India is beating US at Paid Maternity Leave

In India, less than 30% of women work and the deficit costs the country an estimated 2.5 percentage points of gross domestic product per year. Last year, the Upper House of the Parliament made an attempt to fix the problem by doubling its mandated paid maternity leave from three months to six.

On the economic front, there is plenty of evidence to suggest that women-led development in India does not hurt business and is actually good for the company. Moreover, the cost sustained by employers in the process (reimbursements for temporary replacements) is de minimis. To quote a report by McKinsey Global Institute (November 2015), “Achieving gender equality in India would have a larger economic impact there than in any other region in the world – $700 billion of added GDP in 2025 – but comprehensive change is needed.”

Intervention from the government in the form of enactment of laws cementing women in the workforce is a much-needed measure. Women in India are largely underemployed or unemployed, and bringing them into the economy by making it easier to have a child and yet pursue a career is pivotal. No country is going to grow without women growing with it.

The question to be asked is: How will the bill play out in the Indian context? Will this be enough to bridge India’s gender gap in the workforce? Or could it make things worse?

Family Policies Are Changing

The progressive law might actually reduce the number of women in the organized workforce. For example, after Spain introduced the family-friendly law (Act 39/99) in 1999 allowing all workers with children under 7 to work reduced hours without being fired, the enactment spurred the substitution of fertile-age women away from good jobs and a decrease in their relative pay. Similarly, when Chile made it mandatory for companies of a certain size to provide free childcare, it was found that companies responded by reducing women’s salaries by nine to twenty percent. India is doing something similar by making it mandatory for companies with 30 women or 50 employees, whichever is less, to provide crèche facilities.

The United States has one of the most regressive maternity leave policies in the world, ranking last place, along with Australia and Portugal, as stated by the Organization for Economic Co-operation and Development. The US is one of a handful of 41 countries that does not offer any paid maternity leave mandated by the federal government. (Six months is the norm in most developed countries. A baby needs to be close to mother and exclusively breastfed for up to 4 to 6 months.)

The advanced economies of Scandinavia, which consistently stand out in the World Economic Forum’s annual Global Gender Gap Report, show an interesting perspective. The expansion of family policies has been found to have increased women’s labor force participation; it has achieved 72 percent female employment, one of the highest among OECD countries.

The landmark bill puts the rest of the world to absolute shame. The move places India ahead of Australia, France, Germany, Japan and the US for paid maternity leave. Where is the best place to be a working mother? Definitely, not the U.S.

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