Of course, it is relatively seldom that any particular policy has only one objective (that’s one of the things that makes policy formation difficult). So I’ll just try to have a go at setting out what I think are the reasons for paid maternity leave.

I agree with Alison that, in the first instance, paid maternity leave recognises that a woman is incapacitated for work for a period (variable) around the birth of a baby. We would not want mothers either working too close before the birth or returning to work too early afterwards simply because of financial necessity, so a period of paid leave would obviate that. This is presumably what the ILO standard of around 3 months maternity leave is aimed at.

Next, there is the issue of the public benefits of enabling mothers or fathers to continue to provide parental care for a period of time (James’ objective 7). If a small baby goes into formal child care, the government will subsidise that care fairly heavily – so it may be possible to devise a parental leave scheme that doesn’t cost the taxpayer all that much more in net terms. But in any case, the majority of people believe, and there seems to be some research evidence, that babies are best off with parental care for the first year or so.

I think those are the two main reasons for having paid maternity/parental leave. Others might be to:

* enable mothers to start their families earlier than they would if they had to meet all, or a larger share, of the costs themselves – there may well be public health benefits in this and, to the extent that some women end up having more children in total it might have a marginal positive effect on the birth rate; and

* enable those partnered mothers for whom child bearing is currently financially the most difficult (ie those in lower paid and/or less secure jobs) to have their ‘fair share’ of the babies being born. As I pointed out in my earlier comment, this is the group that currently gets little or nothing in the way of income replacement.

The last of those proposed objectives is, I’ll admit, a values-based objective.
I think it is still a commonly held value in the community as a whole that people should be able to have (at least one or two) children if they want to. A problem I’ve always had with the ‘parents should only have children if they can afford them’ argument is that it seems to me that the people for whom cost is most likely to be a barrier are those in the lower income segment of the working population.

Well-to-do parents can have as many children as they like without suffering too large a drop in their standard of living. At the other end of the spectrum, income support recipients can also have as many children as they like because the money they get increases with each additional child more or less in proportion to their costs.

If you are a couple in low-paid work, you are likely to get family payments to help meet the direct costs of your children, but financially negotiating that first year or so of the child’s life is likely to be very difficult.

Jennifer: Let’s suppose for argument’s sake that taking maternity leave put your unskilled worker into a temptation zone where she might shortsightedly postpone her return to work, and eventually find her options closing down. But as long as she is entitled to at least unpaid maternity leave, the question is why she would be more likely to come back if the leave was paid. Is the problem that she has adjusted to the lower income, so that the thought of losing her income for a further five or ten years is not as unthinkable as it once was? Or is that having paid leave would cement her relationship with the firm give her a moral incentive to come back? On he other hand, if the problem is the firm not wanting her back, then why wouldn’t the solution be a longer unpaid maternity entitlement, or indeed a financial incentive as proposed by Joshua?

BRG: I was hoping you might make comment on this post, since you were in the thick of the discussion on the previous occasion. We seem to agree that, other things being equal, working women probably need a bigger financial inducement to have a baby, as I mentioned in points 3 and (implicitly) 6. One can see why non-working women might find this a bit unfair, though. In any case, as you note, this would be a good argument for a bigger cash payout to working mothers, which they could use as they see fit. So I think that proponents of PML really need to hammer Point 7 rather than go on about how insulting the status quo is.

Alison: It’s never too late to comment. I agree with the thrust of your argument about rights, and its clear that non-discrimination is the starting point of Joshua’s piece as well. Also. I know I should have talked about parental leave more broadly rather than focusing on mothers, but it was complicated enough already. And thanks for raising the health issue — that does bolster the social insurance argument for government funded PML, although the whole thing is tricky, as I argued in my response to Peter. Finally, your point about different cultures having different conventions and arrangements for achieving a given goal is also a useful antidote for those of us who tend in terms of narrow economic incentives.

