Opinion: Workers have little interest in state ‘solutions,’ as few opt into PFML, WA Cares

Elizabeth Hovde believes we need more lawmakers committed to priority-based budgeting, something every individual knows helps keep them safe

Elizabeth Hovde
Washington Policy Center

Washington state’s Employment Security Department (ESD) reports that only 4,163 self-employed workers want to be included in the state’s Paid Family and Medical Leave (PFML) program. That’s among around 362,000 self-employed workers. State lawmakers imposed PFML on W2 workers in 2017, allowing self-employed people to opt in.

That low number — a little more than 1 percent — is not surprising. The program now comes with a tax rate of 0.8% of an employee’s gross wages. Employers with 50-plus employees pay up to 27.24% of this and employees pay 72.76%. That means a person earning $50,000 each year loses nearly $300 of income, and his or her employer pays more than $100 on their behalf, for a program the worker may never need. Even worse, low-income workers’ wages are often going to people with more resources.

The PFML payroll tax began in January 2019, and the state began giving benefits to some Washingtonians, regardless of need or income, in January 2020.

Having your own money to spend on, save for and invest in possible life needs is a more efficient use of earnings. Adverse selection — knowing you have a pregnancy or the potential of needing time off work to care for yourself or a loved one — is likely prompting a self-employed person to choose this tax.

Enter WA Cares

A similarly low uptake should be expected for self-employed workers wanting to be part of WA Cares, the state’s new program related to services for long-term care. The required tax for W2 workers is 58 cents of every $100 they make. That’s not attractive for another benefit a Washington worker might never need or qualify for, especially with WA Cares’ vestment and health criteria.

Fewer than 400 self-employed people have opted into WA Cares, as of Sept. 27. That’s a lot less than the PFML uptake, but WA Cares is just four months into its tax assessment. We’ll see how things go, but it doesn’t look to me like the 40,000 first-year uptake that ESD budgeted for in 2021 will be reached. In its defense, PFML was in its infancy. The agency told me it budgeted administration costs to accommodate WA Cares’ opt-ins using an actuarial firm’s low estimate of interested self-employed workers.

Whether the uptake number for WA Cares rises or doesn’t, it should be clear to lawmakers and the public that this is an unwanted social program. When people have a choice to opt in, they don’t.

These payroll taxes make Washington state a less attractive place to live and work. Between PFML and WA Cares, that worker making $50,000 has nearly $700 taken for the programs each year. The price goes up with income. (Calculate your income loss at paidleave.wa.gov/estimate-your-paid-leave-payments/.)

These decreases in take-home pay, compliments of state lawmakers, need to end. Repealing both programs would help workers in Washington state.

Safety-nets exist for those in need

What about people in true need with no assets, savings, family help or other resources? Public safety nets funded by taxpayers are appropriate and should be protected by lawmakers. Instead, the state’s majority party has chosen to create “safety” nets for people not in need. In the case of WA Cares, doing so also cost-shifts part of the state’s Medicaid budget onto the backs of workers, both low- and high-income ones, allowing the state to spend more money on other needs and wants.

We need more lawmakers committed to priority-based budgeting, something every individual knows helps keep them safe. We can protect the elderly and vulnerable without costly programs that create benefits for only some people, regardless of actual need, and make it harder for families to make ends meet.

Elizabeth Hovde is a policy analyst and director of the Centers for Health Care and Worker Rights at the Washington Policy Center. She is a Clark County resident.