Leaving no parent behind: Lessons from family friendly policies in Nepal

Family-friendly policies can have far reaching benefits for both parents and children. They support parents—specifically women—to thrive in their workplace and improve children’s development, notably in the critical first 1,000 days. But the benefits extend beyond families. Businesses can be more productive and increase retention of their workforce. Global wealth and human development outcomes improve when women join the labor force and gender wage-gaps shrink, potentially leading to up to 20 percent increase in a country’s GDP. The gains from these policies can be particularly significant for lower middle-income countries that have large gaps between male and female labor force participation rates. These gaps are higher for a woman with kids.

Policy nuances for designing family-friendly policies in developing countries

Designing family-friendly policies in low- and middle-income countries (LMICs) requires being cognizant of the diverse labor markets, administrative challenges, fiscal constraints, and prevailing social norms.

A World Bank study in Nepal evaluated parental leave and related benefits to identify implementation gaps and opportunities to expand coverage to parents, especially those in the informal sector. It used a framework with six salient elements: parental leave, cash benefits, medical benefits, workplace protections, non-discrimination for return to work, and childcare.

A survey of 1,000 employed individuals across urban Nepal was conducted in June 2023 to assess legislated benefits for the formal sector workers and enquire about awareness and willingness to contribute to the voluntary scheme launched in August 2023, two months after the survey. The voluntary social insurance scheme required informal sector workers to contribute 20.37 percent of the minimum basic salary and provides a package of coverage on health, maternity, accident and old age benefits. The individual’s contribution share is 11 percent, and the government covers the rest.

The study’s three findings shed light on design and implementation considerations for adopting family-friendly policies in an LMIC context:

1. Workers in the informal economy need parental benefits and most are willing to contribute for access.

The study found that 30 percent of parents from the informal sector had to borrow money, while others had to reduce work hours, stop working or dip into their savings after the birth of their most recent child. Informal workers make up large shares of the employed population in developing economies, among whom women are overrepresented. Unless parental benefits and supporting measures expand to include these workers, countries risk productivity losses and negative impacts on finances and well-being. Depending on fiscal space, innovations can include non-contributory maternity benefits, like Argentina’s Asignación por Embarazo para Protección Social (pregnancy allowance for social protection) or Nepal’s voluntary social insurance scheme.

Encouragingly, 47 percent of respondents reported a willingness to pay 1,000 Nepalese rupees (NPR) per month, or $7.17, which is close to the required individual contribution of NPR1,032, or $7.40, in the voluntary scheme. The remaining survey respondents were only willing to pay a substantially lower amount of NPR100 or $0.72, which is the contribution for maternity benefits only.

Schemes like the one launched in Nepal are promising examples for expanding coverage to the informal sector, but governments must focus on sustainable financing and increasing awareness of the scheme. Other supporting measures for the informal sector can include mobile creches at public works sites (such as in  Rwanda, Ethiopia, and India), community-based childcare models, and leave pooling for parents.

2. Financial constraints can drive new mothers to join the labor force while shouldering a greater care burden.

Fifty-five percent of women in the study started working for the first time after childbirth citing financial reasons. These working women reported working 54 hours a week on unpaid childcare, compared to an average of 24 hours reported by men in our sample, signaling the greater care burden working mothers face that can push these women into lower paying roles. As developing economies focus on facilitating women’s entry or reentry in the labor force post childbirth, they must also promote equitable care sharing by including fathers in the rights, responsibilities, and social norms programming around caregiving.

For women working in the formal sector, increasing paternal leave can improve gender equality and reduce bias in hiring of women. For parents in the informal sector where mandates are tough to enforce, social protection and employment initiatives should consider safeguarding and remunerating caregiving roles. Fathers and male caregivers should be encouraged through positive framing and peer influence given the documented benefits for them, their families, and for greater gender equality.

3. Legislation on paid leave and family-friendly workplaces can have adverse consequences on gender equality if financing and monitoring is not in place.

Significant progress has been made by countries on mandating paid parental benefits (figure 1). However, legislation is not a silver bullet for improving national outcomes. First, it applies largely to the formal sector which includes a small share of women workers in LMICs. In the Nepal study, 68 percent of parents in the formal sector took paid leave and 35 percent of those in the informal sector took leave at the birth of their most recent child; the latter largely unpaid. Second, relying only on payroll-financed and employer provided benefits can give rise to implementation gaps, labor market distortions, and bias against hiring of young women.
 

Figure 1: Countries and regions can better support women after childbirth by enacting legislative reform

Source: https://wbl.worldbank.org/en/data/exploretopics/wbl_hc This Indicator captures laws in place on maternity, paternity, parental leave and dismissal of pregnant workers.

When the benefits are financed solely through payroll taxes on employers and employees, high rates can increase the cost of formal employment or lead to firing of women once they become pregnant. If paternity leave is shorter than maternity leave (15 vs 98 days in Nepal), women cost firms more and can cause a hiring bias. Promising examples to address this challenge include a national integrated system of care in Uruguay, and quasi-universal schemes such as Linda Mama in Kenya. In these countries, benefits are financed using the principle of cost-sharing across government, employers and employees; with general revenues subsidizing the poorest.

Monitoring of family-friendly policies that are administered by firms or local governments can be difficult. Among women respondents from the formal sector, only 18 percent had access to a place to breastfeed, 2.3 percent had access to childcare at work, and 31 percent received a lactation break—benefits that are mandated by the law. Targeted awareness campaigns to inform workers about their rights, compliance checks by social security agencies and auditors and behavioral nudges like recognizing family-friendly workplaces are some approaches to improve monitoring.

Innovating to expand coverage of family-friendly policies

Childbirth can be a turning point for parents, notably women, impacting their labor dynamics, productivity, and household care responsibilities. Parental benefits and family-friendly policies have documented benefits for women, men, families and children while also changing social norms in the long run towards greater gender equality. But developing economies could benefit from adapting parental benefit designs to their diverse labor markets and paying close attention to how they will be financed, delivered, and enforced such that they minimize labor market distortions and leave no parent or child behind. 

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