Tuesday, 10 February 2015

An Economist speaks

from the Telegraph:

But Ms Reeves dismissed those concerns, telling BBC Radio 4 Today that “good” businesses that “value” employees will support Labour’s plans.

“This is exactly what people used to say about maternity leave, that it was a big burden on businesses. But the reality is, what good businesses know, is that it is really important to keep women in the workplace once they have children and not let them drift off because they can’t manage work and family life. That’s increasingly the case for dads.”

“Good employers like Asda, National Grid and Citibank are already giving more than the statutory paternity leave. What good businesses know is that unless they give that flexibility to mums and dads, they are likely to lose their best employees as they will go to a business that does value them, or they will sadly drop out of the workforce altogether.”


So, why does it need more government legislation? If it's in the interest of businesses, they'll do it. Now, maybe Rachel Reeves knows better than those businesses, but as someone who's only worked at HBOS, one of the failed banks, I think that's unlikely.

And ASDA aren't like a software or manufacturing company that can be based anywhere in the world. Adding 2 weeks paternity leave makes people here more expensive. OK, maybe only slightly more expensive, but "only slightly" can tip the balance in favour of another supplier.

As for maternity leave, I know a company that closed down a software team in the UK for this reason. Hiring staff that come in and within a year go off on maternity leave for a year introduces huge costs, most notably, backfilling with expensive temporary staff. It increased their staff costs by 10% over a 2 year period, which was enough to shut down the team and expand the team in the USA.

22 comments:

Lola said...

Last para. Yup. I will not employ women of child bearing age because of the maternity leave taxes. It's just too much risk.

Rich Tee said...

It worries me because I work for a small software company that is already outsourcing work to India.

She is also a fan of auto-enrolment pensions, which might encourage further outsourcing as they don't have to pay the pensions of Indian workers so they are now even cheaper than British.

She is my MP so I might send her a letter, come to think of it.

The Stigler said...

Lola,

Any business I know that isn't big enough to have a formal recruitment process doesn't that. They mostly avoid finding staff via agencies and stick with hiring on recommendations.

That company I mentioned was big enough to have proper processes. And the result was that one employee cost them thousands to hire, and only worked 1 year out of 3, and then left the company (the other 2 years she was back filled with contractors). As the boss said to me, they were perfectly fine with paying for 12 weeks of paid leave (above statutory in the USA) but the unpaid leave option was a massive cost to them.

Rich Tee,
Wouldn't waste my time on it. She's already decided how "good businesses" operate. Become a contractor - everyone knows they're protected (what's your skill area?)

Lola said...

TS. Yep. All our staff have got here by recommendation.

mombers said...

This just levels the playing field a little bit, the risk of parental leave is now slightly increased for a male employee. The current arrangement is incredibly unfair to women, who get discriminated against (with good reason I agree) whether they intend to have children or not.

Also, we need to think about how we plan for the future. Poor parental support in work is associated with low fertility - people opt out of having children as the opportunity cost is so high. Do we then plan for a future where we bring in even more immigrants to run the economy as the indigenous workforce is shrinking? Or somehow figure out a way to support a growing army of retired people? The UK has already got £5tn in unfunded pensions and healthcare commitments. Discouraging working people from having children surely only makes this worse.

Lola said...

M. Well, as 'we' know, the problem is 'rent'. Having LVT / CI sorts out a lot of the need to have two working parents.

The Stigler said...

mombers,

"This just levels the playing field a little bit, the risk of parental leave is now slightly increased for a male employee. The current arrangement is incredibly unfair to women, who get discriminated against (with good reason I agree) whether they intend to have children or not."

In the industry I work in, levelling the playing field just makes it worse for both parties, as the more employment "rights" you pile onto people, the more likely someone is to send the work abroad. If you equalised the right to maternity/paternity leave, you'd pretty much kill off all permanent employment in software in this country. At which point, where's the money going to come from to look after all those empty pension pots?

DBC Reed said...

Lola is right: a lot of the problem is two working parents .Elizabeth Warren, whom lefty liberals are trying to get to run against Hillary Clinton for President ,is interesting going-on definitive about what she and her co-author (her daughter?) call the Two Income Trap .She crunches a lot of bankruptcy figures to show that two parents working increase the chances of going bust.All a bit counter-intuitive.(Perhaps not for land taxers. ) She mentions the role played by double mortgages 1970's onwards.

DBC Reed said...

PS A good intro to Warren is her piece in the Harvard Journal entitled ( I think) " The middle class family on the precipice".

Lola said...

DBCR. Double Mortgages. Indeed. My personal underwriting on mortgageability (as a broker) has always been maxed at 3.5 main plus 1 x second. Never had an impairment, on full status and self cert, in 25+ years.

Kj said...

Stigler: As a resident of a jurisdiction where we have more or less equalized parental leave, I don't really see the empirical evidence of a permanent export of jobs, at least not for that reason alone. I know that smaller IT firms dislike when someone buggers off on parental/maternal leave, but it's an established fact that it will happen, and you organize with that in mind. I know it happens that certain employers will pay compensation in order for the mother to take the entire leave, but that's in very few specialized professions and among executives higher up on the payscale. The employer does not pay a penny for this, and while you are probably right that the outlay is not the problem in some fields, for those who can organize around it, the employers are pretty happy they are not paying for it.

Mark Wadsworth said...

1. It's all EU inspired corporatist bollocks. For large employers with dozens or hundreds of young women employees, they know that at any particular time, five or ten per cent will be on maternity leave; they can cover for each other.

For small businesses, it is a pain in the arse.

