Options for Parental Leave

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    Options for ParentalLeave

    Joshua GansThought Leadership Forum, 19th June 2008

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    Goals

    Child development Income support for parents Improve gender equality

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    Market Failures

    Impediments to taking leave Liquidity constraints Indivisibilities

    Externalities in child development Require parent -- not others

    Potential for discrimination

    Gender and family preference Mis-allocation of skills/ability

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    Current Policy

    Right to 52 weeks of unpaid leave for oneparent

    Public service and larger employers havepaid parental options Usually maternity leave Between 6 - 14 weeks

    Various parental support Baby bonus: $357 per week for 14 weeks Other payments for low income households

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    Policy Responses

    Parental leave entitlements Should it apply to both parents?

    Paid leave Who should pay?

    Most of OECD have publicly funded paidleave of 14 weeks or more

    NZ: Up to income cap for 14 weeks Norway: 100% of income and mandated

    paternal leave

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    Evaluating Policies

    Does the policy increase the actualamount of leave taken?

    Does the policy improve workconditions for women and family-oriented employees?

    Is the policy equitable?

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    The Firms DecisionWageGap

    Prob Woman Takes Leave1/2 1

    The HouseholdDecision

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    No discriminationWageGap

    Prob Woman Takes Leave1/2 1

    Household

    Work

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    DiscriminationWageGap

    Prob Woman Takes Leave1/2 1

    Household

    Work

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    Evidence

    Source: Australian Institute for Family Studies

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    Evidence

    Source: Australian Institute for Family Studies

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    Full Paid Leave

    Minimum wage support Form of social insurance

    Some proposals are for leave on full pay Strong incentives to take leave Large private benefits

    Incentives to have children when pay ishigher (e.g., delayed parenting)

    Potential for large cross subsidy

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    Evidence

    Source: Australian Institute for Family Studies

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    Evidence

    Source: Australian Institute for Family Studies

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    Public PaidWageGap

    Prob Woman Takes Leave1/2 1

    Household

    Work

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    Private PaidWageGap

    Prob Woman Takes Leave1/2 1

    Household

    Work

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    Whose leave?

    If create more incentives for maternityrather than paternity leave that increasesthe wage gap

    Discriminatory pressures may be faced byfathers too Studies show that wage gap has likely

    increased where maternity leave benefitsare stronger

    Sweden requires 30 days paternity leave

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    Equity

    Minimum wage paid leave is a form ofsocial insurance Fairly costless given current policies

    Use income-contingent loans for leaveabove this amount Like HECS but based on household income No fiscal burden Private benefits paid privately (overcoming

    liquidity constraints)

    Still has impact on gender discrimination

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    Return to Work

    What if firms were paid to bringparents back in the workforce?

    Conditions:

    Parent takes leave If return to work for a given period (say, 6

    months), firm receives tax credit on salary

    Mitigates cost of taking leave andprovides an incentive for re-integration

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    RTW CreditsWageGap

    Prob Woman Takes Leave1/2 1

    Household

    Work

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    MixtureWageGap

    Prob Woman Takes Leave1/2 1

    Household

    Work

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    Summary

    Minimum Wage Paid Leave Income-Contingent Loans for Gap Return to Work Tax Credits

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    Self-Promotion