As election campaigns go, paid parental leave is not usually the issue that swings votes. But like infrastructure, it is an investment into the future. Something that New Zealand notoriously underinvests in. Paid parental leave supports the value we place on the first months of a child’s life, and the support society provides to the parents doing the caring.
The National Party’s recent announcement that it would gradually extend paid parental leave from 26 weeks to 30 weeks if re-elected deserves attention, given that the government it leads has reduced employment entitlements during its term in government. Arguably the most detrimental has been the controversial changes to how pay equity claims can be made. Dozens of existing claims have been blocked from female-dominated workforces which are generally considered to be underpaid in comparison to those dominated by men, saving the government “billions of dollars” as the Prime Minister admitted.
National’s policy would see paid parental leave extending to 30 weeks by 2029. The party has also revived its policy to allow parents greater flexibility in how they share leave entitlements, enabling mothers and fathers to take leave together or in overlapping periods rather than constraining families into more rigid arrangements. The Prime Minister describes the policy as giving families more choice and more time with their babies.
The Labour Party has pointed to National’s historical opposition to some parental leave extensions, while National has responded by highlighting Labour’s rejection of previous proposals to make leave-sharing arrangements more flexible. The reality is that New Zealand’s parental leave scheme remains modest by international standards.
Recent OECD comparisons show that mothers across OECD countries receive, on average, just under 19 weeks of paid maternity leave around childbirth. In the OECD many countries replace a substantial proportion of a parent's earnings during maternity leave, with a number of OECD countries effectively providing full-rate compensation for mothers on average earnings.
New Zealand currently provides up to 26 weeks of paid parental leave, which may appear generous. The difficulty is that payments are capped. From 1 July this year the maximum weekly parental leave payment increased to $811.05 before tax. For many middle-income and higher-income households, that represents a substantial reduction in income at precisely the time family expenses are increasing. Arguably, those households have less need for the State’s assistance, but a significant proportion of those households rely on both parents incomes to meet the high cost of living.
That gap has increasingly been filled by some employers. Contact Energy attracted attention when it introduced a parental leave package that tops up government payments to full salary for the entire 26-week leave period, continues employer KiwiSaver contributions during leave, offers flexible return-to-work arrangements, and provides a childcare contribution. It shows what progressive employers can do to support working families and improve gender equity in the workplace.
Employer generosity should not be the solution though. Statistics cited by the New Zealand Institute of Economic Research indicate that only a small proportion of employers provide salary top-ups or continue KiwiSaver contributions during parental leave. The result is that the financial impact of having children falls unevenly across the workforce. Employees of large corporates may receive more generous support but employees of small businesses often do not. Women are more likely to be significantly impacted in relation to their KiwiSaver plans, and their return to work. The Retirement Commission has highlighted that women retire with significantly less savings than men, reflecting factors such as pay disparities, part-time work, and periods spent caring for children.
While few people decide whether to have children based solely on parental leave entitlements, government support sends an important signal about whether families are valued (and the tamariki are New Zealand’s future workforce). Young families face many increased expenses, doctors appointments, prescriptions, increased housing costs, heating, expensive childcare etc, while often operating on reduced incomes.
Extending paid parental leave is expensive and the country faces fiscal challenges such as growing unemployment, increased inflation and a cost of living crisis. Those concerns are legitimate. But New Zealand is also a nation of small businesses, many of which operate on narrow margins and they cannot realistically afford extensive employer-funded parental leave schemes.
National’s policy will not place New Zealand at the top of the OECD rankings. It does not eliminate the costs many parents still experience when taking leave. It does not solve the long-term impact on women in particular. But it would move New Zealand in the right direction. Read more....