Maternity Protection and Its Effect on Employment

Transcription

1 e-labor News No. 149 Issue paper Maternity Protection and Its Effect on Employment Jayoung Yoon I. Introduction Korea has well-structured maternity- and paternity-leave programs designed to protect the rights of male and female workers who have family responsibilities and to promote female employment. The Maternity Leave Benefits program provides social protection to future and current mothers by preventing women s displacement due to childbirth and addressing employers reluctance to hire women. And the Parental Leave Benefits program is intended to improve workers job security and economic participation by encouraging actual use of parental leave. Such protection is expected to have a positive impact on women s employment by granting incentives to retain workers who otherwise might have had to leave their jobs. But it is also likely to cause employers to avoid hiring women by raising the cost of hiring women. Although there is growing take-up of maternity leave and parental leave along with growing consensus and social support for workers right to use these benefits, individual employers who feel the economic cost of maternity protection might choose to avoid hiring women who come with such entitlements. And as the maternity protection program matures, there is also the risk that greater use does not necessarily lead to greater hiring of women. In the beginning it might have been used for only a small number of women who wanted to keep working or a few employers who wanted to retain those women who were so competent that they were deemed indispensable. But as the program matures and its use becomes more universal, and as the relative values women assign to and spectrum of preferences between work and child care broaden, the connection between parental leave and attachment to the labor market may weaken. In addition, the labor market environment where job insecurity is worsening might limit any effective benefit to women s employment from maternity protection. This is a translated version of a paper published in the Monthly Labor Review (KLI, June 2014). It includes modified excerpts from the Korea Labor Institute s Study on Redesigning Maternity Protection to Address the Loopholes and Strengthen the Employment Effect (Jiyeun Chang, Jayoung Yoon, & Hyungoo Shin, 2013), commissioned by the Ministry of Employment and Labor. Research fellow, Korea Labor Institute (jayoungy@kli.re.kr). 1

2 This study reviews the status and use of the maternity protection program in Korea and analyzes its impact on women s employment at the workplace level. It then presents policy implications for how to improve the program. Section II briefly summarizes the past and present state of maternity protection in Korea. Section III looks at those who are excluded from the benefits of the maternity protection program both de jure and de facto. Section IV analyzes the employment effect of maternity protection, by reviewing how the major policy changes between 2006 and 2011 have been translated into practices in the workplace, using the Employment Insurance database. It looks at some of the major policy changes such as the increase in parental leave benefits in 2007 and the shift from fixed amounts to fixed percentages in 2011, and it discusses their impact on women s employment by comparing the employment effects of these changes at the individual level. Section V concludes by listing the implications for future improvement of the maternity protection program in Korea. II. Past and Present of Maternity Protection in Korea This section introduces the chronology of the childbirth-/childcare-related leave and benefits programs in Korea, with a focus on maternity leave benefits and parental leave. 1. Maternity Leave Benefits As of 2013, the Maternity Leave program applies to women workers giving birth, to be used before or after. Article 74 (Protection of Pregnant Women) of the Labor Standards Act and Article 18 (Support for Maternity Leave) of the Act on Equal Employment and Support for Work-Family Reconciliation guarantee 90 days of paid leave to workers at all workplaces with one or more employees to be taken before or after giving birth (with a guarantee of at least 45 days after childbirth). The program s objective is to allow preparation for pregnancy and delivery, and recuperation and recovery thereafter. It applies to all pregnant women workers, regardless of employment type (not only regular workers but also non-regular workers such as part-timers) or years in service. But in the case of maternity leave benefits, the insured period under Employment Insurance until the end of the leave must be at least 180 days in total (including present and former workplaces). Maternity leave benefits were included under the umbrella of social insurance in 2001, laying an effective foundation for maternity leave to be used more actively. Shortly thereafter, the Employment Insurance (EI) share of the cost was increased as a way to ease the financial burden on employers, especially at small workplaces. The employer would pay the salary for the initial 60 days of maternity leave. The remaining 30 days would be covered by EI. For enterprises under a 2

