The Problem with Paid Parental Leave

A Chinese fable called “Three in the Morning and Four in the Evening,” relates this story: An old man in ancient China wanted to reduce his pet monkeys’ food as he can’t afford the previous amount any longer. He first told them that he would reduce the monkey’s ration to three acorns in the morning and four acorns in the evening. Thereupon, his monkeys protested angrily. Then the old man said, “How about four in the morning and three in the evening?” Knowing that he would get four acorns the next morning, the monkey became ecstatic.
We may laugh at the monkey in this story, but when actress Anne Hathaway gave a speech at the United Nations this month arguing for paid parental leave for all parents – both mothers and fathers – she is no wiser than the monkey.
In a capitalist economy, the labor market, as well as other sectors of the market, is made possible by the entrepreneurs who attempt to make profits. After an entrepreneur conceives a profit opportunity in his mind, he starts to organize the production according to his plan. Entrepreneurs pay for the factors of production in advance to get the finished goods and services in return. He or she must also be able to deliver these goods or services at a price lower than what customers are willing to pay. Otherwise, the business will fail.

This post was published at Ludwig von Mises Institute on March 28, 2017.