Is Maternity Benefit Really A Benefit?

The new Maternity Benefit Amendment might harm women instead of helping them.

Last week, the Lok Sabha passed the Maternity Benefit Amendment Bill. Once the President gives his assent to the Bill and it becomes an Act, women will be entitled to a maternity leave of 26 weeks. Currently, it stands at 12 weeks.

The new law will apply to organisations employing 10 or more people. It will be available only for the first two children. Beyond that the leave will be limited to 12 weeks. The prime minister Narendra Modi called it “a landmark moment in our efforts towards women-led development.” The labour minister Bandaru Dattatreya said the new bill was his humble gift to women.

Nevertheless, the question is, is this really a gift to women? Before I answer this, let’s try and understand a concept called the Broken Window Fallacy. This concept was put forward by the nineteenth century French economist Frédéric Bastiat.

Bastiat talks about a shopkeeper’s careless son breaking a pane of a glass window. He then goes on to say that those present would say: “It is an ill wind that blows nobody good. Everybody must live, and what would become of glaziers if panes of glass were never broken.”

The point they are trying to make is that if windows weren’t broken, how would those repairing windows, the glaziers that is, ever make a living. This seems like a fair question to ask, but things aren’t as simple as that.

As Bastiat writes in Essays on Political Economy: “This form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.”

Bastiat then goes on to explain what he means by this. Let’s say replacing the pane of the broken window costs 6 francs. This is the amount that the shopkeeper pays the glazier. If the shopkeeper’s son would not have broken the window there was no way that the glazier could have earned these six francs.

As Bastiat puts it: “The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.” This leads us to conclude that breaking windows is a good thing because it leads to money circulating and those who repair broken windows doing well in the process.

Nevertheless, this is just one side of the argument. As Bastiat writes: “It is not seen that our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps have replaced his old shoes, or added a book to his library. In short, he would have employed his six francs in some way which this accident prevented.”

Now how does all this apply in case of the 26-week maternity benefit? Like the above case, there is a seen part to the benefit and an unseen part. The seen part of the benefit is very obvious. Women currently working in establishments with 10 or more people will get a 26 week maternity benefit during pregnancy. Of course, it is more than likely that this benefit will be limited to the organised sector. It is unlikely to benefit women working in the unorganised sector, which provides a bulk of the employment.

Further, this seen benefit comes with a cost attached to it. Small and big establishments will have to pay an employee half a year’s worth of salary when she is not available at work. While the big establishments will be able to manage this, the small ones won’t. Hence, the likely unseen impact of this is going to lead to managers not hiring women of child-bearing age.

A report in the Guardian points out: “A survey of 500 managers by law firm Slater & Gordon showed that more than 40% admitted they are generally wary of hiring a woman of childbearing age, while a similar number would be wary of hiring a woman who has already had a child or hiring a mother for a senior role.” This evidence is from the United Kingdom. Along similar lines, increasing the maternity benefit to 26 weeks is going to ensure that Indian managers will face similar incentives.

This is not to suggest that women are not entitled to an extended leave post child-birth. Nevertheless, it is only fair to keep in mind that the perfect is the enemy of good. The male-female ratio in most of corporate India is anyway lopsided to begin with. As an October 2015 report in the Economic Times points out: “The fairer sex comprises less than 2% of the workforce of marquee companies like Adani Ports, Bajaj Auto, Grasim, UltraTech and Hero MotoCorp.”  The 26-week maternity benefit is likely to make it worse, and that is clearly not a good thing.

This is in line with the Indian tendency to implement welfare measures much ahead of economic growth.

The other unseen impact of this move is that with a 26-week maternity leave, the mother is likely to become even more of a primary caregiver to the child during the initial days. Hence, to that extent, the extension of maternity benefit is patriarchal in nature. That possibly cannot be a good thing.