James, you lay out seven possible arguments to justify government funded paid maternity leave in order to clarify what the clear and widely shared objectives are that would justify a universal government-funded paid leave – mostly from an econonc or sociological perpsective – but it seems to me there is one argument that you’ve left out, and that is work as a basic right. Women have the right to work and the Australian government endorsed it as an ‘inalienable right’ by ratifying the Convention on the Elimination of All Forms of Discrimination against Women. The same convention also outlines women’s rights to protection of health and the function of reproduction in relation to employment. Since pregnancy and childbirth are physical conditions that bring about a temporary incapacity to work, they should be considered as categories of social insurance and subsidised by the government as part of its obligation to safeguard both the right to work and health.

This basic right should be guaranteed for all women in the workforce and called maternity leave since only women can give birth. But once a woman has recovered from childbirth and is physically able to work again, the length of leave and question of who pays for it, is a different issue. For clarity’s sake it should be called parental leave and debated separately from maternity leave. Either one parent stays home – and to assume it is the mother is discriminatory – or the child goes to day-care. In any case, someone has to pay and the different ways this is handled will reflect the values, priorities, labour structure etc. in different countries.

So I can see how your seven arguments are a useful point of reference for debate – once we have acknowledged maternity leave as a basic right for all women.

Now, I guess it is possible at one extreme to have one part of the female population bearing the babies and the other part in the workforce, but I don’t think that would be desirable. So if you want the same women to have the babies and to supply the paid labour, how might you go about ensuring that happens?

One thing that is undeniable is that the indirect costs of child bearing and rearing are mostly borne by women in terms of income foregone. Many women, and it would seem many fewer men, probably see this as unfair. And while there is clearly no simple formula for calculating what these costs are, better educated and more highly paid women stand to lose more financially if they take a period out of work and/or work part-time for any significant length of time. So, for me, paid maternity leave, from the point of view of the mother, is simply a small compensation for her personal opportunity cost of helping to produce the next generation. Two categories of women currently do not suffer an income loss in the immediate period following birth – better-educated, better-paid women in good professional and white-collar jobs and income support recipients, some of whom even get to move onto better income support (single parent pensions) as a result of giving birth.

So the current paid maternity leave debate is really about whether it is appropriate to offer some level of financial compensation to those working women who by choice or chance don’t happen to work in jobs that offer paid maternity leave. These women are probably those most likely to drop out of paid work for too long, as Jennifer fears, but they may also be the ones most likely to have to go back to work too early (from the point of view of the baby) if they really can’t afford to take much time off.

I actually think that apart from the issue of financial compensation for income lost that James’ seventh objective is an important one and the most likely measurable outcome from offering some form of paid maternity leave safety net. I think many mothers who currently return to work within the first two years would use additional financial assistance (whether by way of baby bonus or paid maternity leave or both) to enable them to stay home longer with their newborns.

I have no evidence to offer, only anecdote, but most paid maternity leave is only paid on condition of a mother returning to work. So paid maternity leave will increase the chances of the mother remaining attached to the workforce. For high skilled workers, the benefit to the employer of that specific employee is high, so they will offer it (I myself would be entitled to 12 weeks paid maternity leave, should I plan to have another baby, which I don’t). And my employer reckons that the direct costs of replacing me would be around 30% of my salary (recruiting costs, which includes the time of my boss in trying to find a replacement, rather than doing his/her own job), plus another 70% or so in indirect costs (lower productivity of my replacement and my peers and my team while my replacement is trained up).

But for a lower skilled woman, the employer can find a replacement reasonably easily, so both the direct and indirect costs of replacing her are a much lower proportion of salary. So the employer doesn’t care about retaining that specific woman, and is less inclined to offer paid maternity leave to increase the chances of her coming back from maternity leave.

But the economy as a whole loses if she doesn’t come back from maternity leave. She is less likely to go back to work at all after her baby is born – perhaps for a few years. And once she does, she is less employable, and will find it harder to find another job. So she might not bother at all – perhaps until the children are in high school. So the taxpayer has an interest in maintaining her commitment to the workforce, by effectively providing her a bribe to go back to work somewhere.

I have comments on some of your other reasons, but perhaps I should write my own post (as I have been intended for a while!) rather than clogging your comments.

It is a long term investment. But most analysis I see about it focuses on the actual year of the maternity leave, and misses that long term investment.

