By Sharon Sa

This article is sourced from Policy Options.

Since Canada first introduced modest paid parental leave benefits more than 50 years ago, the program has improved dramatically.

When maternity benefits were first introduced by the federal government in 1971 under what was then called unemployment insurance, mothers had to prove they had been paid to work at least 10 weeks before conception.

By contrast, eligible applicants today can choose to receive either 12 months (standard) or 18 months (extended) of paid leave with as much as 33 to 55 per cent of the individual’s paid salary toa maximum of $401 to $668 per week.

This program exists across Canada outside Quebec through employment insurance (EI). In Quebec, a parallel benefits plan is administered through the Quebec Parental Insurance Program (QPIP).

But, despite multiple reforms over the decades, Canada’s maternity and parental leave program ranks among the least generous in wage replacement rates out of the 38 OECD countries.

With a housing crisis and the overall increased cost of living, new parents are faced with growing financial pressures. Add to this the fact that benefits offered through EI have not kept up with inflation.

There is an ongoing debate over whether increasing benefits may disincentivize participation in the workforce. Research into the impact of programs administered in Quebec shows that providing complementary benefits, such as affordable child care, could mitigate this effect, particularly among less advantaged parents.

If Canada were to improve benefits, the funding mechanism used would be crucial. If payouts increase while the number of contributors to EI decreases, it could strain the government’s fiscal position, possibly leading to cuts or reallocations in other areas of government spending.

Alternatively, to compensate for the decrease in contributors, it could result in higher premiums for both employers and employees.

It would also make it difficult to increase parental and maternity leave benefits without impacting other EI benefits that are part of the current system.

The way benefits are currently administered by the EI program disproportionately impacts lower-income households. Almost one-third of all Canadian mothers outside Québec do not receive paid maternity or parental benefits, due to factors such as restrictive eligibility criteria. These include the requirement of 600 employment hours in the year before conception.

Applicants such as single mothers, freelancers, adolescent parents and other members of the workforce who fall under a lower-income threshold (typically earning between $25,000 to $43,000 per year) could also face ineligibility or other negative impacts.

For example, consider a single mother who works as a freelance graphic designer. Because she has irregular work hours and fluctuating income, meeting the current eligibility criteria for maternity benefits becomes difficult, if not impossible.

Under the current system, were she to have a second child, she could find herself without any form of paid leave to care for her newborn, triggering immense financial strain and a struggle to cover basic necessities such as rent and groceries.

Across Canada, a variety of individuals including single parents, freelancers and those with lower incomes are disproportionately affected by the current system’s rigid requirements.

Deeper issues in the EI system

A number of challenges in the way parental leave is managed under the EI system need to be rectified if outcomes are to improve in the future.

The first issue lies in creating a false sense of choice, particularly for new mothers who require longer leaves. Since the introduction of extended parental leave in 2017, findings revealed that those who opted for extended parental benefits were more likely to be high-income earners personally, have higher family income, had a partner, worked in large organizations and/or received a top-up which exists in the public sector and some private companies.

Just 15 per cent of beneficiaries opted for the extended plan. The reason for this is simple: most Canadians, particularly those with lower incomes, find it too challenging or impossible to make ends meet on the current benefit.

This leads many to return to work early. In addition, they are susceptible to steep penalties at work reinforcing gender-based bias despite protections under the Canada Labour Code.

Secondly, the current system fails to provide parental leave benefits in conjunction with unemployment benefits. Former Liberal employment minister Carla Qualtrough acknowledges that the inability to “stack” employment insurance and parental leave benefits into one claim creates an equity issue in the system, particularly for new mothers.

While a rate increase could address some short-term issues, it would fail to address larger, systemic problems of equity. Increasing benefits without considering a structural overhaul risks exacerbating these issues. Rather, removing parental benefits from the EI system and making it its own federal program is an opportunity to make the distribution of benefits fair, predictable and equitable.

Access to appropriate public support is a key component of economic well-being. Parental benefits have consequences not only for work-family balance, but also for labour market dynamics, gender equality and overall productivity.

Providing equitable access to these programs is not only a matter of individual entitlement but a cornerstone of sustainable economic growth and prosperity for society as a whole.

See the original article here: https://policyoptions.irpp.org/magazines/may-2024/parental-leave-equity/