OECD report shows NZ on track with family-friendly policies

The government has welcomed a report by the Organisation for Economic Cooperation and Development (OECD) that gives a vote of confidence to the Working for Families package of reforms.

The report compares New Zealand with Portugal and Switzerland.

“Not surprisingly, the OECD gives a positive assessment of family-friendly policies in New Zealand, and says we compare well with the other two countries,” said Social Development and Employment Minister Steve Maharey.

The report makes eight recommendations for improving family-friendly policies in New Zealand, relating to workplace support for parents, balancing financial support with work incentives, and childcare systems and policies.

“It acknowledges that Working for Families addresses many of the report’s recommendations, and says the package has ‘the potential to transform the lives of many families’.”

Some of the report’s recommendations are already being carried out, such as better incentives to work, increased childcare assistance, and monitoring of domestic purposes benefit reform.

Others, such as allowing parental leave periods to be spread to facilitate part-time work, will be considered in policy reviews in the next few years.

“The reforms we have made to the Domestic Purposes and Widows Benefits are working.” Steve Maharey said. “While some suggested that they would see more people signing up for benefits, staying on benefits longer and being reluctant to work, this has not happened at all.

“The statistics speak for themselves. Since 1997 the proportion of sole parents leaving a benefit for work has almost doubled. In March 1997, 19% of sole parents left the benefit for work. In March 2004, 36% of sole parents were leaving the benefit for work.”

(OECD recommendations and government responses attached)

Contact: Suzanne Pollard, Acting Press Secretary, (04) 471 9154 or (021) 270 9115, email: michael.gibbs@parliament.govt.nz, www.beehive.govt.nz/maharey

OECD Recommendations and government responses

Time-Related Workplace Support for Parents

1. Recommendation

Reform the current employment-protected leave periods to include entitlement to part-time work for parents with very young children. This could allow spreading of income support beyond 14 weeks of paid leave, without any additional spending by government.

Response

The Parental Leave and Employment Protection Amendment Bill extends eligibility for Paid Parental Leave to employees who have been employed with the same employer for between six and 12 months service and will extend the duration of paid leave progressively from 12 weeks to 14 weeks by December 2005. Entitlement to work part-time during job protected leave and spreading of parental leave payments beyond a minimum period are not currently being considered but could be included in the scope of the 2005 evaluation of the Parental Leave and Employment Protection Amendment Bill.

2. Recommendation

To give employers due notice on the return of employees from parental leave, increase the notice period for parents on parental leave (up to the first birthday) from three weeks to 2-3 months.

Response

Notice periods were not identified as a significant issue for employers in the 2003 review of the Paid Parental Leave scheme but issues relating to notice periods could be considered in the 2005 evaluation of the Paid Parental Leave scheme.

3. Recommendation

Enhance the family-friendly nature of work places, for example, by introducing subsidies to employers for participating in initiatives that provide tailored advice on family-friendly policy practices, and ensure long-term enterprise commitment through regular assessment or audits.

Response

Tailored advice on family-friendly policy practice is being considered by officials as part of the on-going work in the Work-Life Balance Project. We will be developing best practice advice and tools for employers and employees to use in the work place. At this stage there are no proposals to include subsidies or formal auditing processes. The government is taking a leadership role to enhance family friendly initiatives in the public sector through the implementation of the Pay and Employment Equity Audit Tool and requirements for its use in the public sector.

Balancing Adequacy with Work Incentives

4. Recommendation

The new family assistance package announced in May 2004 involves major income gains for low and middle income families with children while also providing better financial incentives for families to move off benefits. However, the package does not improve the marginal effective tax rate structure that second earners in couple families face. Further reform could address this issue by strengthening the role of the Childcare Subsidy programme, as it directly links working hours with financial support to parents.

Response

Working for Families will benefit almost 300,000 families once fully in place. It improves incentives for families to move into and stay in work and ensures that they are better off in work. The improvements to childcare assistance go a considerable distance to improving work incentives. The increase in the Childcare Subsidy thresholds from October 2004 and their indexation mean that many second earners not previously entitled will be able to receive childcare assistance. For a family with three children, entitlement to the Childcare Subsidy will not cut-out until total family income reaches $69,000.

5. Recommendation

Closely monitor and evaluate the introduction of enhanced case management for Domestic Purposes Benefit (DPB) clients and enforce mutual obligations (requiring sole parents to seek work actively) if the reform does not lead to a significant increase in employment.

Response

MSD monitoring of the effects of the 2002 Domestic Purpose Benefit reform show that DPB numbers have not increased since the removal of the work test and introduction of enhanced case management. Exit rates from benefit have improved and sole parents are less likely than before to return to the benefit.

6. Recommendation

Make work pay for DPB clients by addressing high effective marginal tax rates throughout the benefit phase-out range by either lowering the basic benefit rates and introducing an employment-conditional increment that gives incentives to increase work effort or introducing an employment-conditional benefit for all families with children.

Response

As part of Working for Families, an In-Work Payment (employment conditional benefit) is being introduced for low and middle-income working families from April 2006. The In-Work Payment and the increased rates and thresholds for childcare assistance will improve the financial incentives for sole parents to work.

Childcare Systems and Policies

7. Recommendation

Invest more in out-of-school-hours-care capacity, for example, by exploring options to make better use of existing education facilities for the provision of such care.

Response

Working for Families has substantially increased OSCAR rates and thresholds. Officials are currently undertaking policy work on OSCAR capacity and supply to assess the size of the issue and are looking at a range of options for enhancing supply of OSCAR services.

8. Recommendation

Extend the role of childcare-related income support linked to licensed childcare services by starting to redirect “bulk funding” for pre-primary school education from providers to parents. Paying childcare subsidies directly to users would remove inequities between parents, and between the childcare and the kindergarten sector. Linking such payments to families’ working hours could strengthen financial incentives for parents (second earners) seeking work, while a comprehensive licensing system would maintain quality standards.

Response

Government has established the Early Childhood Education (ECE) Strategic Plan that aims to ensure all children have the opportunity to participate in quality early childhood education. In line with the Strategic Plan, substantial investment was made to funding for early childhood education and care as part of Budget 2004 and officials will be reporting back in October 2004 on how childcare or early childhood policy settings can be enhanced to support labour market participation, particularly by women. The government will cover the cost of increasing quality in early childhood education. Enhancements to the Childcare Subsidy in Working for Families is designed to strengthen financial incentives for parents to work.

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