Paid parental leave motivations and policy – UPDATED

We have competing paid parental leave schemes in this election, and voters are going to choose between them.But the kind of scheme desired depends a great deal on why you would want a paid parental scheme at all. Whilst details of the different schemes are available in the media, there’s little discussion of motivation to help a reader to decide which is best for a given purpose, only what is best for speculative electoral reasons.

Broadly I can see three  philosophy based (rather than self interest) motivations.

The Rights Motivation Having a baby is a universal right and if people cannot afford to take the time off work that is necessary to have a baby, the state should enable them to do so.

The Pro-Natalist Motivation We need more babies. This may be because we want to offset the aging population, or because we desire population growth. Since population growth can also be achieved by immigration, a pro natalist position may also be the result of desiring a more easily assimilated source of population growth. In short, a parental leave scheme is desired so it can make having babies more attractive to parents by both reducing the opportunity costs faced by a period where no wages are earned and subsidising the cost of the baby produced.

The  Equality Motivation The time taken off will inevitably fall partially on women (since she has to give birth) and then almost always the period of extreme infancy through the choices of the parents (conditioned by culture and economics). It is unfair that a mother cannot earn money by selling her labour in this period whilst a father can, so the state should compensate her for the unfairness of biology and cultural norms.

If we consider each of these motivations they have different implications for a given scheme.

The Rights motivation is fairly simple. A scheme need only make it possible to have a baby, not more attractive. Having a baby may not be possible for those who cannot draw on savings or access credit (you can’t borrow against a baby usually) to pay for the basics of life when not earning a wage.

The two obvious options here are either a near sustenance payment or a income contingent loan. The sustenance payment need not replace lost income, just make it possible to survive “in frugal comfort”, to echo the Harvester Judgement. This begins to sound like Labor’s scheme at the minimum wage and the longer, but also minimum wage scheme proposed by the Greens. Interestingly Labor’s scheme does not include Superannuation whereas the Greens do. Super is not essential in the short term, so the Greens scheme implies some other motivations. The efficiency of a scheme in regard to the Rights motivation can be improved by means testing to exclude those who already have the capacity to exercise their right. Income contingent loans (“HECS style”) perform the same task by allowing access to credit to allow the  period without wages and at less cost to the budget. This would probably be the most efficient scheme if one were purely motivated by the Rights motivation.

The Pro-Natalist motivation requires far more however. It must make the option of having a baby more attractive by compensating the person taking leave for the wages they don’t earn, so that the baby is less expensive. The Coalition’s scheme addresses the opportunity cost problem by providing leave at the mother’s wage (more on that below) which suggests they hold the Pro-Natalist motivation (population expansion). All three parties support various subsidiary benefits such as the Family Tax Benefit, the baby bonus, childcare rebates or guarantees which imply the pro-natalist position as well.

These are all fairly inefficient though in regards to the objective. If the purpose was the increase births, then you would only expend funds on those who are on the verge of  having a child, but who think it’s just too expensive. A universal payment will mainly go towards couples who would have had a baby anyway, and replacing the wages of workers who were already prepared to take leave. Unfortunately I cannot think of a way to find out which people are already committed to having a baby and which are waverers, so it seems that paid leave would be a very expensive way of producing more babies.

The Equality Motivation is the most complex. A scheme can replace the lost wages of the mother for the inevitable time taken off (around childbirth) – that is straightforward. Where the complexity occurs is how the scheme can enforce or change gender norms. I think it can be reasonably assumed that the Equality motivation is correlated with broader feminist beliefs such as closing the gender gap, so these are important.

Children contributes to the gender gap through more than just lost earning. There is also the interruption of a career progression, which can stall after a leave and there may be a tendency for employers to avoid applicants who they think will take leave – in this case women of child bearing age – for career stream jobs. A straight out maternity scheme would encourage practice of women taking all the leave and the belief amongst employers that only women will take leave. Subsequently women’s careers will remain interrupted and discriminated against in hiring in a way men of the same age are not.Most schemes are parental rather than maternal, so this seems to be commonly understood.

It is still complicated though. With many exceptions, most babies are still born to couples made of a mother and father in a marriage – formal or de facto.  This means that if we focus on matters financial alone (which is what paid parental leave directly targets) the impact of lost work time is felt by the household as  a whole – not just by the person taking leave. On matters financial alone, the couple is likely to make decisions in their joint interest.

The practice of men taking parental leave is still not accepted by most institutions on a cultural level and a man taking it will face a strange stigma and reduced future earnings. A gap in the CV is also harder to accept from a man in the current culture. If there is a couple with identical present incomes who believe in equality, they may still choose for the mother to take all of the leave – after all, her future earnings are already stunted by social expectations of maternity; his will be become stunted if he defies expectations of paternity. In ensuring their own future income is maximised, they help to enforce these gender norms, so that later couples will do the same. This might be discrimination against men in regard to taking leave, but the ultimate effect is detrimental to women’s careers and their numbers in high jobs – something advocates of the equality motivation are likely to dislike.

