Maternity Leave – the economics

Emperor Penguins have a fairly equal system of paternity and maternity leave

Paul Frijters at Club Troppo has a post up about maternity leave – a disucssion of the recent policy announcement from the Greens and the Democrats to guarantee 14 weeks of maternity leave (at minimum wage) and the pros and cons from an economic perspective. I commented there that I thought most discussions of maternity leave were far too short term focused, but it was rushed (as I did a bit of blogging while procrastinating about doing more work after the kids went to bed*) so I thought I’d try and expand here.

Australia has, by legislation, 12 months unpaid maternity or paternity leave for permanent employees. Only one parent can take it at a time (enforced through statutory declaration). There is no legislated paid maternity or paternity leave.  Most public sector jobs, and many white collar private sector jobs (particularly in large companies) have some form of paid maternity leave (occasionally paternity also) – generally around 6 -12 weeks. That makes us right at the bottom of most countries for paid maternity leave (with the US, and a few other small third world countries). However, the unpaid maternity leave is quite important, and does make a fair bit of difference, in that your job must be available by legislation, in 12 months time. Some countries with paid maternity leave force you back much earlier than 12 months.

For a short term focused employer, clearly maternity leave of any description is a nuisance, and a pain. Particularly if they employ people with easily substitutable skills (such as many retail environments) maternity leave is an investment not worth making. An employer who thinks about the long term, and particularly one who employs people with skills that take some time to learn (e.g. nursing, teaching, to pick two more traditionally female occupations) will understand that maternity leave, even paid maternity leave, is probably worth the annoyance and expenses, when compared with the difficulty of hiring and training a suitable substitute employee.

For the country, the question is how much to keep out of the way of business, and letting them make their own decisions with the parameters above, and how much there are externalities involved in having ways of keeping women attached to the workforce. If the only variable that mattered was the profitability of the business, clearly businesses should be able to make their own decisions about maternity leave. For large organisations like my own, which view themselves as knowledge organisations, we would continue to have a combination of paid and unpaid maternity leave, with better conditions for more skilled people. Smaller organisations, particularly those that employed unskilled people, would get rid of maternity leave as soon as they could.

But what about the country? Are there policy reasons for maternity leave? Over a woman’s** lifetime, there are benefits to the country from her working beyond the benefits to her. She will pay more tax. Children who have a parent in the workforce are more likely to join the workforce themselves, and less likely to go down a path of delinquency and crime. And international comparisons seem to suggest (compare Italy with northern Europe, for an extreme example), that the easier you make it for women to remain somewhat attached to the workforce after they have had children, the more children they will have.

But the policy question from the Club Troppo’s commentators is whether the benefits to society of these externalities are worth the cost in somewhat reduced productivity to the businesses. My view is that they definitely are. And I think that even if you disregard the benefits of children to society (many people who argue that children are a completely personal decision are still happy to argue for a pay as you go approach to the funding of old age pensions) the benefits of continuing women’s attachment to the workforce, which is what maternity leave does, are considerable, and valuable over the long term.

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* I generally don’t participate in the comment discussions on these big blogs –  I’m too busy being that “ideal employee” that most rightwing bloggers extol, between 8am and 6pm, to blog or comment anywhere.

** I’ve gone fairly quickly from parental leave to talking about mothers and women. Notwithstanding that in my household the person who has given up paid employment for childcare is male, this is still 95% an argument about women’s, rather than parental, employment.

  2 comments for “Maternity Leave – the economics

  1. October 31, 2007 at 12:29 am

    Is there actually data that shows “Children who have a parent in the workforce… are less likely to go down a path of delinquency and crime?” And what’s the comparison here — children with no parents in the workforce vs. children with at least one parent in the workforce?

    In the US, the debate is almost all about two parent families, and whether it’s worse for kids to have two working parents vs. just one. (There’s no real evidence that it is, but that doesn’t stop the right from insisting that it’s so.)

  2. October 31, 2007 at 7:26 am

    Elizabeth, I was too lazy to go searching for data. I’ve seen that assertion made in policy debates about unemployment benefits, and about Australian aboriginal issues, and I can make a logical case for it (role modelling of behaviour that includes healthy participation in society has an effect, and is much easier if you have a job).

    The debate is the same here (about one vs two working parents), but I thought I’d extend it.

    Updated to add that I found this study – finding that “Data from the NSAF provide evidence that children with unemployed parents are more likely to experience all of the negative outcomes in table 3.” (which don’t include delinquency but do include behavioural issues and bad school outcomes)

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