3 certain size, EI would also pay for the salary to be paid by the employer (i.e., for the initial 60 days) up to 1.35 million KRW a month. For higher salaries, the employer would cover the remainder. For companies designated as preferentially supported enterprises if a worker cannot receive the benefits because she has not fulfilled the insured period, EI would also pay her benefits for 90 days (up to 4.05 million KRW in total). 2. Parental Leave Benefits The Parental Leave program, amended on January 14, 2014, allows up to 1 year of leave for parents of children younger than 9 or below Grade 3. Dual-income parents can alternate taking the leave and are allowed up to 2 years of parental leave for the same child. Parental leave benefits began as a fixed amount (500,000 KRW/month) regardless of actual income level but were amended, as of January 1, 2011, to 40% of the ordinary wage, and ranges from a minimum of 500,000 KRW to a maximum of 1 million KRW. To prevent women s career disconnect after taking up the leave, 15% of the parental leave benefits are given 6 months after a woman returns to the same workplace. The employee s leave has to be at least 30 days long on a continuous basis, and the insured period under EI has to be at least 180 days. In addition, the program of allowing workers to reduce their working hours during the child-raising period was introduced in 2008, granting more flexibility in not only the payment rate but also in the use of parental leave. Beginning in 2011, workers who are working shorter working hours for at least 30 days would be entitled to parental leave benefits in proportion to the reduced hours. The period of reduced work hours can last up to 1 year, together with the parental leave period. Over the years, a series of revisions have been made to encourage greater use of parental leave benefits: in 2004, the amount was increased from 300,000 to 400,000 KRW; in 2006, it was expanded to include infants and toddlers age 3 or younger; in 2007, the amount was again raised from 400,000 to 500,000 KRW; in 2010, it was expanded to all preschool children age 6 or younger (those born after January 1, 2008); and in 2011, the amount was fixed at 40%. The increase in both the benefits level and children s eligibility has helped steadily increase the take-up of parental leave benefits (see Table 2). III. Loopholes in Maternity Protection Maternity protection is designed to prevent job displacement of workers due to childbirth and child care. For one reason or another, however, it does not include all workers. The biggest coverage shortfall is found in non-regular workers and micro-enterprise workers 3

4 who do not have EI coverage or (even if they do have it) who cannot enjoy the benefits because of job insecurity. First, a worker will not benefit from maternity protection programs, even if she has EI coverage, if she stops working right after giving birth and thus loses her entitlement to maternity leave benefits or parental leave benefits. National Health Insurance data show that 93.9% of the 99,025 women covered under workplace health insurance who gave birth in 2011 maintained their insured status 1 month after delivery, but only 89.5% did so 3 months after. This indicates that about 10% of women workers giving birth lose their entitlement to maternity leave benefits or parental leave benefits by immediately leaving work. Many such cases are found in the sectors that have a high share of non-regular workers: construction, accommodation/food services, transportation/storage/telecommunications, social security and administration, education, and other services. Second, both the Maternity Leave and the Parental Leave programs are used more actively at large companies by regular workers who have better job security. Even if they are covered under EI, non-regular workers find it harder to claim maternity protection. Use of maternity leave is steadily increasing. Because people are marrying later and, as a result, having babies later, the share of those in their thirties taking maternity leave is rising. Of these, 61.08% earn ordinary wages of 1.25 to 2.5 million KRW. By sector, health and social services (19.4%) and manufacturing (20.1%) make up the highest share. Workplaces with over 500 employees account for the highest percentage. Although use of maternity leave in smaller workplaces is also steadily increasing, it is not keeping pace with the increases at larger companies. By occupation, professionals (35.87%), office workers (18.12%), and technicians and associate-professionals (16.29%) made up the highest share as of 2012, demonstrating that there is more use among workers with secure employment relations or income. 4

