Parental leave and benefits

Put yourself in the place of an employer faced with two excellent and similarly qualified candidates for a position. You'd be very happy with either. But one, a young women, comes with maternity leave risk. If she decides to have a child, you will bear costs of worsening productivity over the course of the pregnancy despite her best efforts, costs of finding a temp worker to cover her position while she is on maternity leave, and the uncertainty of whether she will indeed return when leave concludes. She may also wish to move to flexible time arrangements on return. The other, male, doesn't. You're running a small business where losing a skilled worker for a short period is a very real burden, even if somebody else is paying her salary while she's on the government's paid parental leave scheme. Whom do you choose?

Cactus Kate makes the case:

I will never apologise for being honest enough to say that I don't like employing women of child bearing age especially if they have just got married or are loved up with a boyfriend because you know the next step. Babies. It is bad enough for a small business losing a staffer for 12 (as it is in HK at 4/5th pay) or 14 weeks, try employment laws where you can't sack a woman while she is pregnant (that's nine months of secure employment) even if she is hopeless at her job or not turning up, try the woman who at 11 weeks and a few days of investment and patience waiting for her to return to work, then hands you their bloody resignation. Try co-workers having to pick up the slack while she is away as you can't afford a temp.

In many cases they cope fine which means on return to the workforce it's pretty clear the new mothers position can be made redundant anyhow. This is the reality of parental leave. It indicates pretty quickly to an employer just how crucial a woman is or isn't to an operation. In many ways it's a rehearsal for redundancy.

We can wish that employers would willingly take on these costs. And many who do find that they wind up with a very loyal and committed employee if they do. But it is a risk. And it's a risk that, at least in data from a very nicely designed field experiment in France, has employers shy away from employing women with high maternity risk. Lower employment isn't the only way that the policy's costs can be shifted; Jon Gruber finds that costs of mandated maternity benefits through US employer-provided health insurance tends to be borne through lower wages for women [HT: @KevinMilligan]. And it's a pretty plausible candidate explanation for the lesbian pay gap; my excellent honours student, Hayden Skilling, is investigating this as his honours project this year.

New Zealand currently requires employers to hold a woman's position open for a year if she takes maternity; the government provides paid leave scaled to the woman's salary (and subject to a relatively low cap) for 14 weeks. The Labour Party proposes extending this to 26 weeks; the bill has been drawn from the ballot. It is likely to pass first reading, but likely to be killed afterwards because of the budgetary implications.

Were it implemented, I'd expect that the policy will increase the amount of time that women spend on maternity leave. In Canada, Baker and Milligan found that a doubling of the compensated maternity leave entitlement significantly increased the amount of time women spent on maternity leave.* Employers will bear costs despite that the paid leave entitlement is covered by IRD: it will be harder for employers to cover leave internally and so more of them will have to find replacements willing to work on temporary contracts. A longer time outside of the workplace means skills have longer to erode. Women are also more likely to want to return on part-time or flex-time arrangements after longer periods outside of the workforce; Schott finds that the American Family and Medical Leave Act increased women's likelihood of returning to work part-time rather than full-time.** Finally, we may expect increased labour market participation among women anticipating maternity leave, but also increased employer reluctance to take on women of higher maternity risk except at lower wages. But, I don't have a great sense of the incremental cost above existing leave entitlements; what's true at the margin might not cash out as much in the aggregate.

If Labour's economics were just a bit stronger, they'd be trying to couple their policy with some kind of compensation mechanism for employers whose workers take maternity leave rather than embedding the lump of labour fallacy into the bill's explanatory note:

Extending paid parental leave from the current entitlement of 14 weeks to 26 weeks would support families and also create jobs across the economy as employers engage staff to replace those on paid parental leave. As the majority of paid parental leave is uplifted by women, it has the added benefit of creating jobs in areas of the economy where women work, while supporting families and the well-being of children.

Why not advocate for a maximum 35-hour work-week to encourage employers to hire more temp workers to cover the work not done?

* While the Canadian change increased breastfeeding rates, one of the NZ bill's other stated purposes, it had no effect on child health outcomes.

** While Schott finds increased workplace flexibility encourages post-natal female employment, we might reasonably worry that increased likelihood of moving to part-time or flex-time arrangements reduces an employer's willingness to invest in an employee's human capital or to take on the worker in the first place except at lower wages.

Note: updated a couple of times for clarity and to add links to a couple of helpful tweets from Kevin Milligan and Frances Woolley.

Update 2: @askessler recommends this IZA piece showing no long term benefits to kids from paid maternity leave extensions in Germany. 

Planning for gypsys

Mark Pennington over at Pileus analyzes the expulsion of the Roma Irish Travellers [who I had mistakenly thought had had a link long back with the Roma] from an illegal camp site at Dale Farm in Essex. Honestly, I'd not paid much attention and had just figured that they were camped out on public land or on somebody else's property. But that was wrong. Here's Mark:

There is no doubt in my mind that the decision to evict the Gypsies from the site was the correct one under the terms of British law and land use planning law in particular. There is, however, equally no doubt in my mind that UK law in this regard is oppressive and provides a prime illustration of what happens when private property rights are over-ridden in the name of third party ‘community interests’.

As I understand it, the Dale Farm residents bought the property from whence they were evicted, but they acted illegally in erecting a campsite which had not been granted planning permission. As noted in previous posts on this site development rights in the UK are nationalised – if you own a piece of land you have no right to develop it as such – merely a right to request permission to do so from a local government planning authority which purports to represent ‘the community’. As a consequence, all land use decisions are fundamentally politicised and this typically results in the triumph of local ‘nimbyism’.

The Dale farm residents and other gypsies are unfortunate victims of this nimbyism. Though they were wrong to break the law in erecting an illegal site, the reason that they did so was that it is so difficult for them to legitimately build sites anywhere in the country – even on land that they themselves own. Whenever they apply for permission this is typically refused owing to the hordes of local nimby’s pressuring the local authorities and indeed the national government to keep out what are seen as ‘undesirable residents’.

Mark notes the irony of that those protesting the eviction also favour the democratization of all property use, ensuring the politicization of all land use decisions and the repression of folks who scare the median local voter. As Jennifer Roback points out* racism is cheaper at the ballot box than in the market.

* I love this article, which anticipates some of the arguments that came in the Brennan and Lomasky work on expressive voting and in Caplan's Rational Irrationality model.

Affirmative action

A Chinese IT outsourcing company that has started hiring new U.S. computer science graduates to work in Shanghai requires prospective job candidates to demonstrate an IQ of 125 or above on a test it administers to sort out job applicants.

In doing so, Bleum Inc. is following a hiring practice it applies to college recruits in China. But a new Chinese college graduate must score an IQ of 140 on the company's test.

An IQ test is the first screen for any U.S. or Chinese applicant.

The lower IQ threshold for new U.S. graduates reflects the fact that the pool of U.S. talent available to the company is smaller than the pool of Chinese talent, Bleum said.

...

Moreover, unlike many of the larger IT offshore development companies, Bleum is focused on long-term engagements with its clients, not on one-time projects. Over time, it hopes to hire 100 to 500 U.S. workers to help support North American customers.

So says Computerworld, HT Slashdot. [Note the piece is a year old now]

So, is it differential thresholds for the Americans because they bring complementary skills that are relatively scarce in China? Or are they being hired for entirely different positions in tech support while the Chinese workers handle the harder programming problems? Tough to tell from the article.