"Baby bonus" or paid parental leave--which one is better?

• Author: Callister, Paul
• Position: Report

Abstract

New Zealand's paid parental leave policy was introduced in 2001. Since then it has been altered a number of times, including an extension to its length and a loosening of eligibility criteria. Given that some parents continue to be ineligible for leave, there have been calls for further expansion of the eligibility criteria and an increase in the length of leave. Australia does not currently have a paid parental leave scheme. Instead it has a "baby bonus" as well as job protection legislation. Through this combination most core jobs are protecte, and, with the exception of very-high-income families, there is a payment for all new parents. While this gives rise to some middle-class capture, the Australian policy provides support to parents who most need it, including those on the margins of the labour force. New Zealand's scheme also has an element of middle-class capture, but with those disqualified from receiving payments or receiving the lowest payments, being among those families most in need.

INTRODUCTION

The issue of paid parental leave is a topical policy concern in both Australia and New Zealand. In New Zealand the ongoing discussions focus on extending the current paid parental leave scheme in terms of both length and eligibility criteria. (2) In Australia the question is whether to introduce a federal paid parental leave scheme. Informing the New Zealand discussions, in 2007 two major reports on parental leave were published, one by the Department of Labour and the other by the New Zealand Families Commission. (3) A further report by the National Advisory Council on the Employment of Women was published in June 2008 (NACEW, 2008). While all the reports have included concerns about child and maternal health, historically parental leave policy has not been explicitly recognised by the Ministry of Health as an important health issue for infants, mothers and, by extension, their families. Parental leave has been framed primarily as a labour market concern in many countries, and this is perhaps one reason why parental leave design does not appear to be high on the current priority list of New Zealand health policy makers. Yet by not having a strong input from the health sector, the design of parental leave policy may not be optimal.

Internationally, the issue of paid parental leave, and its design, was first considered over a century ago. For example, in 1877 Switzerland passed legislation that restricted women's paid work two weeks before and six weeks after the birth of a child. A number of European countries followed with similar policies. In 1919 the International Labour Organization (ILO) was formed, and the Maternity Protection Convention was among the policies developed during the first year of the ILO's existence. In New Zealand, debates about paid parental leave have also taken place over a long period of time (Callister and Galtry 2006). During this time there have been major changes in the operation of labour markets, family types, the roles of men and women in both paid and unpaid work, fertility, and thinking about the delivery of support to parents and children, with a greater focus on targeted rather than universal benefits (Pool et al. 2007). In addition, research has now provided a much better understanding of the potential health benefits associated with parental leave. Some of these changes challenge the original conceptualisation of paid parental leave schemes.

Drawing on the Department of Labour and Families Commission reports, as well as a number of other studies of parental leave, three models of financial support for new parents are considered here. One is the model operating in 2008 on the other side of the Tasman. This involves legislation for job protection as well as a separate universal "baby bonus". The second model involves linking paid parental leave primarily to eligibility for job protection, as in New Zealand. In effect, this is a targeted form of income support based on recent work history. A third option is a payment for time out of paid work, based on need. This paper considers which model is best for New Zealand parents and children.

NEW ZEALAND: WHAT IS THE AIM OF PARENTAL LEAVE?

The Department of Labour's evaluation of parental leave notes that the primary objectives of the Parental Leave and Employment Protection Act 1987 have evolved in response to changes in both families and paid work. The key objectives of the Act, and subsequent amendments set out in that report, are to assist the attainment of:

* gender equity within the labour market, with increased female labour-force retention and the opportunity to return to paid work without disadvantage to position or pay

* gender equity within families, with fathers sharing leave and caring responsibilities

* improved health outcomes for both mother and child, with the ability for mothers to recover from childbirth, bond with a new baby, and resume paid work without negative consequences to her own or her child's health

* income stability for families through the provision of financial security during the leave period (Department of Labour 2007:8).

Given the Department of Labour's primary focus on employment, it is not surprising that gender equity in the labour market is listed first. Although the Families Commission's report mirrors these four goals, it combines the two gender equity aims and, perhaps reflecting less of a labour market emphasis, places the goals in a different order (p. 7). First is maternal and child health, next is income stability, and last is gender equity. Determining which policy goal, or goals, is the most important clearly matters to the design of paid leave, especially because there can be some tensions between the various aims. In particular, the design of parental leave can either create tension between supporting maternal and child health and gender equity, or help reduce this tension (Callister and Galtry 2006).

In New Zealand, as in many other countries, there are two components to paid parental leave. First there is job protection. This is the statutory right to return to the same job with the same terms and conditions after a period of leave. Second is payment for time out of the labour market. In the early days of parental leave in New Zealand it was only job protection that was available, but when a payment became available for the first time in 2002 the two components were linked. As of 2007, in order to be eligible for a payment a person had to be eligible for job protection. However, as an extra dimension to New Zealand's leave policy, the eligibility criterion for 14 weeks' paid leave is less stringent than the criterion entitling an individual to 52 weeks of job protection. To be eligible for paid parental leave (PPL), employees must have worked continuously with the same employer for an average of at least 10 hours a week (including at least one hour in every week or 40 hours in every month) in the six or 12 months immediately before the baby's expected due date or the date the employee has assumed the care of a child they intend to adopt. However, employees who have worked continuously with the same employer for 12 months or more are also entitled to up to 52 weeks of employment-protected unpaid parental leave, less any paid parental leave taken. As discussed, the eligibility criterion for the 14 weeks' paid leave period--but not the 52 weeks of job protection--has been based on a six-month reference period. After much lobbying by a range of groups, in 2006 the self-employed also became eligible for paid parental leave. (4) Naturally the state cannot protect the jobs of the self-employed, so this represents some separation of payment from job protection. However, there is an assumption that these self-employed parents will remain attached to the labour market.

A fundamental question is whether paid leave should be a universal right for all parents, or targeted, as in New Zealand, on the basis of attachment to the labour market. This is a particularly important issue in countries that have relatively flexible labour markets. OECD surveys have shown that entitlement to both job protection and income support has often been conditional on previous work experience...