5 Table 1. Maternity Leave Users: Characteristics Year of payment Characteristic No. of recipients of maternity leave benefits (persons) 22,317 41,105 68,564 90,322 93,402 Age (%) 24 or younger or older Permanent worker (%) Preferentially supported enterprises (%) Ordinary wage (%) < 1.25 million million million or more Workplace size < 10 employees Industry Manufacturing Finance/business services Wholesale/retail trade Accommodation/food services Public administration/defense/ social security and administration Education Human health/social work Other services Others Note. Ordinary wage of 0 is not included in the calculation of wage distribution among the benefits recipients. From Employment Insurance database (recipients starting to receive maternity leave benefits in the period 2002 December 31, 2012). 5

6 Table 2. Share of Parental Leave Benefits Recipients out of Maternity Leave Benefits Recipients, by Year Year Maternity leave (persons) Parental leave(persons) Percentage(%) ,317 4, ,105 10, ,564 29, ,322 51, ,402 53, Note. Yearly calculation of those who started receiving the benefits that year. Of those who received maternity leave benefits, those who used parental leave are calculated. From the Employment Insurance database (recipients starting to receive maternity leave benefits in the period 2002 December 31, 2012). Use of parental leave has also steadily increased since 2002, especially among regular workers at large companies. Whereas only 18.63% of maternity leave takers also used parental leave in 2002, their share grew to 57.18% in As shown in Table 3, 42.62% of the parental leave users in 2012 belonged to workplaces with more than 500 employees. Although the use has increased in small workplaces with fewer than 10 employees since 2002, the pace of increase does not match that in larger companies. Third, although they are just as entitled to the program as women are, extremely few men claim parental leave, because of social stereotypes about gender roles and corporate practices. It is true that the number of men who use parental leave increases each year, but as of 2012, 97.21% of the users were women. Men remain effectively uncovered by the parental leave program. 6

7 Table 3. Parental Leave Users: Characteristics Year of payment Characteristic Parental leave users (persons) 3,762 10,703 29,141 57,970 64,116 Women (%) or younger Age (%) Ordinary wage (%) 45 or older < 1.25 million million million or more Workplace size < 10 employees Industry Manufacturing Finance/business services Wholesale/retail trade Accommodation/food services Public administration/defense/ social security and administration Education Human health/social work Other services Others Note. Ordinary wage of 0 is not included in the calculation of the wage distribution among the users. From the Employment Insurance database (recipients starting to receive maternity leave benefits in the period 2002 December 31, 2012). 7

8 IV. Employment Effects of Maternity Protection This section analyzes the employment effect of maternity protection and parental leave programs using workplace-level data. The main area of interest is change (if any) in the share of women workers of reproductive age out of those insured under EI following the expansion of the Parental Leave Benefits program. Two policy thresholds are of interest in this analysis: the 2007 increase in the parental leave benefits amount from 400,000 to 500,000 KRW, and the 2011 shift from a fixed amount to a fixed percentage. The two revisions increased the income replacement rate; thus we assume that they helped maintain employment of women by encouraging them to opt for parental leave rather than leaving work altogether. But another factor to consider is the possibility of the employer avoiding women candidates of reproductive age for fear of their potentially more frequent use of parental leave. The empirical analysis reviews such diverse policy effects at the workplace level. The estimation model is as follows. First, the model used in Jeong-Ho Kim (2009, 2012) is used for the period when the main policy changes described above took place. In Model 1, Yi is the share of women age 25 34, men age 25 34, women age 40 or older, and men age 40 or older at each workplace. The effect is estimated by comparing the impact of each policy variable on the share of women and men of the same age. Aside from the policy dummy variable, the control variables include year dummy, workplace location (city/province) dummy, industry dummy, number of employers, and preferentially supported enterprises. 1, = Share of women workers age 25 34, share of men age 25 34, share of women age 40 or older, share of men age 40 or older Data on the share of each age group at each workplace was compiled using the insured workers career data from the EI database. The period of analysis was limited to , a period that includes the time when parental leave benefits was raised and the fixed amount was changed to a fixed rate. Individual observed numbers include workplace information between 2006 and December 2012, such as number of employees, location (city/province), and industry. 1 Preferentially Supported Enterprises (Article 15, Enforcement Decree of the Employment Insurance Act) is defined as follows: companies with 300 or less employees in the mining industry; 500 or less in manufacturing; 300 or less in warehousing and telecommunications; 300 or less in construction; 100 or less in other sectors; and the companies that fall under Paragraph 1 3, Article 2 of the Small and Medium-sized Business Act. 8

