Paid Leave Policy and Shocks to Financial Strains during COVID-19

Background and Purpose: During the COVID-19 pandemic, the majority of American families experienced some combination of health exposure to the virus, major changes at work (e.g., layoffs, remote working), and disruptions at home with shifts to remote learning. Workers with access to paid sick or family leave were able to take time from work to attend to their health or care for family. This study seeks to understand the extent to which access to paid sick/family leave from work moderated the financial strain experienced by so many during the COVID-19 pandemic. We first describe how financial strains changed over the early period of the pandemic. We then develop a typology of pandemic-related disruptions to the family system and estimate how these disruptions related to changes in financial strain. Third, we test the extent to which having access to employer-provided paid sick/family leave moderated COVID-19’s impact on financial strain.

Methods: This study used data from the nationally-representative Socioeconomic Impact of COVID-19 Survey administered by the Social Policy Institute at Washington University in St. Louis. The survey tracked approximately 5,500 individuals in fifty states across five waves (beginning April-May, 2020 ending in May-June, 2021). Data were restricted to waves 1 through 3 to capture the exogenous shock of early COVID-19 prior to the distribution the Economic Impact Payments in December 2020/January 2021 and March 2021. We analyzed two commonly used indicators of financial strain (1) difficulty meeting financial obligations (e.g., housing, bills, medical appointments, etc.) and (2) use of alternative financial resources. We generated three indicators of COVID-19 disruptions: direct health-related exposure, indirect work-related and indirect care-related. Survey respondents indicated whether or not their employer provided paid sick leave or paid family leave. We employed descriptive analysis and linear probability modeling. In the full paper we also provide results from fixed effects regression models.

Results: Across the three waves of the early pandemic, we observed an increase in reported financial strain (14.5% at wave 1 to 18.5% at wave 3) and the prevalence of multiple financial strains (6.7% at wave 1 to 10.6% at wave 3). Families affected by COVID-19 through health, employment, or care shocks were all significantly more likely to experience financial strains. Interaction models showed that access to paid leave moderated the COVID-19’s effects on financial strain: families with access to uninterrupted paid leave, compared to those without, experienced a statistically significantly lower likelihood financial strain (27 percentage point difference for health; 23 percentage point difference for care shocks, p < .001).

Conclusions and Implications: This paper is among the first to document how financial strain changed over time in the early months of the pandemic. We show that strains increased, primarily among socio-economically marginalized groups and that these strains were largely explained by the direct and indirect shocks brought about by the pandemic. In observing that family and medical leave moderates health and care shocks specifically, we add further evidence to the ongoing policy debates on the benefits of expanding paid leave.