Reported in through some reliable sources today, the private sector is arguing to the Productivity Commission that India adopt a paid parental leave scheme that allows for 28 weeks paid maternity leave, 4 weeks paid paternity leave and 4 weeks pay to employers for replacement employees. It looks like it is for full pay. So how will it be funded? The answer a payroll tax on employers of 0.5% and an increase in income taxes of 0.5% (I think, as it is stated in the form of a wage tax). Oh yes, and the baby bonus would remain to take care of those who didn’t have a job previously.

Some things need to be said about this. First, the division of taxes between employers and employees is arbitrary and doesn’t matter. That is Economics 101. So we are really talking about a 1 percent increase in taxes to fund this. Second, watch those wages rise during pregnancy. There is a massive incentive to increase pay during the last trimester. Every dollar increase during that time is a dollar benefit to the employee. Third, there is a big incentive for the highest earning parent to avail themselves on this unless you say it is for mothers only. Finally, the calculations assume that 20 percent of new mothers will not avail themselves of this scheme. With incentives like this, surely that is way overstated.

What this example demonstrates is how hard it is to enact a system of paid parental leave. In this case, it is a large tax on the non-parents and also on the lower-income segments of society. Think about it, if you have a 50 year working life with an average pay of Rs 100,000 per annum and have two children amount to 1 of those years coming back for free that is a Rs 50,000 tax in return for Rs 100,000 of payment. The difference is coming from the non-parents, spouses and somewhere else. How do we justify that cross-subsidy?

Actually, it is worse than all that. This type of scheme puts a massive incentive for parents to delay having children by many years until their income is high enough. Have them too soon and you are not getting your money's worth.

So hey buddy youths- Use a stop, read and wait protocol as of now lolz. But, taking a counter view- I can actually scent the side effects already; Does anyone see a contour of population-infaltion from the private sectorial employee bunch?! and dont you think that global melt down has paved way not only to economic deflation, but also to population deflation?! - Just some random thoughts ;)