9 Summary statistics for the basic variables used in the empirical analysis are presented in Table 4. The total observed number is 5.20 million. The share of women workers age is, on average, 15.2%, of men age is 16.8%, of women 40 or older is 15.9%, and of men 40 or older is 28.7%. From 2006 until more recently, the share of both men and women 40 or older is increasing, reflecting the general increase in the number of middle-/old-aged workers and the decline of youth employment. Table 4. Descriptive Statistics, (N=5,224,576) Group Average share All years Women workers age Men age Women age 40 or older Men age 40 or older Note. Data on the number of employees and indication of benefit recipients as of the end of each December was compiled for each workplace using data on insured workplaces from 2006 to From Korea Employment Information Service, Employment Insurance database. The following is the result of estimation using the model. Dependent variables are the share of women age and 40 or older and the share of men age and 40 or older, and the main policy variable is the increase in parental leave benefits. Results from the least-squares estimation method are summarized in Table 5. We assessed whether the raise in parental leave benefits has positive effects on women s employment by comparing changes in the share of women age (reproductive age) in the workplace and changes in the share of men of the same age. First, around 2007 and around 2011, the share of men and women workers age decreased, and the share of men and women workers age 40 or older increased. It shows that the age distribution among workers in a workplace has shifted more heavily toward the middle-/older-aged in the 2000s. In other words, during the time that the use of maternity protection increased, demographic changes have occurred in the labor market in a way that shows a negative impact not only on young women of reproductive age but also on young men. Thus the impact of maternity protection on women s employment can only be filtered out through comparison with male workers in the same age group. If the share of women workers age decreased more sharply than the share of male workers of the same age, we can assume the decrease is related to more frequent use of maternity protection programs. Columns 1 and 2 in Table 5 show no particular negative effect on employment of women age Whereas the share of male workers age fell by 1% after 2007 compared with pre-2007, 9

10 when parental leave benefits was increased, women workers of the same age decreased by only 0.2%. Table 5. Changes in Women s Employment by Workplace Following Increase in Maternity Benefits ( ) Dependent variable Since 2007 Since 2011 Preferentially supported enterprises No. of employees (100 persons) (1) Share of women age *** *** *** (0.001) *** *** *** *** *** (2) Share of men age *** *** *** (0.002) *** *** *** *** *** (3) Share of women age 40 or older *** *** *** (0.002) *** *** *** *** *** (4) Share of men age 40 or older *** *** *** (0.003) *** *** *** *** *** Observed number 5,224,576 5,224,576 5,224,576 5,224,576 R-squared Note. Numbers in parentheses indicate robust standard errors. Includes dummy variables by city/province and industry. From Korea Employment Information Service, Employment Insurance database. * p<0.1. ** p<0.05. *** p<0.01. Likewise, before and after 2011, when the benefits program was changed from a fixed amount to a fixed rate, the share of male workers age decreased by 5.1% and the share of women workers of the same age declined by just 3.0%. This indicates a lack of empirical evidence that greater use of maternity protection depresses the hiring of women of reproductive age at the workplace level. The same result is found when the age group is broadened from to Limitations of this analysis should be noted, however, because it is based on the share of women at each workplace. It looks at the total number at a given time and does not necessarily take into account the retention of women workers who used maternity protection. Although it does show that the share of women age did not decrease any more than did the share of 10

