Insights into Editorial: The economics of maternity leave

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Insights into Editorial: The economics of maternity leave 


 

Summary:

The government, through an amendment to the Maternity Benefit Act, has enhanced the paid maternity leave for women in the organised sector to 26 weeks from the current 12. This move is in line with several expert recommendations including that of the World Health Organisation, which recommends exclusive breastfeeding of children for the first 24 weeks.

Significance of this move:

This move places India in the league of wealthy Western countries that have some of the most generous benefits for new mothers. In fact, once the amendment to the Maternity Benefit Act, 1961, comes into effect, only Canada and Norway will be ahead of India, with 50 and 44 weeks of paid leave, respectively.

 

Other provisions in the Maternity Benefit (Amendment) Bill, 2016:

  • Maternity leave for children beyond the first two will continue to be 12 weeks.
  • Maternity leave of 12 weeks to be available to mothers adopting a child below the age of three months as well as to the “commissioning mothers”. The commissioning mother has been defined as biological mother who uses her egg to create an embryo planted in any other woman.
  • Every establishment with more than 50 employees to provide for crèche facilities for working mothers and such mothers will be permitted to make four visits during working hours to look after and feed the child in the crèche.
  • The employer may permit a woman to work from home if it is possible to do so.
  • Every establishment will be required to make these benefits available to the women from the time of her appointment.

 

Background:

In 2012, which is the most recent data available, only 27% of Indian women worked compared to 55% in OECD countries and 63% in East Asia. This deficit shaves off an estimated 2.5% from the country’s gross domestic product every year. Worse still, India is one of the few countries where women’s participation in the workforce has actually fallen—the International Labour Organization reported last year that female participation declined from 34.1% in 1999-00 to 27.2% in 2011-12. There is also a stark rural-urban divide: In 1972-73, women comprised 31.8% of all rural workers; in 2011-12, that figure had dropped to 24.8%. For urban workers, the number has increased only marginally, from 13.4% to 14.7% in that same time period.

 

Benefits of maternity leave:

  • Data from around the globe shows that access to maternity leave reduces the risk of infant mortality, and improves breastfeeding rates and duration which has a positive bearing on the child’s physical and mental health.
  • Studies also show that adequate maternity leave (of at least 12 weeks) helps prevent postpartum depression and stress in new mothers.
  • On the economic front, there is ample evidence to suggest maternity leave does not hurt businesses and is actually good for the economy—women workers who have access to maternity leave are more likely to return to the workforce, allowing their firms to not just retain but also attract the best talent. Moreover, the cost incurred by employers in the process (reimbursements for temporary replacements or overtime expenses) is considered to be negligible.
  • A survey by the Associated Chambers of Commerce and Industry of India last year found that 25% of urban Indian women quit their jobs after having their first child. Extended maternity leave might help change this pattern.

 

Why this move would have very little difference?

Positive though it is, the amended law is expected to cover only 1.8 million women, a small subset of women in the workforce. For many poor millions in the unorganised sector, the only support available is a small conditional cash benefit of ₹6,000 during pregnancy and lactation offered under the Maternity Benefit Programme. Besides, it is reported the government is planning to restrict even this meagre benefit to the first child for budgetary reasons.

 

Challenges ahead:

Internationally, there have been instances wherein pro-women, family-oriented policies have backfired.

  • For example, after Chile made it mandatory for companies of a certain size to provide free childcare (India is doing something similar by making it compulsory for companies with either 30 women employees or more than 50 employees to provide access to a crèche) it was found that companies responded by reducing women’s salaries by nine to 20%.
  • Similarly, when Spain introduced a new law in 1999 allowing all workers with children under 7 to work reduced hours without being fired, it was only women who took the benefit—and soon companies were found to be hiring and promoting fewer women while women of childbearing age were 45% more likely to be fired.

 

What else needs to be done?

  • Providing benefits for women and children is a societal responsibility which can be funded in a large country through a combination of general taxation and contributory payments from those who have the means.
  • Health care should be treated as a right and deliveries handled without cost to women; the income guarantees during the 26-week period can be ensured through a universal social insurance system. Such a policy would harmonise the varying maternity benefit provisions found in different laws that govern labour at present. There would also be no discrimination against women in recruitment by employers who currently have to factor in benefit payments. Conversely, women would not suffer loss of income simply because they cannot remain in employment after childbirth.
  • Beneficiaries covered by the latest amendment must be protected from discrimination through clear provisions. Mandating creche facilities to help women workers under the changed law is a forward-looking move, but it will work well only with a good oversight mechanism.

 

Conclusion:

Women’s empowerment can be achieved through universal initiatives, not by imposing conditionalities to avail benefits. Access to welfare support has become even more critical as workers migrate frequently due to economic changes. The twin imperatives are, therefore, to create more jobs for women in a diversified economy, and to provide social opportunity through maternal and child welfare measures.

It also becomes clear that India’s problem is not just about ensuring women return to the workforce after childbirth but in bringing women into the workforce in the first place. Resolving this will require more than just maternity leave—let us keep that in mind as we celebrate our newly acquired progressive credentials.