The Maternity Benefit Boondoggle

In March 2017, the Modi government amended the Maternity Benefit Act to increase paid maternity leave from 12 to 26 weeks for all women employees in establishments employing ten or more people. At that time we wrote that the end result of this scheme will be more unemployment for women employees. Instead of getting any benefit from such schemes, women will become unemployed  simply because their employers can’t pay them when they are not producing any value. That is how the markets work, and should work if we want to improve the standard of living of Indians.

Exactly the same consequence followed that policy decision. The Hindu reports,

“There is also a wide perception that private entities are not encouraging women employees because if they are employed, they may have to provide maternity benefit to them, particularly 26 weeks of paid holiday,” said the statement, adding that the extended maternity leave has become a deterrent for female employees who are asked to quit or retrenched on flimsy grounds before they go on maternity leave.

What is the government’s response after seeing this failure of their policy? Did they abolish the Maternity Benefit Act? Not at all. The way governments and market firms function is totally different. In a market if some firm makes a mistake like this then they will definitely go bankrupt and will either have to shut down their business or sell it to someone else. But that is not how governments work. Governments don’t have to earn their revenue in market by satisfying consumer’s most urgent needs. The major source of their earning (sic) is taxation i.e., forceful confiscation of a share of other’s income. This is legal plunder. This is the precise reason why governments keep on wasting tax payers’ resources on one boondoggle after another. The response of Modi government to the failure of their Maternity Benefit Act amendment is to turn this policy into another boondoggle to waste tax payers’ resources. The Hindu reports,

The Ministry of Labour and Employment is therefore working on an incentive scheme whereby the government would bear the cost of maternity leave wages for seven weeks, subject to certain conditions. The financial implication to the Centre is estimated to be ₹ 400 crore, and the Ministry is in the process of obtaining budgetary approvals.

This means, now government will spend tax money on paying private firms for their losses taking place due to this Maternity Benefit Act. Not only women will not be contributing anything in the economy when they are on maternity leave, but now even tax payers will be on hook to pay for their leaves. The money that could have been used for productive purposes, in the absence of taxation, will now go to waste. Economy will not gain anything; there are only losses. Such socialist policies of the successive governments in India are responsible for the dire condition of majority of the Indians. As long as this socialism is not ending, nothing better should be expected.