Notes on the Front

Commentary on Irish Political Economy by Michael Taft, researcher for SIPTU

Connecting Dots

Imagesca03145m When children begin one of those connect-the-dot puzzles, the idea that the exercise will lead to any coherence seems foolish. By the time they finish tracing, they have completed the picture and, hopefully, learned a valuable lesson – that disparate pieces of information can, if you approach the matter creatively, but rigorously, create a new picture.

For instance, a social welfare programme, improved health, progressivity, more childcare places, economic security, less crime, better educational performance – what simple tracing could make all these cohere?

For me, it started with grooming rats.

Recently, the Guardian reported a study on the effect of mother rats licking and grooming their young:

Researchers have long known that animals brought up with a lot of maternal care are less easily frightened and more adventurous. The tests. . . showed that motherly care had its calming effect by altering the expression of a gene that governs the brain’s response to stress. The genetic tweak leads to more stress receptors . . which together act to dampen down the body’s reaction to stressful situations. Later tests suggested the genetic changes were long lasting and were even passed to future generations.

The scientists conducting this study were excited by the possible implications for humans raised in a more caring, secure social environment.

That started me thinking. The Left doesn’t like to tread this ground too much because the Right uses all manner of findings to pursue a ‘traditional family’ agenda. Admittedly this is more pronounced in the US. But I remember back in the high unemployment days of the early 19080s when backbench TDs from both right-wing parties suggested that ‘two-income’ families (code for women working) were selfish and that one of the spouses (code for women) should give up their job in order to share employment with ‘no-income’ families.

Still, there is a vast literature on the beneficial effects of parental caring on children, especially in the first year. The National Economic and Social Forum’s Early Childhood Care and Education is one small example and, while it focuses on early education, it spends some time enumerating the benefits of extended parental care for small children:

  • Better educational performance
  • Better health and reduced infant mortality
  • Less stress and anxiety for parents
  • Greater social stability later in life (e.g. less juvenile crime, school absenteeism, etc.)

Okay, lets move to the next dot: maternity leave. Maternity leave is intended to achieve many of the beneficial outcomes outlined by the NESF. Except that in Ireland we have the worst maternity leave programme in Europe. Full stop.

According to the Mercer Human Resource study, we are at the bottom of the league. Here, a woman is entitled to 22 weeks paid leave. And the pay is a miserly – 80% of weekly pay, but only to a maximum of €265 per week. It doesn’t even cover the full income of someone on the minimum wage. And even then it’s taxed. What do other countries do?

  • Denmark: 100% of pay for 60 weeks up to €450 per week
  • Norway: 100% of wage for 43 weeks or 80% for 53 weeks
  • Sweden: 80% of wage for 55 weeks up to €32,000 per year, and a small supplement for a further 13 weeks
  • Italy: 100% of wage for 22 weeks and 30% for 26 weeks

We don’t even begin to compare. The Labour Party has highlighted this issue, stating that most mothers are economically forced to return to the workforce prematurely (in some cases they stay out to care for their children and really suffer a decline in income). This, in turn, creates unnecessary financial stress in the household. We fail to maximise the benefits the NESF refers to, in large part because of state policy.

Bad enough that households suffer income loss just when expenditures increase, owing to a new child. If parents have to return to work prematurely, there is the stress of making child-care arrangements – either searching for a place (and, if lucky, finding one but at a very high price), or dragooning grandparents or relatives into doing the job.

So what could the Left propose? Very simple. We could propose best practice. In the first instance (the proverbial ‘within two years of coming into office’):

  • Double the amount of leave from 22 to 44 weeks and double the maximum payment threshold to €530 per week. We could retain the tax to ensure that the system is progressive, with those on very high incomes receiving less benefit than those on low to middle-incomes.

We should tweak it to allow 13 weeks to be taken up by fathers at the same payment levels (we don’t even have a paid parental leave for fathers – only unpaid which effectively means no leave unless you have the money to forgo income). We could go further, and allow complete transferability of parental leave, enabling households to decide whether the primary carer in the first year is to be the mother or the father.

This simple programme would achieve the NESF’s goals – and go even further:

  • It would provide economic security for households at a time when they need it most, and protect them from income loss.
  • It would open up new childcare places (cheaper than building new ones) since, unlike countries with a property maternity leave programme, Ireland has a very high percentage of children under one year in crèches.

Would this get much media attention? Nah. It’s not macho enough. Most commentators like the ‘fighting crime’, ‘slashing spending’, ‘cutting taxes’ debate – so many fists and swords and chainsaws.

But that shouldn’t deter us – though it may force us to find new outlets to communicate our policies. For there are 60,000 births a year. I would ask any electoral strategist to get out their calculator and see how many people would be affected over a three year period: mothers, most fathers, other relations who would benefit from the family time together. It would affect a great many people.

And the cost? In gross terms it would cost approximately €650 million, but when one factors in taxation it would be less (the Revenue Commissioners estimate that nearly 20% of Child Benefit payments, for example, would be returned to the Exchequer if it were taxed). So do a little comparison:

  • A 2% cut in the standard tax rate would cost over €1 billion and mean an extra €13 per week.
  • The PDs 3% cut in the top tax rate would give a single average income earner less than €4 per week and cost nearly €700 million (it would have no effect for most couples).

Such a best-practice maternity leave programme would cost less than any tax cut while providing all manner of short and long-term familial and social benefits: it would leave an average income mother, in her child’s first year, €336 per week better off.  One more example of the superiority of social provision over tax cuts.

