Purpose
The aim of this study is to document the changes to early-years payments and demonstrate a ‘difference-in-differences’ approach that can be used to estimate the causal effects of being in the first cohort eligible. We use linked administrative data, and estimate impacts on two outcomes:
- the incomes of parents with infants in the first six months post-birth
- months with no wages and salaries post-birth, as a proxy for time parents spent at home with their infants, in the first six and 12 months.
Methodology
The analysis presented in the remainder of this report is based entirely on data held in the IDI. This is a collection of de-identified linked administrative and survey data made available for approved research (Statistics NZ, 2017; Milne et al., 2019). Administrative data in the collection have national coverage of those who engage with services. Data sets used included Department of Internal Affairs data on birth registrations, Ministry of Health maternity collection data, MSD data on benefit payments and Working for Families tax credits paid via MSD, and Inland Revenue data on wages and salaries, paid parental leave, Working for Families tax credits and income from self-employment.
The study population is comprised of families where the birth of a child occurred three months either side of 1 July over the period 2015-2018. Our main analysis focuses on families identified in birth registration data (child, mother/first parent, father/second parent). Given that parents recorded on birth registrations may not always be the people who care for a child, we also test the sensitivity of results to examining mothers and children as recorded in maternity data, and mothers/female caregivers and children as recorded in benefit data (for the sub-population supported by benefit after the birth).
Key Results
Even without the early-years changes, there were increases in income for families with
children born in 2018.
- For mothers and first parents in the cohort with births just before the 1 July 2018 introduction of the early-years changes, average gross income was around $74 per week higher in the six months following the birth when compared with the equivalent cohort with births in 2017, a 17 percent increase.
- A key driver of the increase was more income from Working for Families tax credits and benefit payments, consistent with the Families Package increases to Family Tax Credit and Accommodation Supplement, and the new Winter Energy Payment it introduced. There was also higher income from paid parental leave post-birth, reflecting higher levels of employment before the child’s birth among those having children in 2018 compared to those having children in 2017. Income from Families Package and other benefit payments (inclusive of paid parental leave) increased by $49 a week on average. Employment income also increased.
- For fathers and second parents, the average income increase was like that of mothers/first parents in absolute terms, but much smaller in relative terms (a seven percent increase) and was driven almost entirely by increases in employment income, including self-employment.
The main focus for this initial study is the additional income gains from the early-years changes, as these changes offer the best basis for estimating the causal impacts of increased financial assistance.
- Using difference-in-differences, we estimate that being in the first cohort eligible for the post-1 July 2018 early-years changes resulted in additional income gains for mothers and first parents that averaged $55 per week in the first six months post-birth. This is equivalent to a further 10 percent increase in mothers and first parents’ income over the period, on average.
- These estimated additional income gains were broadly similar across Māori, Pacific, and non-Māori, non-Pacific mothers and first parents. While most additional income for non-Māori, non-Pacific mothers and first parents came from increases in paid parental leave income, Māori and Pacific mothers and first parents benefitted in equal measure from paid parental leave income and Best Start. For fathers and second parents in the first cohort eligible for the early-years changes, the difference made to total income was not statistically significant. This is because Best Start and paid parental leave tend to be received by the mother or first parent in the family.
Mothers and first parents eligible for paid parental leave are estimated to have spent more time off work in their child’s first year as a result of being in the first cohort eligible for the early-years changes, as intended by the policy.
- The difference-in-differences estimation of impact is an 0.21 of a month increase in months with no wages or salaries, close to a week.
- Across ethnic groups, the effect on months with no wages and salaries was only statistically significant for non-Māori, non-Pacific mothers/first parents. This is consistent with their higher representation among those eligible the extended paid parental leave.
- Because non-Māori, non-Pacific mothers/first parents had less time with no wages and salaries post-birth on average before the early-years changes, the increase in months with no wages and salaries appears to have resulted in a slight reduction in ethnic differences in time at home with an infant after the birth.
Results remain robust when we apply a range of sensitivity and robustness tests, including tests for sensitivity to possible small birth shifting effects around the implementation date, and tests to check that there was a common pattern to differences for cohorts born either side of 1 July in the previous years we use as a basis for difference-in-differences estimation.