Some babies are more special than others

By   /   June 17, 2016  /   11 Comments

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This week Labour’s bid to get an extension to Paid Parental Leave (PPL) is likely to be stopped in its tracks by a veto from Bill English. For all the wrong reasons.

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This week Labour’s bid to get an extension to Paid Parental Leave (PPL) is likely to be stopped in its tracks by a veto from Bill English.  For all the wrong reasons.

The debate has been side-tracked by the government into an affordability issue, and by the Opposition into a motherhood and apple pie issue, making any questioning look churlish.

But what is paid parental leave? Is it really a payment that is needed to allow all babies to bond with their mothers and be breastfed for the best start in life as the rhetoric suggests?

That is the way it is sold. For example Dunne said in this week’s debate that six months was the “minimum” amount of time parents should have at home with their children and it was “important parents have the opportunity and choice to spend time with their newborns”.  Of course. Who could disagree?

But until 2016, only under half of all newborns got paid parental leave because of the stringent and unsuitable rules around the kind of paid work experience prior to the birth that’s needed. Recent changes have liberalised the rules so more qualify. This just means that the boundary has been shifted and the stakes are very high for those who just miss out.

Those who hit the lucky jackpot of full PPL currently get a massive $8326 net extra, paid for by the state. Under Labour’s extension this would rise to just over $12,000 net, regardless of a partner’s income.

To qualify for PPL, at least ten hours of work per week on average for each of 26 weeks out of 52 prior to the birth is required.   This means that not all mothers get the full PPL. Once the hours of work requirement is met, Paid Parental Leave replaces gross income up to $516.85 a week with a minimum of $147.50.

What this means is that a high income earner needs fewer hours to qualify for the maximum. This makes a mockery of a fixed 10 hours of work requirement and suggests that PPL is a fundamentally a compensation for lost income. It elevates the contribution to the paid workforce above all other considerations. Ironically, however, it is not an employer payment and does not oblige the mother to go back to work and despite being state paid, it is not income tested. Obviously PPL is not a state payment to support all newborns get the best start in life.

There are huge and growing gaps in how newborns are treated in NZ. About 15,000 or 25% of mothers of newborns who do not get any PPL may get the Parental Tax Credit of just $2200 under Working for Families tax credits. This is income-tested and denied to any family on a benefit or student allowance.

Getting PPL can also qualify a mother for the In Work Tax Credit of another $72.50 a week even though she is not in paid work and may have no intention of going back. She can’t have the IWTC if she has a partner on a student allowance.  If she doesn’t get PPL she can’t have the Parental Tax Credit either. The needs of the precious newborn are lost by the application of this  stupid set of rules.

That leaves around 15,000 mothers who qualify for nothing extra at all.  Theirs are often the most needy of all babies.

To continue down the path of expansion of PPL perpetuates the growing inequality between mothers who have been in substantial paid work and those who receive income-tested benefits, child support, or who have been working at home to raise their families supported by a partner’s income or have been involved in unpaid work.  It is likely to create perverse incentives for a mother to leave her first child at daycare at a very young age and go back to work for sufficient time to qualify for full PPL for the next child.  The costs of not doing so are getting too high.

If Labour got its bill through and then failed to win the next election, the high cost of PPL would be used as an argument for National to ignore the huge gaps that are created.

In fact what is needed is a complete overhaul of the mishmash of support for new babies. More money needs to be spent but it needs to be spent more equitably and inclusively based on the needs of the baby rather than simply extending the existing PPL to 26 weeks.  

 

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About the author

Co-director retirement policy and Research Centre, CPAG management committee

11 Comments

  1. Sam Sam says:

    Tl;dr (will at some stage) I like what the Swedes do, 18 months split between mother and father how they wish, but not more than 12 months for any one.

    This also means women don’t have as big a hit to their career since their male coworkers also tend to take leave.

  2. Mike the Lefty says:

    This National government is like the Titanic. It caters for the rich pricks with no regard for those on the lower deck, it runs too fast and is out of control, with a captain who can’t see any of the dangers that lurk all around but still thinks its unsinkable.
    This could be the issue that finally sinks it.

    • Susan St John says:

      On that reasoning it is surprising they vetoed this bill as the PPL excludes the worst off and goes without any income test to high income families

  3. I would like to know what will happen where a mother is an integral part of a family business, working in it, often for very little, has a child, business can’t afford to pay anyone else, so young mum fits the work around the child’s needs. I have been in this situation with 4 children over 10 years. I presume that there would be no paid psrental leave in this situation.

    • business can’t afford to pay anyone else,

      Perhaps that business is so grossly under-capitalised that it’s going to collapse anyway. Why should a new “young mum” have to prop up a failing business at the expense of her family?

    • Susan St John says:

      Frank
      by that reasoning the industry of child rearing should collapse as it is totally propped up by the unpaid work of mothers.
      Surely the issue here is that PPL is a tax funded payment to support babies and mothers- why should she miss out? PPL only replaces lost income and if you dont earn any regardless of how many hours you work you dont get any or the very minimum

  4. Kim dandy says:

    As a citizen of New Zealand I would like to veto it back in! Maybe an extremely large signed petition placed on the National parties desk showing how many votes they are likely to lose over this one, may help.

  5. Andrew says:

    We have to be careful what we wish for.

    Extending PPL to the levels demanded by Labour would probably work to undermine the careers and pay of female professionals.

    Many company owners would be reluctant to take on staff which included a ‘pregnancy time-bomb’ which would impact on their future productivity. And even if they did hire a women, might they not be reluctant to promote such a person into a critically important role?

    Mums returning to work after such a long break would require time to get up to speed and in some fast paced environments, need retraining to keep up.

    • Susan St John says:

      I cant see how it would as it is not funded by the employer? 6 months out of the workforce would not require retraining surely?

      The point is there is no obligation to go back to work and the comment in the last sentence if it is true is true independently of PPL.

      • Andrew says:

        SUSAN: In managerial, professional and technical roles the issue of often less about the money than the problem of finding a suitable stand-in for work that requires a highly specific skill, knowledge or maybe maintaining a relationship with an important client. Skills are in short supply across a wide range of industries today – as evinced by the very low unemployment rate. It’s nearly impossible to find replacements ‘off the shelf’ today.

        As regards the need for retraining, take for example a commercial pilot. Having taken six months off, is that person OK to just jump back in the pilot’s seat and resume work as if nothing has happened? How about a surgeon? So there is a cost to getting them back up to speed.

        In project management roles, churn in the project team is highly undesirable and if there is the possibility of a potential team member going absent (for whatever reason) they might not get picked. This then tends to side-line the aspiring female project manager in the long term because she doesn’t get the roles that develop her career.

        Most NZ companies are very small. The loss of a key person in the company can be a real blow for an operation, so would a recruiter tend to steer away from hiring a women if she’s likely to disappear for half a year?

        Think it through because you can’t have it both ways. If you want extensive PPL then maybe women have to accept a secondary role in the workplace.

        • Susan says:

          Andrew
          I accept the thrust of your argument re the effect on businesses of a key employees taking time out. But this is a different issue from whether leave is paid or not and how much. My argument is that PPL is a lottery-being tied to fulfilling requirement of paid work even though it is a tax funded not employer funded scheme and is suppose to be in the best interests of babies. My preference is to pay all mothers of newborns the same amount and pay for that by combining the costs of PPL with the parental tax credit, in work tax credit, and childcare subsidies for those under one year. I don’t see the point in limiting contact with the workplace – mothers can use the money to pay for nannies etc if they choose and see fit. Australia does this all much better than we do