The American Consumer Institute’s Surveys Consumers on Unpaid Leave
The Family Medical Leave Act (FMLA) provides workers with unpaid leave in cases of major family emergency. While the Act is crucial in helping workers deal with unpredictable family hardships, reports of chronic abuse of FMLA rules put workers with a legitimate need for emergency leave in jeopardy. In addition, apparent abuse and fraud of some is resulting in billions of dollars of costs to businesses, costs that businesses eventually recoup by charging consumers higher prices for goods and services. This ConsumerGram finds the percent of fraud and abuse to be significant, and concludes that the Department of Labor needs to fix its rules so that legitimate leave is permitted and workers are protected, while limiting fraud that harms consumers.
Billions of Dollars of Added Costs
In 1993 Congress pass the FMLA to protect workers by allowing them to take unpaid leave from their jobs in the case a major emergency, such as an illness of a family member. In this way, workers are able to deal with their hardship and come back to their job as things become settled. However, the lack of clarity in the Department of Labor’s rules has allowed some workers to take leave for questionable reasons, exaggerated illnesses and non-emergencies. Suggestive of systematic abuse, the incidence of FMLA use is not evenly spread among industries; and, according to the Employment Policy Foundation, 35% of workers who take FMLA will do so more than once per year, and 5% will have 15 or more episodes in one year. Abuse puts in jeopardy those workers who legitimately need leave for emergencies. Furthermore, when productive workers are needed to cover those on leave, stress, hardship and coworker resentment develops and teamwork suffers.
Just as consumer fraud, shoplifting and taxes all creep into the daily prices that consumers pay for goods and services, so does the waste from FMLA abuse. Not only do productive workers stand to suffer from FMLA abuse, so do consumers.
Empirical Evidence: Consumer Effects
A recent paper by Larry Darby and Joseph Fuhr (Benefits and Costs of the Family Medical Leave Act of 1993: A Consumer Welfare Perspective, Feb. 16, 2007), finds that the FMLA program results in over $30 billion in economic losses to consumers, or about $666 per household in a five-year periods. The authors state “the cost of implementation of the Act is effectively a dead weight economic loss that reflects economic waste and confers very limited benefit on all but a few stakeholders.” In other words, the costs of FMLA outweigh the benefits.
The American Consumer Institute’s 2007 Consumer Pulse survey included two FMLA-related questions for consumers. First, we asked 800 consumers if they knew anyone who has taken unpaid leave as allowed for by FMLA. Of the 800 consumers that we asked, 70% responded “no” and 28% responded “yes” (with remaining consumers not answering). We then asked those responding “yes” if they knew or suspected anyone of taking unpaid family medical leave in a non-emergency. To our surprise 20% responded ‘yes.” In other words, one in five consumers suspect or are aware of someone who abused FMLA leave. If these consumers are right, then the cost of FMLA on the industry and consumer is indeed sizable as estimated by Drs. Darby and Fuhr. However, even if some of these consumers are all wrong, there is still a perception that FMLA abuse is rampant, which undermines the productivity and efficiency of the workplace. Either way, consumers lose, as waste and abuse leads to higher prices for goods and services.
Solution: Clarify FMLA Rules
The Department of Labor should take quick steps to remove any ambiguity from the law. By making rules clarify what leave is permissible under FMLA, worker rights can be protected and consumers harm reduced.
Technical Note on the 2007 Consumer Pulse Survey
The American Consumer Institute’s 2007 Consumer Pulse Survey is based on a scientifically drawn (random and stratified) sample of 800 consumers using well-accepted and rigorous statistical methods, and the survey’s results accurately reflect national opinions of consumers. The sample population was drawn in proportion to the U.S. population, using the most widely used database for survey research. Telephone calls were administered using random digit dialing. Hispanic translation and interviewing was available, as needed. The sample size for the 2007 Consumer Pulse Survey is sufficiently high to permit statements with reasonable statistical accuracy. At a 95% confidence level, a sample of 800 consumers provides a confidence interval of ± 3.46%, in a worse case. Finally, the results were cross-tabulated by demographic and other relevant factors, including political party.