Amy Traub

Paid Leave or Bust!

A new study from Harvard University researchers finds that 62.1 percent of bankruptcies in 2007 had a medical cause, up from 46.2 percent in 2001. As the researchers note “the financial burden of illness is increasing.” Advocates are correct to point out that this underscores the urgency of a health care overhaul. But it also highlights the need for paid family and medical leave.

According to the study, 40.3 percent of bankrupt households went bust because of income loss due to illness. An income earner got sick and stopped earning a paycheck – or they stopped working to care for a sick loved one – and suddenly they couldn’t pay the mortgage, or for that matter, those mounting medical bills. In most of the world, they’d be guaranteed at least some pay. But not the U.S.

In this country, even baby steps – like the House’s recent measure to guarantee four weeks of paid leave to federal employees who are welcoming a new child – are hard won. As New Jersey Governor Jon Corzine explained at DMI’s Marketplace of Ideas series last fall, enacting a family leave insurance system in his state took twelve years of legislative wrangling, despite strong popular support. Business organizations were vehemently opposed, even though the system was 100% employee funded.

The hurdles are considerable, but the new bankruptcy study brings home the need to pass legislation like Rep. Pete Stark’s Family Leave Insurance Act. As I’ve argued before, ensuring that an illness or a new child isn't a one way ticket to the poorhouse is critical to ensuring that the economy recovery leaves the American middle class stronger than we were before the downturn.

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Posted at 8:13 AM, Jun 09, 2009 in Middle-class squeeze
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