Susan St John: Longer paid parental leave would not help some babies

Labour Party MP Sue Moroney's parental leave bill was vetoed. Photo / Greg Bowker

• Susan St John is an honorary Associate Professor at the Auckland University business school.

Labour's bid to get an extension to paid parental leave has been stopped in its tracks by a veto from Bill English. Last week it was finally debated but the veto meant no vote.

Most commentators have expressed dismay that paid parental leave can be so niggardly when there is money for flags, defence, and possible tax cuts.

The Government pretends its veto is for reasons of fiscal prudence. Mr English further enraged the pro paid parental leave lobby by citing an annual cost from Labour's policies of $280 million when it was actually a four-yearly cost.

Advocates argue that the benefits from 26 weeks are substantial. The rhetoric has been that paid leave is needed to allow babies to bond with their mothers and be breastfed for the best start in life. Peter Dunne said in the 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". Who could disagree?

Yet if the needs of all babies were actually at the centre the policy would look very different.

Until 2016, only under half of all parents of newborns got paid parental leave because of the stringent and perverse rules around the kind of paid work experience 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 paid parental leave get $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, at least 10 hours of work per week on average for each of 26 weeks out of 52 prior to the birth is required. This means not all mothers get the full benefit. Once the hours of work requirement is met, the payment replaces gross income up to $516.85 a week. The net amount of paid parental leave can vary between $2365 and $8326. It seems some babies are more worthy than others.

Paid parental leave is fundamentally a compensation for lost income. A high-income earner needs fewer hours to qualify for the maximum. It elevates the contribution to the paid workforce above all other considerations. Ironically 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. Paid parental leave is not fundamentally a state payment to support all newborns.

Those who hit the lucky jackpot of full paid parental leave get $8326 net extra, paid for by the state.

For babies who miss out, some qualify for the parental tax credit as a Working for Families payment of just $2200. This is income-tested and denied to any family on a benefit or student allowance. Around 15,000 babies, many of whom are the most deprived in New Zealand, get nothing at all extra to help them bond with their mothers.

Getting paid parental leave 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 returning to employment. So much for that being a work incentive.

An expansion of paid parental leave perpetuates the growing inequality between mothers who have been in substantial well-paid work and may also belong to high-income households, and those who receive income-tested benefits, child support, a student allowance 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 some mothers to leave her first child at daycare as soon as possible and go back to work for sufficient time to qualify for full paid leave for the next child.

The costs of not doing so are getting too high. 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 than simply putting the existing paid parental leave to 26 weeks. The needs of all babies need to be at the centre rather than paid work.