Question

Describe paid maternity leave using concepts such as market structure, tradeoffs, competition, market failure, externalities, taxes, among others (microeconomic reasoning).

Answer 1

                                    Paid maternity leave refers to a social welfare concept of an economy where the women employees are given paid leaves for pre-delivery and post-delivery care from the organizations in which they undergo work. The maternity paid leaves are given based on the various national laws that governs the same. Now, with reference to various microeconomic concepts, the effects of this activity are discussed as follows

· The number of women employees undergoing paid maternity leave varies for all the organizations. Since this leave is a right of an employee, the organization cannot cut short or deny such leave requests. This would result in lower employee strength of that particular organization.

· Labour force plays a major role in maximising the output and hence profits. The above scenario is expected to reduce the available work force of an organization and thus would result in having influences on the productivity of the organization.

· The cost incurred on payment of such employees would bring no benefit to the organization at such instances since the marginal productivity of the employee is zero.

· With unequal equilibrium between input cost and production efficiency, the organization would become less competent in the market as they were before.

· The organization would have to involve another employee at times if the outgoing employee was in charge of key sector of it. This would result in more and more costs on the firm as they would have to spent more on training the new employee to be industrially efficient.

· Now, considering the economy as a whole and with many firms facing similar issues, it would result in unequal and disturbed competition patterns in the market as those firms would have to compete with firms that are fully efficient at certain stages.

· The above action could result in trade off’s since the money spent on the wages for providing paid maternity leave would result in lowering the money that could be spent on production costs and hence would affect the market stability and equilibrium.

· With rising trade off’s, it would finally lead to many externalities in the economy as they would start affecting the consumers in the economy due to inefficiencies in market competitions causing illegal trading patterns across the economy.

· With lowered production potential of the economy, taxation rates could find an increase which would result in further reduction of revenue for many organization.

                                                            Thus, provision of paid maternity leave is only a welfare concept in an economy. On order to maintain market equilibrium, the firms should also be provided with certain austerity measures so that the outgoing of an employee would have only lesser effects on the market forces and the working of an organization.