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Abstract
This paper examines comparative data on compensating families for birth and adoption. Cost data (costs
as a percentage of gross domestic product) are examined for 21 OECD countries with more detailed analysis
reserved for the United States and Canada. The paper develops an actuarial cost framework and applies
it in three situations: (1) Canada from 1975 to 2004; (2) state temporary disability insurance (TDI)
programs in the United States from 1985 to 2004, both total TDI costs and the costs of pregnancy benefits;
and (3) California, which now compensates families for births and adoptions through both TDI and its
new program of paid family leave.
Introduction
One of the salient developments over the past sixty years in the labor markets of the Organisation
of Economic Co-operation and Development (OECD) has been the growth in the participation of women.
The most noticeable change has occurred among married women and especially women with young children.
In Canada and the United States, more than half of such women now return to the labor market during
the year following the birth of a child. For example, Cohany and Sok (2007) report that 53.5 percent
of married women with children under one year, infants, were in the paid labor force in 2005, a percentage
that has been stable in recent years.
Pregnancy, childbirth and the postnatal period are three phases in a woman's reproductive life
that are an especially vulnerable time for a working woman and her family. An expectant and nursing
mother needs adequate time to give birth, to recover, and to nurse her child. At the same time, she
needs assurance that she will not lose her position of employment because of pregnancy, the birth or
adoption of a child, or absence on maternity leave. The loss of continuity in employment is a major
impediment for a woman in terms of earnings and career advancement and is costly in terms of employment-related
benefits. Not only does maternity protection ensure equal access to employment, but it stabilizes the
flow of income that makes an important contribution to household income security and family well-being.
Maternal protection refers to employment-related initiatives that were first enacted as maternity
policies more than a hundred years ago to protect the health of working women at the time of childbirth.
While employment-protected leave for employed women around the time of childbirth is available in all
the OECD-member countries, some have adapted to the needs of working families with legislation mandating
parental leave. Parental leave includes several types of initiatives that allow women, or women and
men, to temporarily transition from the labor force and devote time to childbirth, adoption, or other
family needs. The critical difference in policy is due to the approach taken by policy makers in supporting
households as working families reconcile labor market work with family life. Much of the debate regarding
family policy is framed by choice for parents, we wish to examine how much choice is available to parents
for infant care.
As defined by the International Labour Organisation (ILO, 1997), maternal protection includes maternity
leave, employment protection, cash and medical benefits, and the health protection of the mother and
child. In the OECD, leave related to maternal protection includes maternity leave, family leave, paternity
leave, parental leave, and child rearing leave. Table 1 shows the percentage of gross domestic product
(GDP) allocated to public social expenditure on the family for a large number of OECD-member countries,
OECD-21. In the time series data, available for OECD countries from 1980 to 2001, the OECD-21 average
expenditure on the family as a percentage of GDP ranges from 1.6 to 1.9 percent. As these percentages
show, expenditure to support families is modest, but family policies are an essential part of social
policy, particularly policy related to the well-being of children. A significant proportion of family
expenditure is spent on programs for maternity (and parental) leave, maternity allowances and birth
grants.
An aim of the paper is to compare one aspect of statutory maternity protection leave, namely birth
and adoption leave, in the OECD. Generally, birth and adoption leave is known as maternity leave (or
pregnancy leave). This is an employment-related leave of absence for employed women around the time
of childbirth, or adoption. In most OECD countries, women on maternity leave may combine pre-birth
with post-birth leave and receive specific income support payments during the maternity leave period.
All OECD countries define adoptive mothers (and parents) as eligible for leave as well as biological
mothers. The rationale is that new parents, whether at the time of childbirth or adoption, require
time to adapt to a new role and to a new child. Statutory birth and adoption leave is provided by law
to employed women and protects their jobs until they return to work (in some countries, it also covers
unemployed women and those with no labor market attachment). By narrowing the focus to maternity-related
leave from the broader maternity protection, we can directly compare cross-national variation in birth
and adoption programs.
In addition to presenting a cross-national comparison of statutory leave arrangements, we analyze
quantitative data on birth and adoption leave in Canada and the United States. The North American comparison
is particularly interesting because Canada is the only English-speaking country that provides both
compensated maternity leave and parental leave. Also, the comparison allows us to determine the costs
and assess the generosity associated with birth and adoption leave in Canada and the United States.
One way of assessing generosity is to consider the volume of maternity-related leave payments, both
the number of recipients and weeks compensated, and relate these to the number of children being born.
This approach gives a fuller picture of the role of compensated maternity benefits in supporting families
with birth and adoptions.
We acknowledge that the focus on statutory programs ignores the role of collective bargaining agreements
between unions and employers that may increase mandatory leave provisions. It also ignores employer-provided
paid leave in non-union employment and other national policies related to children. For instance, Australia
and the United States are the only two OECD countries without a national program of compensated birth
and adoption leave. The Australian government, however, provides a significant lump-sum birth grant
and also income-tested family benefit payments to families with one-earner. In the United States, California,
Hawaii, New Jersey, New York and Rhode Island provide income support to parents for pregnancy and births
through state-financed temporary disability insurance (TDI) programs. While family benefit payments
in Australia are not addressed in this paper, TDI in the United States is examined.
The following section examines the variation in maternity-related leave in the OECD in terms of coverage,
eligibility criteria, maximum leave duration, benefit replacement rates, and advance notice requirements.
Section three develops an actuarial framework for examining the short-term costs of social insurance
programs and applies this general framework to TDI programs in the United States. It also compares
the experience (recipiency rates, replacement rates) with birth and adoption leave in Canada to the
performance of state TDI programs by examining both cross section and time series variation in the
costs of these programs. California is singled out for additional analysis. Section four concludes.
(End of excerpt. The complete report is available in PDF format.)
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