11 men of the same age, the same result could have been seen if the women workers who used maternity protection moved to another workplace thereafter and were replaced by other women. As seen in Table 6, whereas the number of parental leave takers has increased since 2002, the percentage of those who stay at the same workplace at a certain period after the end of their parental leave continues to decline. In 2002, 62.8% of those who used parental leave stayed at the same workplace 1 year after returning, but their share fell to 52.7% in 2006 and to 47.7% in Similarly, 1 week (or immediately) after the end of the parental leave, those who remain at the same workplace decreased from 75.6% in 2006 to 67.1% in This is where questions can be raised about the effectiveness of maternity protection programs in achieving the goal of helping workers with children maintain a balance between work and child care. Determining why the retention rate is falling would require more micro-level analysis, but we can assume that there are factors of both demand and supply that weaken the link between parental leave and job retention. Overall, analysis at the workplace level and the individual level indicates that although there is no evidence of a negative impact on women s share in the workplace any more than men s, it is still likely that maternity protection is not helping individual women keep their original jobs. Table 6. Job Retention Rate Among Users of Parental Leave Benefits After Benefits Payment Ended Beginning of payment (persons, %) Parental leave users 1 week later 1 month later 3 months later 6 months later 1 year later , , , , , , , , , , , All years 269, Note. Parental leave users includes those who leave their workplace during the leave period. From Parental Leave database and insured workers career database (for cases where payment ended between January 1, 2002, and September 31, 2012). 11

12 V. Policy Recommendations for Improving Maternity Protection Maternity protection policy can be a double-edged sword for women s employment. On one hand, it could increase the labor supply of women of reproductive age by helping them keep their jobs instead of voluntarily or involuntarily leaving. On the other hand, it could cause employers to avoid hiring women of reproductive age because of the higher cost involved. This study analyzed the impact of two revisions to maternity protection (the parental leave benefits increase in 2007 and the change from a fixed amount to a fixed rate in 2011) on women s employment at the workplace level. There is no evidence that such revisions, intended to promote the use of maternity protection, had a negative impact on the employment of women of reproductive age at the workplace level. But the fact that the job retention rate for parental leave users has continued to decrease since 2002 points to the need for a more thorough analysis of whether maternity protection is serving its intended purpose, which is to help workers stay at the same workplace through the childbirth and child-care phases. Continuously developing one s career and entering the promotion ladder requires an environment that allows the worker to stay at the same workplace. It is indeed a welcome finding that maternity protection does not have a negative impact on women s employment in terms of total numbers. But for the program to serve its intended purpose, there must be changes in the usage patterns of and employers attitude toward maternity protection, and more active moves to improve the program itself for example, implementing stronger supervision and monitoring. In trying to address the loopholes in maternity protection, some are raising the urgent need to broaden social sharing of maternity leave and parental leave. Employees of non-regular contracts and micro-enterprises are effectively excluded from social insurance, and maternity protection benefits are paid out of the Unemployment Benefit account, whose finances are worsening as the benefits continue to increase. Against this backdrop, some are calling for a new funding structure (Hye-Won Kim, 2014). Various measures are being reviewed, but one thing that must be kept in mind is how to guarantee workers right to return to work, a right that is promised by the maternity protection program. No doubt, securing appropriate funding and improving the equity in beneficiaries are urgent issues that must be addressed. But equally important is to provide a real guarantee of the right to take leave, or the right to return to the same workplace, if the employee wishes. References Kim, Hye-Won. (2014). Increasing the social sharing of maternity leave and parental leave benefits. Symposium on Social Sharing of Maternity Leave and Parental Leave Benefits, Tripartite 12

13 Commission on Economic and Social Development, Korea Women s Development Institute. Kim, Jeong-Ho. (2012). Parental leave support and women s labor supply. Korea Development Study (Korea Development Institute), 34(1), Kim, Jeong-Ho et al. (2009). In-depth evaluation of 2008 fiscal projects: Maternity Leave, Parental Leave programs. Korea Development Institute. Jang, Jiyeon, Yoon, Jayoung, & Shin, Hyeon-Gu. (2013). Study on redesigning maternity protection to address the loopholes and strengthen employment effect. Commissioned by the Ministry of Employment and Labor, Korea Labor Institute. 13