2. Dads don't tradionally take paterenity leave. But for those who want it, surely they can save up their holidays while the wife is expecting and then take two or three weeks off out of normal leave.

3. With a Citizen's Income in place, women or indeed men have far more scope to say 'Sod it, my other half is working, I'll take off as much time as I want.

4. With lower taxes on output and employment, there will be full employment, so much easier for people to return to work after a year or three, regardless of whether it is with the same or a different employer.

5. See also what DBC and L said re two parents having to work.

6. Momb, yes, in the very long run it is surely better for social cohesion for the next generation of workers and businessmen to have grown up here rather than us relying in immigrants (i.e. you and me, to be honest).

7. Kj, different rules apply to easily exportable jobs like IT (Stigler's field) and things which have to be done locally (accounting, shops, hair dressers, car mechanics etc).

Shiney said...

Chaps

In manufacturing, where I make a meagre crust, you end up automating the jobs away as the cost of putting in kit is now less (effectively - MW will explain, he's an accountant!).

It happens in 'service' jobs as well - for example automated tills in supermarkets, petrol stations where you can only pay at pump.

The only place it doesn't seem to happen is 'Government' - but you wait.. all those 'clerical' (clerks, receptionists etc) 'manual' (bathing, washing, cooking, cleaning etc in NHS) jobs will eventually be automated away as well.

The Stigler said...

Kj,

"As a resident of a jurisdiction where we have more or less equalized parental leave, I don't really see the empirical evidence of a permanent export of jobs, at least not for that reason alone. I know that smaller IT firms dislike when someone buggers off on parental/maternal leave, but it's an established fact that it will happen, and you organize with that in mind. I know it happens that certain employers will pay compensation in order for the mother to take the entire leave, but that's in very few specialized professions and among executives higher up on the payscale. The employer does not pay a penny for this, and while you are probably right that the outlay is not the problem in some fields, for those who can organize around it, the employers are pretty happy they are not paying for it."

But it isn't an "established fact" because employers have other alternatives, like pushing work offshore.

Bayard said...

"The only place it doesn't seem to happen is 'Government'"

That's because, in the public sector, all the incentives are to take on more staff - it's the only other means of promotion apart from dead man's shoes.

The Stigler said...

Kj,

And just to add, this isn't about the cost of giving mothers a few weeks of statutory leave. It's about the fact that while the mother is off, you need to backfill them with other people, and that means contractors, who are pretty expensive.

In the case of that team I mentioned, they spent thousands recruiting someone, who a few months in announced she was pregnant, and 6 months in went off on maternity. She then was off for a year, which meant a contractor (me) took over for a while (and you can't fix someone in for a year because that isn't how the maternity leave laws work). Near the end of that year, she told the company she wasn't coming back. I stayed on a few more months as a contractor, and then they spent a load of money hiring another employee.

DBC Reed said...

A lot of this implies that the smaller SME's don't have the capacity to cope that well with any changes at all over a year.From my experience with other trade union reps( in the good old days when the UK had a proper mixed economy) I grew to hate working with the smaller set-ups because the managements could not delegate and were spending too much time on comapative trivia like cover for absent staff etc and not attending to core matters.I had to deal with one top bloke who boasted that he had spent two weeks sorting out the place's drains.Small is not necessarily beautiful.

Kj said...

TS: I'm not disputing your experience, or that it's a bigger problem for businesses with fewer employees than those with greater number of employees, it evidently is. I'm disputing that it's a great cause of export of jobs in itself.
MW: agreed with CD/LVT as the other solution, ofcourse.
Another point of view, which I happen to agree with, as long as we don't have CD's or low taxes on labour, is this: without the right to leave, the implication must be that people who intend to have children shouldn't apply for jobs at all, or work after the kid can be put into nursery/daycare. Obviously someone has to stay home with the newborn, and that employee would have needed to be off work whether they had the right to or not, the difference with statuatory leave being that they would have been able to be fired without. And yes, fathers do take leave, even when it's voluntary exchangeable between the parents, maybe they don't in the UK I don't know.

Derek said...

Extra holiday/maternity leave/paternity leave are all similar to increases in the minimum wage in that they make it more expensive to employ a person. And yes, in the short term that will lead to increased unemployment. But in the longer term, the extra cost comes out of rents. So an increase in paternity leave will lead to a reduction in business rents. This is why the Norwegian entitlement level isn't harming the Norwegian economy.

However if the Norwegian level were to be introduced overnight in the UK, it would cause acute short term pain in the form of increased unemployment, followed by long term gain in the form of cheaper rents. That's why any changes of this sort should be introduced gradually.

Kj said...

Derek: agree with Your points, at least as far as entitlements vs. the economy vs. rents goes. TS's point about problems for individual businesses, esp. small vs big, is still a valid point, and this applies to any leave entitlement as you point out.

Derek said...

Agreed, Kj. When it comes down to individual cases, there are huge differences in the effects depending upon whether the business is large or small, owns its own premises or rents, is location dependent or not. So I don't dispute that TS's point is a valid one, particularly in an industry which is easy to offshore. I just wanted to make sure that we weren't losing sight of the forest by concentrating too much on the trees.

Mark Wadsworth said...

To continue my list…

8. To the extent that mums want to go back to work rather than stay at home (and get a CI), what's wrong with low cost or 'free' childcare? Most people have no objection to 'free' state education starting from age 5, why not 'free' childcare starting from age two or age one?

Surely, if women want to work, it is better for one to be employed in a nursery (very few men do this) and two women to have wealth creating jobs than for all three to be at home?