February 13, 2015 by Paul Goldsmith
There has been much kerfuffle this week about Labour’s plans to double paid paternity leave to four weeks (doubling the payment for those weeks from £138 to £260) and to allow couples to share maternity leave entitlement of up to a year. As with many of this type of policy announcement, the response to it says more about the person or group responding than the policy itself. Business groups decry the extra cost and burden of bureaucratic regulation (a small business has to jump through a lot of hoops to claim the money back as well as arranging temporary cover), Daily Mail commentators moan about the increased tax burden that this involves whilst Mums groups shout out “about time too” and Guardian commentators coo from behind their herbal tea at the progressiveness of it all. So we have to look beyond the naturally self-interested and politically demarcated response to the actual economic implications of this move.
Economics involves humans, and human decisions. It explains how individuals, businesses and governments allocate resources to achieve maximum economic welfare. Economic welfare is not measured only by GDP or in monetary terms, but also includes a sense of social welfare too. In the patriarchal society of the past, it was assumed that mothers stay at home and fathers went to work. That isn’t so now, because it could and should be either. You can’t put a monetary value on what fathers get from bonding with their new born child but I can tell you from experience that it can make a difference for the rest of the child, and the father’s life. A former CEO of a FTSE 100 company told me once that he had been involved in the upbringing of his first two children, playing with them, bathing them, changing their nappies, but the third was born when he was at the top of the company, and he just couldn’t be involved. 20 years later he says that the quality of relationship with the third child is quantitatively and qualitatively different from that with the first two, and he regrets it.
Women taking time out to have then look after their children leads directly to the gender gap in pay and to the gap in achievement and positions in the elite of society for women. Every year out of work reduces salary by about 3% and every year in work increases salary by about 3%, meaning a couple that has the same income as each other at 30, but where the man goes to work for the next ten years whilst the mother stays at home during that time, may arrive at their 40th birthday with the man having 60% more earning power than the woman. This can affect the choices women make when they are younger in terms of how much time they spend training, educating themselves, and pushing for promotions. There have been a variety of studies on this, but the general result is that the UK misses out on about 2% of GDP because of the reduction in opportunities provided to women due to the responsibilities for rearing children. That’s about £40bn a year.
So any policy that helps with this benefits us all. Allowing fathers to spend more time helping out in the first month of the baby’s life (one where, I found, the lack of sleep and the worry of just keeping the little thing alive makes two people working together extremely value), is a start. But the shared maternity leave of up to a year is also vital. Because if you take the couple in the paragraph above, what if over those ten years they share the leave half and half. They then arrive at 40 with the same experience and same earning power. A different ball-game.
Yet, the culture change that would have to happen is enormous. New rules introduced in 2011 allow Dads up to 20 weeks’ paid holiday to allow their wives to go back to work. This Additional Paternity Leave scheme has had take up of 1.4%. Yes, one point four percent. THAT is the key aspect of this. How do we get men to agree to put their career on hold to raise children like so many women down the years have done? I wonder if we are getting to the point where, before marrying or agreeing to have children, any pre-nuptial agreement needs to include who will stay home and who will work and when and how? It’s all very well throwing money at the problem. But Miliband and co might be far better to launch a proper, coordinated campaign to persuade men to accept that women have just as much right to have a career and to expect them to share child-raising. We’re not there yet, but slowly (very slowly) we are moving.