New research has offered insights into the impact of the Government’s families package – and how the overheating housing market has undercut some of its expected gains
Efforts to give new parents more time with newborns through paid parental leave seem to have fallen short of initial expectations, with new research pegging inflated housing costs as a potential culprit.
In late 2017, the Government announced it would increase the amount of paid parental leave from 18 weeks – first to 22 weeks from July 2018, then to 26 from July 2020 – as part of a “families package” to tackle child poverty.
A Ministry of Social Development report published this month, assessing the impact of the changes for families who benefited from them in 2018 compared with those who didn’t, noted a gap in the effect of the leave extension.
While paid parental leave was increased by four weeks in the measured period, eligible mothers and first parents in the first group to benefit from the changes increased their time off work in the first year by less than a week on average.
The report noted that the effect of the policy change was “small relative to the number of additional weeks of paid parental leave provided by the policy”, and cited the overheated housing market as a possible explanation.
“One possible explanation is that recent inflation in house prices and rents worked in opposition to the policy reform, and constrained the amount of leave working parents were financially able to take.”
Another theory was that mothers were influenced by concerns their employment opportunities and career pathways would be negatively affected by taking additional leave, and by employers’ practices and preferences.
“Attitudes and practices may have still been adjusting in the period we focus on.”
Among the report’s broader findings were that mothers and first parents in the period before the early-years changes still saw their average gross income increase by around $74 per week higher in the six months following the birth, thanks to family tax credit changes and the introduction of the winter energy payment.
Being in the first group eligible for the early-years changes, which included a universal Best Start payment on top of the paid parental leave increase, resulted in additional income gains of $55 per week in the first six months post-birth – a 10 percent increase on average.
The Government has come under pressure to address child poverty more strongly, after it initially implemented only three of 42 recommendations made by its Welfare Expert Advisory Group.
Child poverty figures released by Stats NZ in February showed the number of New Zealand children in households facing material hardship had dropped by 20,000 in the last two years
But with houses prices hitting their highest rate of annual growth in 15 years last month, there has been concern about the flow-on effects for New Zealanders.
National Party social development spokeswoman Louise Upston told Newsroom the report was “another indication of how rising rents and living costs are contributing to increased hardship and mitigating the benefits of additional welfare payments”.
“Families on lower incomes will still be under pressure when on paid parental leave, including maternity leave, if their income is struggling to keep up with rising living costs.”
Upston said Labour was not delivering on its promise to reduce housing costs, which had a significant effect on social development as more people approached the Ministry of Social Development for financial support and emergency payments.
Social Development and Employment Minister Carmel Sepuloni told Newsroom the families package had successfully boosted the incomes of low- and middle-income Kiwis, but conceded “the increased cost of housing is having an impact on many New Zealand households”.
Sepuloni said the Government had a major work programme underway to increase the country’s housing stock and address accommodation costs, while income measures outside of the families package had included a $25 increase to weekly benefits, investing in job training and apprenticeship programmes, and increases to the minimum wage.
The changes made to date had been “affordable and sustainable”, and the Government remained committed to addressing income adequacy.
“While we have made significant progress, we acknowledge there is still more to do.”