Thursday, May 15, 2014

Cost of marginalising Labour

The $172 million extension of Paid Parental Leave, said to be electorally popular,  is one of the big-ticket items in today's budget. Based on Treasury advice, there was no case for the government to extend Paid Parental Leave (beyond buying votes and sidelining Labour.)

Here's what I wrote about it in December 2013:

...last year Treasury analysed who was using paid parental leave, labour market outcomes, and child health outcomes. It found that, "...there is not a strong evidence-based argument to support extending the length of paid parent leave."

Treasury's report states, "...the majority of mothers return to work when the baby is six months old...". Marginal benefits to labour market participation and child health and well-being would therefore be small. Additionally, it notes, "...the most vulnerable children are likely born into families where parents are not eligible for paid parental leave...".

In a discussion about improving income adequacy it found that the arguments are "weak" as "the current access group are likely to be middle and high income women with stable employment." Of the 32,000 paid parental leave recipients in 2011/12, 58 percent were earning over $40,000; 27 percent were earning over $60,000.

Treasury also noted a possible negative impact for employers, particularly small to medium enterprises, as their costs are, "...likely to be more significant as the length of parental leave increases." This could give rise to greater discrimination against child-bearing age females in the labour market.

A fine example of the irrational policies thrown up by redistributive democracies.

1 comment:

James Noble said...

John Key to Kathryn Ryan: Many countries have these policies.

Kathry Ryan to John Key: Communist countries, Mr Key

Frankly I think RNZ justified their entire budget with that one question.