Paid maternity leave, part II

With the coalition now promising a paid maternity leave scheme that once was championed by the Greens and the Democrats, it seems opportune to recycle a post on this topic here at troppo of 2007 called ‘Should we have paid maternity leave‘? All the arguments made for or against today came up then and more. Indeed, the post and the discussion revealed that paid maternity leave will probably lead to knock-on regulation.

Recently, we had a policy discussion forum about the issue of whether Australia should follow most of the rest of the OECD and introduce the right to paid maternity leave. For the full slides, see here: Policy Review Discussion Group_Paid Maternity Leave

During the discussion I introduced the topic of paid maternity in the context of the recent proposals by the Democrats and the Greens to guarantee women 14 weeks of paid maternity leave, with the payment being at the level of the minimum wage and provided by the government. Such a scheme would apply to about 100,000 women a year which would make the cost close to half a billion a year. From an economic point of view, the relevant question to ask is whether there are any market failures at work that would warrant such an appeal to the public purse.

Alison MacIntyre argued this scheme does make sense from an economic point of view because of the benefits to the rest of society of having children to perpetuate the nation. The scheme is an effective subsidy from families without children (who pay part of the tax population paying for the scheme) to families with children. Since private employers do not take such beneficial social incentive effects into account they are not going to be in favour of maternity leave, and indeed would discriminate women if they as employers would have to pay for such a scheme. Private individuals deciding to have kids do not obtain the full societal benefits of having kids. Hence Alison argued we needed a government funded scheme to bribe people into having more kids, or at least to help them out. Most other countries indeed have such a scheme, varying from 12 weeks to a whole year of paid maternity leave. Alison pointed out that women’s groups support it and many large businesses already have such schemes anyway.

Ben Ives on the other hand argued we should not have a scheme like this. His main argument was that having children strongly disrupts the worker-employer relationship, putting an unfair burden on employers of their employees taking time off to care for children, quite apart from the actual wage cost of a maternity scheme. The right to return to the same job when pregnant would furthermore add unfair costs on the employer of training temporary replacements who would then unfairly have to be gotten rid off when the leaver returns. Ben supported the idea that employers should be able to discriminate on the basis of expected pregnancy since this entailed a relevant business cost, and that in general the government should not try to achieve social outcomes (more kids) by labour relations regulation. Ben argued that the incentive to have more children was going to be quite small and probably only relevant at the bottom end of the wage distribution. Finally, Ben made the argument that there was no pressing reason to want a higher population in the first place and that we already have enough kids in Australia.

What the discussion made chrystal clear is that kids are a nuisance from the point of view of the businesses hiring the parents and that any wish to increase the child bearing of workers is going to have to recognise that businesses have little incentive to work along with such schemes. Ben is probably spot on in his assertion that most selfish employers have good reasons to shun people who might get pregnant. Should we as a country ever get really worried about low fertility rates therefore and also want the women with kids to be able to be competitive in the world of work, heavy interference in the worker-employer relation when child bearing is involved is inevitable.

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4 Responses to Paid maternity leave, part II

  1. Patrick says:

    Many businesses can’t afford to be so picky, though.
    I would like to hear more about childcare personally though.

  2. conrad says:

    I don’t think I’ve changed opinion. I still think a smallish lump sum payment is the way to go, preferably with a relatively generous means test.

    I also agree with Patrick that childcare should be a very big issue — perhaps bigger than maternity leave if you are concerned about getting women back into the workforce. I imagine this is perhaps the most important issue from a short-medium term practical point of view.

  3. Kenan says:

    If the problem is that mothers are discriminated in the workplace for having kids then the solution is paid paternity -rather than maternity- leave.

  4. Chris Lloyd says:

    Some other points.

    Kids often come at a time in life when the couple are not financially secure. They should be able to borrow against their future income. How about a HECS style loan?

    Kids are already massively subsidised through education. This can be used as an argument for PPL (it is just one more subsidy) or against (enough is enough).

    Childcare is a much bigger issue because it lasts years, not 6 months. It should be tax deductable because it is a genuine cost incurred in going to work. The Greens won’t like this because it benefits the rich. But the opportunity cost of a highly paid mum staying home to change nappies is higher.

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