to existing employer offerings, and what that impact might cost.
See more details on the methodology here.
“Not Sustainable” For Allegheny County Businesses
Allegheny County’s proposal would make it one of the most extensive leave mandates in the country, placing unprecedented new costs on local employers. For all employers with 15 or more employees, the proposal would mandate:
- 12 weeks of paid parental leave at 100% pay for eligible employees;
- Eligible employees include those on the job for at least 6 months, or 625 logged hours for part-time workers.
- Federal or state agency employees would not be eligible for the policy.
Unlike other areas that mandate similar requirements, the Allegheny County proposal fully places the cost on employers’ own funds. Other states typically require employees and employers to share the cost, or have significantly more-modest employer-funded mandates.
As County lawmakers have debated the size and scope of this policy, employers have raised serious concerns. In the Pittsburgh Post-Gazette, one small restaurant owner called the proposal “not something that can be sustainable in the long-term,” and another warned “I will go out of business.”
Estimated Cost To Employers
EPI estimates the proposal could cost $297.1 million annually in total for employers across the county to implement. Even if you account for paid leave that employers already offer, which may be compatible with the new mandate, the total new cost to Allegheny County employers comes out to $219.7 million a year.*
This estimate is nearly 100 percent higher than the projected annual cost estimate published by the Keystone Research Center, a think tank funded by some of the same unions behind the Allegheny paid leave push. The group claims the proposal would carry a “minimal cost” of $112 million annually. While Pennsylvania employers might dispute the notion that a $112 million new mandate is minimal, the Keystone paper dramatically underestimates the true cost to employers. For example, it relies on a questionable “economic benefits” calculation that wipes nearly $50 million annually off of the total cost – based on a flawed formula that assumes any new mandate, no matter how severe, will generate new economic activity.
Potential Job Loss Impacts
Taking into account the annual cost, and the impact that previous workplace mandates have had on employment, we estimate the proposed policy could cost anywhere from 800 to as much as 1,500 jobs in Allegheny County.
A more-detailed explanation of the jobs impact modeling, based on methodology developed by the Congressional Budget Office, is available here.
These estimates are based on Allegheny County’s existing businesses and employees and how they would be affected by this proposal. It does not take into account other economic consequences such a cost increase could cause, including businesses slowing down hiring and eliminating future job opportunities, businesses deciding expand outside the county, or raising prices on local consumers.
A new survey of local businesses published by CorCom, Inc. confirms a large majority of local businesses believe there will be negative financial impacts for their operations, and may explore a variety of channels to adjust to the proposed policy:
- A quarter (24%) of surveyed local businesses expect to eliminate full-time jobs, and 15% expect to eliminate part-time positions;
- One-third (33%) say they would be more likely to open future locations outside Allegheny County;
- Nearly one-third (29%) say they expect to relocate employees outside Allegheny County; and
- 40% of local businesses expect to reduce hiring of new full-time employees.
Survey results show the costs would not stop at just businesses – local consumers would experience greater costs too. A majority of surveyed employers said they expect to raise their prices to adjust to the proposal. That means that like a mandated minimum wage hike, it could increase the local cost of living for Allegheny County residents.
Conclusion
The question surrounding Allegheny County’s paid parental leave proposal is not about whether it will cost the county and its businesses, it’s about how much it will cost them.
Even the Keystone Research Center estimates this will cost local employers over $100 million every year. EPI’s calculations suggest the costs could be closer to $300 million.
That isn’t “minimal,” it can be business-altering for employers who will be saddled with this proposed mandate. A majority are saying the proposal would negatively impact their operations, and may engage a variety of changes to adjust to these new higher costs.
*DATA NOTES:
(1) Of the estimated cost, roughly $20 million is borne by state and local government agencies. Local governments, whose employees comprise roughly 92 percent of this category, will shoulder most of the burden.
(2) This estimate is sensitive to model assumptions and could be an upper or lower bound. For example, the available data for this analysis does not distinguish by employer size, which may result in a modest overestimate of the cost. Other the other hand, the model also does not account for greater-than-average use of the policy, which could cause this estimate to be a lower bound.