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Lindsay Mitchell

Paid Parental Leave – time to take a step back

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The NZ Herald recently ran a poll asking whether National was right to use its veto to override Labour MP Sue Moroney’s private member’s bill to extend Paid Parental Leave (PPL) from 14 weeks to 6 months. After 16,000 votes were submitted, sixty percent of respondents had answered yes.

Frustratingly, this doesn’t tell us whether people were against the extension in the context of the current economic climate, against an extension full-stop, or against the entire scheme. I fall in the last category.

Nobody disputes the value of bonding and breastfeeding. The real debate should be about who should pay for it – parents, employers or the taxpayer? That’s what the heated discussion was about only 10 or so years ago when the Alliance Party made PPL a major policy plank and Labour backed it. Eventually the principle of personal responsibility was ceded yet again and a 12 week taxpayer-funded provision was introduced. Having won that battle the left has now moved the debate on to the extent and pace at which the parameters should be adjusted.

PPL, a relatively recent innovation, is an example of social spending ‘creep’ across the developed world. When advocating for PPL protagonists play countries off against each other describing various provisions as ‘generous’ or ‘inadequate’ creating an upward race. But why should New Zealand be blindly emulating welfare states whose high taxes and generous entitlements are currently coming home to roost?

Advocates argue that PPL promotes breastfeeding, makes for better child development, safeguards mother’s attachment to the workforce, and boosts fertility rates. Each claim is arguable (and I could put up various researched evidence for and against) but that isn’t the point.

Even if each of the above objectives is laudable, they would still be realised when parents fund the period following their child’s birth themselves. Which they always did up until 2002.

Although he wasn’t against an extension, in fact he was probably pleased to keep the cost away from his members, Employers and Manufacturers Association employment services manager David Lowe said most people take six to 12 months off when they have a baby. One assumes he has the expertise to know. Assuming he is correct then there isn’t a strong case for extending PPL to 6 months anyway because most people already take that amount of time or longer. Most people can afford to pay for it themselves. (As well, there wouldn’t be the commensurate savings from subsidised childcare Sue Moroney is claiming because most parents are not using childcare in those first months.)

Extended PPL is essentially more middle class welfare (in the same vein as Working For Families which John Key once described as communism by stealth.) Because it is not means-tested high income mothers qualify. This results in upward income redistribution. That is, a low-income single person or small business owner is paying tax to fund relatively wealthy mothers to stay at home with their newborns. These circumstances are unjustifiable.

Some commentators have described PPL as ‘nice to have’ though unaffordable right now. But a ‘nice to have’ is never a necessity. It’s a luxury. In reality PPL was a politically expedient policy for Labour to support; directly or indirectly, a vote-buyer. Unfortunately vote-buyers are almost impossible for subsequent governments to abandon.

Hence National appears to be somewhat compromised on the issue. While the Finance Minister Bill English stepped in quickly to put an end to the bill, others stressed that is was only the budgetary constraints dictating his action. According to the Dominion Post, The Government is keeping the door open to extending paid parental leave, with Prime Minister John Key saying that although unaffordable now, the issue could be discussed in the future.

The issue should be discussed in the future. But not just on the basis of whether or not to extend entitlement. It should be revisited under the broad umbrella of personal versus state responsibility. It should be revisited as part of a government-spending reduction programme. Not only does National have to find its way back into surplus; it has to figure out how the shrinking workforce relative to the 65+ age group is going to produce the levels of tax revenue necessary to fund future essentials.