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Pregnancy, Pensions, and Poverty: OECD Reflections

I admit I had not realized this:  young mothers who take paid parental leave in Europe may be sacrificing their retirement by reducing their pensions.  Somehow, I doubt that many others realize this implication of parental leave nor that many young parents figure that impact into their decisions about taking off from work to raise children.

At the first session of the OECD meeting last month, in which the “Closing the Gender Gap” data were released, four ministers of different governments (Norway, France, Italy, and Australia) seemed more concerned about the interaction between women’s early adulthood choices and their old age than anything else.

And you can see why.  Women are always at a higher risk for poverty than men.  I think we have become accustomed to the notion that women are disproportionately represented among the impoverished.  But I am wondering if many young women apply that idea to themselves–or if they think of it as relevant only to another class of women, maybe those in poor nations or recent immigrants to Europe.  In point of fact, all women are at a higher risk of falling into poverty at some point in their lifetime and the way they handle the tradeoffs between work and childcare is the major influence on whether they keep their heads above water.

Source: OECD, "Closing the Gender Gap," 2012. Figure 11.7. With permission. Points represent the OECD average in the mid 2000s.

This panel, led by Anthony Gooch, Director of Public Affairs and Communications, OECD, initially focused on the current problem of caring for old women who had come of age under the traditional gender model.  Two of the panel members, Jenny Macklin (Minister for Families, Housing, Community Services and Indigenous Affairs, Australia) and Elsa Fornero (Minister of Labor and Welfare, Italy) had recently gone through an extensive effort to reform pension laws in their countries.  Fornero, in particular, has suffered a good bit of controversy over decisions taken in the heat of Italy’s financial troubles.  She alluded to the crisis of conscience she had endured over the way pensions disadvantaged women who had been housewives.  The old system, of course, presumed that men took care of women.  There was thought to be little risk for a woman to stay home–indeed, it has been (and apparently still is) expected.  But once the man dies, his wife often receives a much-reduced survivor benefit.  These days, that benefit is not enough to live on.  And so a whole generation of women faces late life impoverishment. They, quite understandably, feel betrayed over conventional life choices made in good faith.

FIrst panel at OECD conference on December 17. From left: Gooch, Fornero, Kristersson, Vallaud-Belkacem, and Jenny Macklin.

Needless to say, this prospect makes ministers keen to change the provisions for the upcoming generations.  Both Ulf Kristersson (Minister for Social Security, Norway) and Najat Vallaud-Belkacem (Minister of Women’s Rights, France) were emphatic about the way that women’s choices in the present, from taking parental leave to assuming part-time status, affected their income later in life.  I was particularly impressed with the emphasis that Kristersson put on the vulnerability of divorced mothers.

No one thinks divorce is going to happen to them.  But, of course, it happens to somebody.  The rates are high and increasing.  If a young mother leaves work to take care of children, she will predictably have trouble getting back into the workforce and will be paid less when she does.  If a divorce occurs at any point in this timeline, the economic result for her (and for the children) can be disastrous.  Child support may help ameliorate the effect, but it won’t be enough to live on or even, in many cases, enough to pay the expenses of the children.  And, inevitably, children grow up, but their mother still needs to support herself.  So, not surprisingly, the biggest risk, according to this panel, was for women who had children and then divorced.

I am often dismayed by the short term window through which young women view parenthood.  Their outlook is also usually colored by a great deal of naiveté–and, of course, they are pushed by the convention that still says their first preference should be to stay home with little children.  And they think that, somehow, the obligations of parenthood are all about being there to observe a baby’s first steps or a kindergartner’s debut in the Christmas pageant. Even government policies are so overly focused on the care of small children–as if school age children and teens don’t need attention!  So people tend to focus both their private decision-making and their public efforts on supporting the mothers of small children–and do so almost exclusively.

Mothers not only need to think about their own economic viability, but that of their children.  Children have to be cared for and educated for a long time.  It is expensive.  If you are left on your own, you must be able to pay for it yourself.  It does not make good mothering to take a short term decision so that you can watch the first steps, if, in payment, you mortgage your ability to, say, pay for graduate school or be independent of your children in retirement.

It is high time we abandoned these soft-focus glasses about the economic implications of these choices.  Choosing to stop work and stay home with your children is not the “safe” option it appears to be.  And the trade-off paying daycare in the present moment is not the only one that has to be made.


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