If large numbers of men started to take leave this could change, but any given couple will make the decision based on their local interests. It’s hard to fashion a mass movement to produce a more optimal outcome. A paid parental leave scheme could address this by making part of the leave men only, so the first movers are less stigmitised on the basis they “were forced to” and so the larger numbers can begin to change expectations. Such a scheme runs in Sweden, described in this article. This may also help to address social expectations that have less direct financial impact than those of your workplace, such those of friends and family.

Where a couple has differing income, pure financial reasons would lead the lower earning member to take as much as the leave as possible unless a paid parental scheme replaces all of the income. Due to the gender gap, this is likely to be the mother in most cases, and the mothers taking leave for these financial reasons will help feed into the expectations that help create the gender gap in the first place. It is notable that the Coalition’s scheme only provides replacement at the mother’s wage meaning it remains more financially attractive for the mother to take leave when her income is lower. As this enforces norms that keep women’s income lower, women will continue to take leave. Whilst this was probably for budgetary reasons, the implicit motivation is not of equality.

There does not appear to be anything in the Greens or Labor schemes that is especially supportive of the equality motivation. Those who favour this motivation might push for a Sweden style scheme of paternal leave.

That all said, someone might just want a scheme because they think they’ll benefit personally, or that they don’t want a scheme where someone else gets what they don’t. Oh well

==UPDATE==

Stephen Bounds in comments gives the following two motivations

* The Better Parent motivation: Although this gets messy and borderline racist, it is well documented that better educated people with higher incomes are the least likely to have children. On the assumption that better educated parents are more likely to produce better educated (and thus more productive) children, parental leave aims to encourage these “high quality” parents to have more children.

* The Pro-Health motivation: People often delay having kids until they feel they are financially able to support them. However, this level of financial stability is often not reached until the mid-30s, when fertility is lower and birth complications higher. A parental leave scheme tips the balance in favour of having children earlier.

I’d bundle both of these as variations of the Pro Natalist position in that they are both motivated to produce babies, just specific babies in this context. The better parent motivation, dedicated to eliminating at least half of the old wisdom that “The rich get richer, the poor get children” would probably target the fact the greater opportunity cost and lost wages for high earners. This is hard to distinguish from the straight pro natalist policy in practice, so we can’t call the Coalition anti-dysgenics yet (though they may have been watching Idiocracy. The Pro Health motivation might be best served by income contingent loan scheme. Wages are lower in youth, so the opportunity cost is already lower, but lack of available funds is obviously a problem. A loan scheme would allow that access to credit in the same way it does to young people who want to study (and have low opportunity cost) but have no available funds on hand.

About Richard Tsukamasa Green

Richard Tsukamasa Green is an economist. Public employment means he can't post on policy much anymore. Also found at @RHTGreen on twitter.
This entry was posted in Economics and public policy, Uncategorized. Bookmark the permalink.

13 Responses to Paid parental leave motivations and policy – UPDATED

  1. Martin says:

    Could there not be a motivation to extend parental leave in order to improve early childhood development? I don’t know about the empirical evidence for this, but it seems a reasonable thesis that children who spend more time with their parents in the first year or two of their lives may have a leg up in terms of their bio-psycho-social development. The parental leave debate seems to be stuck in the hip pocket of the parents, rather than focusing the welfare of the child – and by extension, the future population of Australia.

  2. Stephen Bounds says:

    Hi Richard,

    I think you are missing a couple of other important motivations, somewhat intertwined:

    * The Better Parent motivation: Although this gets messy and borderline racist, it is well documented that better educated people with higher incomes are the least likely to have children. On the assumption that better educated parents are more likely to produce better educated (and thus more productive) children, parental leave aims to encourage these “high quality” parents to have more children.

    * The Pro-Health motivation: People often delay having kids until they feel they are financially able to support them. However, this level of financial stability is often not reached until the mid-30s, when fertility is lower and birth complications higher. A parental leave scheme tips the balance in favour of having children earlier.

  3. Dave says:

    Richard,

    I thought that it was about the baby’s rights, not the parents’. The theory is that a young baby needs to be cared for by a parent (mother?). Parental leave is designed to protect babies by discouraging parents from working.

  4. derrida derider says:

    I think you’ve missed another motivation.

    The Participation motivation: The conventional wisdom of both parties in Canberra is that boosting labour force participation is a necessity to combat population aging, and that getting more mums to work is a part of that.

    Now this conventional wisdom is actually quite wrong:

    more participation reduces rather than increases average productivity because the additional workers are differentially those for whom the opportunity cost of being out of the workforce is low – ie they’re unskilled.
    it’s a “one-off” level effect anyway and so is insignificant in long-run growth in living standards (as only a little number crunching will quickly demonstrate).
    GDP excludes the value of household production, which “pay em to work” policies that reduce such production ignore.

    But the fact remains that this is a motive.

  5. Richard Green says:

    Stephen – Good point, I updated the post.

    Martin and Dave – I’m not sure there’s a huge amount of babies less than a year old being foisted into childcare whilst parents return to work. I know there is concern about toddlers heading into childcare too soon, but all the schemes proposed only cover the first year at most. Do childcare centres provide for sub 1 years, or would they have to get a nanny or grandparent?