. . . dot . . . dot . . . dot . . . And it all started with grooming rats.

9 responses to “Connecting Dots”

  1. p. trotter Avatar
    p. trotter

    2005 OECD figures: Norway, Denmark, Sweden and Italy all have higher female unemployment rates than Ireland. It doesn’t prove anything but it does pour some cold water over your plan.
    http://dx.doi.org/10.1787/336520586174
    So how will the Irish government force employers to continue hiring women after your policy goes through?

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  2. Michael Avatar

    Thanks p. trotter for your comment. I think we should be careful about using unemployment rates when making international comparisons. This is due to the different criteria that countries use to compile their Live Registers. A good measurement for comparative purposes is the participation rate. This is taken from the CSO’s Measuring Progress 2005:
    In Denmark, 71.9% of women between ages of 15-64 are in employment. In Sweden its 70.2%. In Norway 71.7%. In Ireland, however, its 58% while in Italy its 45.3%.
    There doesn’t seem to be an issue between having generous maternity leave programmes and high female employment. Though I take your point about our employers. Its reasonable to assume that if a Government proposed to radically enhance maternity leave, employers’ organisations would be opposed on the grounds that it would incur extra expenditure on their members. This is true to a certain extent (longer temporary vacancies along with recruitment and training). But then Irish employers pay less than half the level of payroll taxes as employers in other countries, so we can only take this complaint so far.
    To answer your questions – So how will the Irish government force employers to continue hiring women after your policy goes through? – it might be helpful to see how they’ve managed to do it elsewhere.

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  3. Niall Avatar

    On a point of information, Michael, Maternity Benefit is not taxable.

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  4. Michael Avatar

    My apologies. I thought that it had become taxable at the same time as unemployment benefit. I see now its one of a minority of social insurance benefits that are not taxed. Thanks for that Niall.

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  5. p. trotter Avatar
    p. trotter

    hi. The participation rate – the size of the labour force as a proportion of the population – is a very useful statistic in many circumstances but perhaps not in this one. It might be high but contain large numbers of people who can’t find a suitable job. Or it might be low, but with nearly everyone happily employed. It doesn’t tell us if the people who want employment are able to find it, even if it is accurately measured.
    Perhaps you would argue that low participation rates are automatically a bad thing, but that is not exactly what we are talking about.
    It’s impossible to ignore the obvious disadvantage to the policy: that extended maternity leave would be a disincentive to hire women. We could have more privileged workers but with higher unemployment rates, as in much of Europe. Maybe you think that would be better than the current situation? I would like to understand the rationale.

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  6. Michael Avatar

    Okay, let’s deal with the unemployment rates of the countries I mentioned. The following is taken from the OECD Standardised Unemployment Rates for women.
    Denmark: 3.8%
    Norway: 2.9%
    Ireland: 4.2%
    Italy: 8.7%
    Sweden: 6.1% (though this figure comes from 2004 – getting current data on Swedish unemployment is not easy)
    From that data I don’t see a co-relation between generous social provision and unemployment. If there was (and it was negative) Denmark and Norway should be faring much worse than Ireland.
    If there is any work done on the issue of the relationship between maternity leave and female unemployment I would certainly be interested in reading it.

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  7. p. trotter Avatar
    p. trotter

    hello again. I too would like to see any work on this topic. Isn’t it remarkable that we are utterly incapable of quantifying what the effect will be? In the absence of a conclusive statistical showdown, what are we left with? It seems to me that all we are left with is a battle of prejudices.
    So, let’s exercise our prejudices. How about a law which mandated employers to provide each of their employees with a copy of Keynes’ General Theory. It’s the magnum opus of arguably the greatest economist of all time, and everyone should have the right to read it.
    Suppose there were no statistics which could prove any positive or negative correlation between the implementation of this law and the unemployment rate. Would you be in favour?
    Let me pre-empt the objection that not everyone will want to read the General Theory. This is true, but then not every woman chooses to have a child, so this type of objection is not generally considered valid when we are talking about employment regulations.
    How about the objection that it is a waste of the employer’s time and resources? Maybe, but employers in Ireland pay less than half the payroll taxes of other countries so they should be able to afford it quite easily.
    (My tongue is not entirely in cheek. Chavez is reported to want to force employers to give people time off to study socialism.)

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  8. Michael Avatar

    Don’t despair, p. trotter. There may well be some good work on this issue out there – I just haven’t come across it. But I will attempt to do so over the next while. And while it may not be conclusive, it can be informative.
    What I’d really like to see is a follow-up study on Comrade Chavez’s initiative to make the Venezualan people more informed on socialism. I predict a substantial rise in productivity and liberation.

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  9. p. trotter Avatar
    p. trotter

    “I predict a substantial rise in productivity and liberation.”
    That’s fine, that’s your prejudice and you’re entitled to it. Naturally, it’s not the same as mine. I think this plan is just more evidence of Venezuala’s slide into totalitarianism. But that’s not the key point here.
    The key point is that we’re never actually going to get statistics proving whether or not Chavez’s plan is a good idea. Yet we’re probably going to stick with our prejudices (just like we are over maternity leave).
    This backs up my theory that people don’t generally change their political opinions over facts and figures. They form a view based on fundamental ideas about how the world works.

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Commentary on Irish Political Economy by Michael Taft, researcher for SIPTU