Maternity Leave and Labour Market Outcomes
by Preetha Joseph
Gender gaps in the labour market are a key concern in India. Latest CPHS employment data shows that female labour participation (LPR) is 8.4% as compared to a 65.7% male LPR. Among the various factors influencing this gender gap is ‘motherhood penalty’, where greater childcare responsibilities of women result in lower supply and demand for female labour. A new paper by Purna Banerjee (RBI), Shreya Biswas (BITS Pilani), and Debojyoti Mazumder (RBI) investigates the demand side consequences of maternity leave policies on labour market outcomes.
In March 2017, the government amended the Maternity Benefit Act (MBA). The mandated maternity leave was extended from 12 weeks to 26 weeks. Those availing maternity leave have the right to the prevailing wage for the entire 26-week duration and the cost is borne by the employer. Authors of this paper aimed to understand the impact of this policy change on the employment and wages of women. They analysed CPHS data for the years 2016-2020, to compare employment status and wage level of women between the pre-reform and post-reform period.
The treatment group in the study was considered as women in the high-fertility age group (18-28 years). The control group included all men as well as women who are not in the high-fertility age group and women in the pre-reform period. The study controls for age, education, caste, household income, household size, number of children in the household, and industry of occupation. The authors also developed a theoretical model to explain the findings of their empirical analysis.
The researchers found that there was a reduction in the probability of employment of women in the high-fertility age group, in the post-reform period. The maternity leave extension also resulted in lower earnings of this cohort. These effects were observed to be greater among those with high-skilled occupations and higher educational qualifications. It was found that women in the high-fertility age group face lower employment and wages compared to male counterparts, in the absence and presence of maternity leave policies. This gap widens when the employers have to bear the costs of the maternity benefits.
Maternity leave and maternity benefits fall in the intersection of maternal health, child development and equity in the labour market. This study highlights the importance of considering labour market dynamics in policy reform, to avoid unintended adverse consequences.
The authors will be presenting their research for the CPHS Research Seminar series, on October 6th, 2022 6.30 PM IST. Their paper will be discussed by Mitali Nikore (Nikore Associates).
The webinar is open to the public. Please register here to sign up for the event.