    Dezzy D – Leaving aside whether the motivation is valid; since a paid leave scheme in itself works as an incentive to take leave, it would in itself actively work against participation for some period (paying them not to work). Perhaps the point they are making is that the woman taking leave knows they can return to their job later, but that would be on the IR/Legal side and not the payments which I was focusing on.

  6. llengib says:

    The Long Term Investment

    That a small present cost to the economy of having a parent leave the workforce for a longer period of time can be borne by society because there will be a larger payoff in the future in terms of the baby having a better start in life (e.g. Breastfeeding, early childhood development, more time to organise re-entry to the workforce and child rearing arrangements).

    Parents may also be able to use the time to upskill and increase their productivity.

    Parents retaining their job means a future citizen has better ‘odds’ – this would be veering into the ‘generational welfare’ area, where a child who only knows a jobless home is more likely to be jobless.

  7. billie says:

    Richard calling the Better Parent motivation borderline racist is an emotive denial of the facts.
    Smart parents have smarter children and they are generally physically more attractive too.
    My sister the midwife says Downes Syndrome babies don’t come out of nowhere look at the parents and you can see the signs in them.
    I think you will find a third of women over age 45 have no children and educated women are more heavily represented in the ranks of childless women.
    Do we want to be a society where only the deadbeats and few rich women have children?

  8. dorinny says:

    * The Better Parent motivation: Although this gets messy and borderline racist, it is well documented that better educated people with higher incomes are the least likely to have children. On the assumption that better educated parents are more likely to produce better educated (and thus more productive) children, parental leave aims to encourage these “high quality” parents to have more children.

    I wouldn’t say that this is borderline racist, but it certainly is borderline discriminatory, particularly in the sense of elitism/class/caste, and to an extent, slightly Xenophobic.

    I happen to know many low income earning individuals who are extremely intelligent.

  9. Judith Sloan says:

    If you are interested in this topic, I suggest you consult the Productivity Commission’s report on paid parental leave. The pro-natal argument is very weak because a pro-natal policy needs to apply to all women having children, not just those working.

    It should also be noted that absent any government-mandated PPL, private provision of PPL is actually quite widespread and applies mainly to better educated, professional employees (hence discounting the notion of inducing the better kinds of mothers reproducing, mmmm). Firms will rationally defend their investments in firm-specific training by awarding paid parental leave to their employees. So to analyse the impact of mandated PPL, it is important to assess the additional effect only.

    The arguments boil down to protecting the new child by encouraging the mother to be with the child for the first few months and the possible increase in female labour force participation. In fact, the vast majority of mothers organise their lives to achieve this time with their new child. The impact of participation is ambiguous: negative in the short run obviously and probably positive, at least until a mother has decided her family is complete. The impact on productivity is likely to be negative as the least skilled will be most affected by the scheme.

  10. Chris Lloyd says:

    ‘A universal payment will mainly go towards couples who would have had a baby anyway” In fact, the last baby bonus was announced less than 9 months prior to the first payment, so they were paying mothers who were already pregnant!

    Am I correct that the Coalition policy requires the mother to have worked for the previous 13 months? This has two effects. First, it provides an incentive for women to make a deal with employers to work for way below their correct wage for 13 months – knowing they are going to get 6 months extra wage later. So the employer and the mother will split the government handout. Secondly, if a couple is planning to have two children close together then it forces mother to leave baby pretty early on to get the 13 months. This doesn’t sound like an outcome that Mr. Rabbit would endorse.

  11. James Farrell says:

    …there’s little discussion of motivation to help a reader to decide which is best for a given purpose…

    For what it’s worth I had a go at the classification exercise here and here. The first post has a link to an earlier post by Paul. I think I arrived at roughly the same set of mechanisms if you include Stephen’s addition.

  12. Parental leave should also be seen in the context of broader family policies.

  13. stirred408 says:

    This website if full of blokes (probably public servants, because only public servants or academics talk this much shit)talking bollocks about an issue that doesn’t effect them much at all.
    The solution many child bearing woman would like but they are not organised enough to make it happen, is that they stay at home, and look after their own kids (rather than palming them off to child care)and work from home. They would be happy to earn below minimum wage (better than not earning any wage).
    Institutions like the government and the unions and employers wont wear it because they are old fashioned and don’t think outside the square. They are also all run by men. A bit like this website.
    6 month parental leave doesn’t fix the fundamental problem of where do parents stick kids after 6 months?
    It is recommended that mothers breastfeed their offspring for 12 months. And most educated women try and achieve that goal. (The ABA nazi’s make women feel guilty if they don’t do this). Mothers would like to work from home in the first year on a wage, and would like to send their kids to child care or some sort of schooling to help their kids socialise and interact with other children 2 or 3 times a week at the age of 1. While their child is at the centre, the would like to go a work place out side the home for those hours.
    I guarentee that this is the solution that most women would go for. With todays technologies, it should be easy to set up a home office. But the unions wont support women being paid below minimum wages to complete a job.

Comments are closed.