IMF Chief Backs Paid Family Leave for United States

Christine Lagarde, managing director of the International Monetary Fund, said policies needed to counter declining productivity and labor force participation, as well as income inequality and almost 15 percent of Americans living in poverty, include a higher federal minimum wage, more generous earned income tax credit, and upgraded social programs for the non-working poor.

Christine Lagarde, managing director of the International Monetary Fund (IMF), said June 22 that U.S. growth prospects "are good despite the recent temporary setbacks" -- declining productivity and labor force participation, as well as income inequality and almost 15 percent of Americans living in poverty -- and called for the United States to adopt paid family leave so a worker can care for a child or parent. She said IMF also recommends a better disability insurance program for the United States.

Lagarde was speaking during a United States 2016 Article IV news conference, "All in all, our assessment is that, if left unchecked, these four forces—participation, productivity, polarization, and poverty—will corrode the underpinnings of growth (both potential and actual) and hold back gains in U.S. living standards," she said, explaining that policies needed to counter those forces include a higher federal minimum wage, more generous earned income tax credit, and upgraded social programs for the non-working poor.

"There is a need to deepen and improve the provision of reasonable benefits to households to give incentives for work, raise the labor supply, and to support families. This should include paid family leave to care for a child or a parent, childcare assistance, and a better disability insurance program. I would just note that the U.S. is the only country among advanced economies without paid maternity leave at the national level and U.S. female labor force participation is 12 percent lower than that for men. Sensible skills-based immigration reform could also raise the labor supply and boost productivity," she said. "Boosting productivity growth is another policy imperative. Productivity gains must inherently be based in the private sector. But public policies can help. A better tax system, efforts toward more trade integration, better infrastructure, a stronger and more vocationally oriented education system would all support higher productivity growth."

She admitted these are not easy measures for the United States to adopt. "None of this is easy. However, there are many good ideas out there as to how best to address these issues. And that provides a strong foundation for progress," she said. "In conclusion, I would like to reiterate that the near-term U.S. growth prospects are good despite the recent temporary setbacks. We think that growth should be 2.2 percent this year and higher still in 2017. And by countering the 'four forces' I have just described, I am confident that the U.S. can remain on the frontier of innovation and opportunity."

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