The Promise of Family Leave in Colorado

Background

In 2019, Colorado considered creation of a statewide social insurance program to provide partial wage replacement and job protection for workers in need of leave for family care or medical reasons. We undertook an analysis of potential costs and benefits of the proposed program to better understand how the program would affect workers and families across the state.  

Methods

Using data from the 2017 American Community Survey (ACS), we identified the number of workers likely to be eligible for the FAMLI program based on details made available by the bill sponsors. We calculated likely utilization rates, based on utilization experience from three states with statewide family and medical insurance programs: CA, NJ, and RI, and taking into account the differences in characteristics across these programs. We then calculated average weekly and total benefits based on Colorado-specific wage data, and assessed the level of premiums that would be needed to fully fund the program. 

Results

We estimate that approximately 5% of eligible workers per year are likely to access leave benefits, with an average weekly benefit of about $670. To fund the program, workers and private-sector employers will each need to contribute about .34% of wages each year. At this premium rate, the program will be able to fully fund a wage replacement scheme that matches or comes close to matching wages of the lowest earners, with a maximum weekly benefit cap of either $1000 or $1200/week. 

Because the proposal requires both workers and employers to contribute to the insurance fund, employers will experience modest increases in payroll costs. However, firms with an employee who takes leave will save the cost of that employee’s salary for the duration of the leave period. This savings on wages will help to offset the cost of hiring a temporary worker or paying overtime to other employees. Additional savings will result from lower turnover costs, which would likely offset the increased payroll taxes among employers with workers who take leave. Furthermore, as previous research indicates, the existence of a paid leave benefit may have positive effects on worker morale and productivity across the economy.

Implications

Overall, we conclude that the program is feasible and is likely to bring a number of important benefits to workers and employers across the state, in exchange for a modest investment in the form of premium contributions. Although the lowest income workers will have the smallest average benefit in terms of dollars received, the benefit structure is progressive, with lower income workers receiving a larger proportion of their average weekly wages. Furthermore, low-income workers are least likely to have access to any paid time off from work. Therefore, they and their children more likely to experience significant benefits in terms of improved health, decreased financial strain, and increased likelihood to have income above the poverty threshold one year after taking leave. We will discuss implications of the program structure for vulnerable workers and highlight gaps in the research about how paid leave impacts households, employers, and states.