Paid Parental Leave Fails Growth Test

13 FEBRUARY 2002

Paid parental leave should not be introduced as it failed to pass the test as a policy that could make a contribution to increasing New Zealand's economic growth outlook, Roger Kerr, executive director of the New Zealand Business Roundtable (NZBR), said today in releasing a submission on the Parental Leave and Employment Protection (Paid Parental Leave) Amendment Bill.

Mr Kerr said the government had made an ambitious commitment to restore New Zealand to the top half of the OECD income rankings. "One of the key tests of any government policy proposal should therefore be whether or not it makes a cost-effective contribution to increasing New Zealand's long-run rate of economic growth", Mr Kerr said.

"Clearly, paid parental leave fails this test. The labour market benefits of paid parental leave are uncertain and a majority of New Zealand workers have demonstrated that they value wages and other benefits more than paid parental leave.

"While the benefits of the proposal are uncertain, its costs are real – in the form of higher taxes, a more rigid labour market and greater compliance and other costs for business. These costs come on top of a number of recent and proposed government initiatives that have made it harder for businesses to succeed in New Zealand", Mr Kerr said.

"New Zealand is not a high income country and it simply cannot go on legislating for benefits that are not backed by growth in the economy. By doing so it risks killing the geese – firms in the productive sector – that lay the golden eggs."

Mr Kerr said paid parental leave is also unfair as it will advantage a particular group of people – two-earner families – at the expense of other groups such as childless couples, the self-employed, older people and single earner families, many of whom are less well-off than those who will benefit from the scheme. Moreover, families are not strengthened when the state assumes roles that should be performed by parents.

"What New Zealand critically needs are policies aimed at stimulating economic growth and lifting the incomes of all New Zealanders, not more middle class welfare", Mr Kerr said.

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