Strengthen Recent Reforms by Linking Family Payments to Day-Care Use, Says OECD

 

25/10/2004 - Willem Adema, the author of Babies and Bosses - a review of New Zealand’s policies to support parents in their choices of work and childcare options – will outline the OECD’s findings at a news conference at 12:00 noon, Thursday October 28 at the Ministry of Social Development, level 3, Bowen State Building, in Wellington.

New Zealand’s new "Working for families" package helps low and middle-income families with children and increases incentives to work for those on income support. However, the reform does little to lower the tax rates facing the second earner in a couple family, giving them limited incentive to work or search for a job. OECD’s Babies and Bosses says that a stronger Childcare Subsidy programme - linking hours worked with financial support for parents, could address this issue.

Better co-ordinating the operating hours of day-care facilities with parental working hours is a key policy challenge in New Zealand. Current funding restricts financial support of childcare services to 6 hours per day, making it difficult for both parents to work full-time. Also, although commendable in itself, increasing the quality of day-care by having high staff-to-child ratios and requiring all staff to have teaching diplomas (rather than a teacher and one assistant working in tandem) will increase childcare costs, and potentially parental fees. The higher cost could prevent parents, particularly those with low incomes, from using the system and force them to give up their jobs, thereby increasing the risk of child poverty.
 
Half of all sole parents in New Zealand are jobless, which is high by international comparison, and at 1.2% of GDP, New Zealand spends more than most OECD countries on income support for sole-parent families. For sole parents on Domestic Purposes Benefit, financial incentives to get a job remain weak and should be strengthened. One way would be to lower basic payment rates while increasing employment-conditional payments. Enhanced case-management has recently been introduced to strengthen employment support for sole parents on benefit. It is too early to assess the impact of reform. If it proves unsuccessful, a system of mutual obligations, requiring sole parents to actively seek work, should be enforced.

Young mothers in New Zealand often take advantage of workplace flexibility to reduce their working hours for a few years and then work longer hours as their children get older. The unusually high proportion (40%) of women in New Zealand holding management jobs suggests that women can more easily pursue a career if part-time work for a limited period is accepted as a solution to the work/family balance. The government could help more employers introduce family-friendly measures by encouraging them to participate in workplace assessments that advise enterprises on tailor-made options to suit both bosses and workers.  
  
Based on its review, the OECD’s Babies and Bosses report suggests the following policy recommendations to improve the balance of work and family life in New Zealand:

  • 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.
  • 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.
  • Closely monitor and evaluate the impact of the introduction of enhanced case management for clients of Domestic Purposes Benefit, and enforce mutual obligations (requiring sole parents to seek work actively) if reform does not lead to a significant increase of employment among sole parents.
  • Modify Domestic Purposes Benefit so to make work pay and avoid high marginal effective tax rates throughout the phase-out range. One way of doing this is through a lower basic payment rate with an employment-conditional increment that gives incentives to increase work effort. For sole parents who can work, this would moderate the benefit and poverty traps substantially. The trade-off of such policy is that those who solely rely on DPB would be worse off. Alternatively, if lowering payment rates is unacceptable for this reason, introduce an employment-conditional benefit for all families with children. 
  • Reform the current employment-protected leave period to include an entitlement to part-time work for parents with very young children. Envisaged reform will gradually extend paid leave to 14 weeks as from December 2005; without additional spending, such reform could allow for spreading of income support beyond this period.
  • Enhance the family-friendly nature of workplaces, for example, through the introduction of subsidies to employers for participating in initiatives that provide workplaces with tailored advice on family-friendly policy practices, and ensure long-term enterprise commitment through regular assessment or audits.
  • To give employers due notice on the return of their employees, increase the notice period for parents on parental leave (up to the first birthday) from three weeks to two-three months.

To obtain a copy of the book, which is under embargo until Thursday 28 October, journalists are invited to contact the Media Relations Division (tel. (33) 1 4524 9700). For further information journalists are invited to contact Willem Adema, Project Manager of the OECD family-friendly policy reviews (Tel. (33) 1 4524 1557) or Mark Pearson (Tel. 33 1 4524 9269).

For further information on family-friendly policies

 

Related Documents

 

Babies and Bosses: OECD Recommendations to Help Families Balance Work and Family Life

 

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