Higher income (and skilled) women, who are most likely to receive maternity leave, and employers of those women both have an incentive to keep their attachment to the workforce – the employee has a big investment in her skills, and the employer will spend a lot of money hiring a replacement.

The lower skilled/income woman and her employer will have less incentive. So the negative externality is that the economy as a whole has an interest in an investment in keeping that woman attached to the workforce, but the investment required is not worthwhile either for the woman or her employer.

Which is why it is worth calling it maternity leave rather than providing a baby bonus regardless of employment status. And why it is most important for the lower paid, so it is probably reasonable for the amount to be capped at some reasonably low level.

Peter

Having done my best to work through the arguments systematically, it’s naturally disappointing to learn that I’ve missed the point. But let’s deal with the wage premium thing first, since this is not a matter of opinion or interpretation. If two workers get the same salary for the same work, and one gets paid maternity leave on top of that, that’s a premium. From the firm’s point of view, the cost of raising children is neither here nor there. It’s not like recreation or sick leave, because the probability of becoming a parent is much higher for some people than others. So paying them a premium is analogous to offering concession tickets to pensioners — but I’m not sure whether you were disagreeing with this for some reason, or whether you simply didn’t understand it. In any case, the 30-40% percent of employers you refer to apparently see the advantage of this kind of scheme.

The rest of your comment purports to show that low-wage working mother are missing out on something that everyone else gets. But they do get the baby bonus, and they presumably would be entitled to the means-tested parenting payment if they went on unpaid leave, although I admit I’m not an expert on the rules governing that entitlement. What you and Eva Cox and Pru Goward seem to have noticed is that the income of parents who take unpaid maternal leave is more volatile than other people’s. Volatility motivates much of our social security system. We tend to have social insurance for things that effect everybody at some stage (getting old), or might effect everybody (getting sick). But getting pregnant when you’re in paid work isn’t in either of these categories. So, unless you can set up a wage-income tax that applies only to people whose probability of having more babies is above some specified threshold, then maternity leave will always be a redistribution of income to parenting workers from everyone else, and therefore needs to be properly justified.

I said at the outset that I haven’t made up my mind, but so far I find only #7 to be persuasive, and also #3 if it can be demonstrated that our low fertility rate is a national problem.

I think you are missing the point – or at least you have never read any of the non-Australian literature on the rationale for paid maternity leave.

James, you say ” Employer-provided or employer-subsidised maternity leave is properly regarded as a wage premium using second-order price discrimination.”

A wage premium for mothers (or women)???

The premium is negative. Having children has large direct costs and even larger indirect costs – and most of the indirect costs are borne by women. For example, using British data from the 1980 Women and Employment Survey Joshi (1990) found that a woman who had two children would give up nearly half the lifetime earnings that she otherwise might have had, with these lost earnings due, in roughly equal parts, to reduced participation in the labour market, shorter hours of work, and lower wages. Using data from the Australian Negotiating the Life Course Survey (NLCS), Gray and Chapman (2001) find that women with one child are estimated to earn 63% of what they would have earned had they remained childless.

Around 30-40% of the female workforce in Australia currently are entitled to paid materniy leave – but guess which 30%? Strangely, its the people who work in the public sector and the well-paid people in the private sector – people who work in banks, insurance companies and law firms and large companies.

So who would benefit from paid maternity leave – given that low income mothers are covered by parenting payment or the current baby bonus then the people who would benefit arwe the lower half of of the wage distribution of women who already have jobs.

That said, my employer already offers about the most generous fully paid primary carer leave in Australia (and more generous than that in most French companies, besides banks). Based partly on that and my experience with other very large employers, I would rather any subsidy be targeted to smaller companies. On that basis, I think Gan’s return-to-work credit is probably on the money.

This is because I think those ‘career-derailing’ effects would necessarily get stronger the smaller the company. In (most) large companies,
– there is a fairly high level of turnover anyway,
– they tend to be more geared to ‘alternative’ career development paths, and
– they are highly likely to have already adopted maternity leave because they practice ‘second-order price discrimination’ as (implicitly) a part of their standard remuneration policy.

All of which suggests that maternity leave is more easily accomodated by large companies.