Is Outdated Parental Leave to Blame for Canada's Fertility Crisis?

Canada’s parental leave system was built for a workforce that no longer exists. As work and family life have changed, the policy hasn’t, leaving more parents without the support they need.

In this episode of Classonomics, Sabrina Maddeaux and Mike Moffatt examine why Canada's parental leave system is increasingly out of step with today's workforce. They discuss how rising housing costs, stagnant income replacement, contract work, and outdated Employment Insurance rules are making it harder for Canadians to start or grow their families.

The conversation explores why many parents, especially freelancers, self-employed workers, and those in the gig economy, struggle to qualify for benefits, how employer parental leave top-ups are disappearing, and what Canada can learn from Quebec's parental insurance plan and Finland's family-friendly reforms.

Topics covered:

Why Canada's fertility rate has reached a record low
How EI parental leave actually works
Why one-third of Canadian mothers don't qualify for paid parental leave
The financial reality of taking parental leave today
Housing costs and the affordability of raising children
Why freelancers, contractors, and gig workers are left behind
The decline of employer parental leave top-ups
Quebec's parental leave model and its impact on fertility
Finland's parental leave reforms and shared parenting
Policy reforms that could make it easier for Canadians to have the families they want

Chapters:

00:00 Why Canada's fertility rate hit a record low
00:49 How Canada's parental leave system actually works
02:42 Why Young Canadians Are Delaying Having Kids
04:18 The Hidden Financial Penalty of Parental Leave
06:32 Why 1 in 3 Mothers Can't Access Paid Leave
08:08 The Self-Employment Trap
10:02 Why Employer Parental Leave Benefits Are Shrinking
12:37 What Quebec Gets Right About Parental Leave
14:34 Finland's Family Policy Is Changing Fatherhood
16:28 How Canada Could Fix Parental Leave
 
Research links:

Statistics Canada -- Canada's total fertility rate reaches a new low in 2024:
https://www.statcan.gc.ca/o1/en/plus/9140-canadas-total-fertility-rate-reaches-new-low-2024

Statistics Canada -- The Daily: Fertility and baby names, 2024:
https://www150.statcan.gc.ca/n1/daily-quotidien/250924/dq250924d-eng.htm

The Hub / Cardus -- Stop dismissing falling fertility rates as a choice (2.2 children wanted stat):
https://thehub.ca/2026/04/14/with-a-record-low-1-25-children-per-canadian-woman-stop-dismissing-falling-fertility-rates-as-a-choice/

Canadian Centre for Policy Alternatives -- Support for parents in a post-pandemic world (EI reform; replacement rate, eligibility threshold proposals):
https://www.policyalternatives.ca/news-research/support-for-parents-in-a-post-pandemic-world-options-for-enhancing-federal-maternity-and-parental-leave/

Policy Options / IRPP -- Parental leave benefits need to be more practical and equitable (1 in 4 self-employed stat; top-up decline):
https://policyoptions.irpp.org/2024/05/parental-leave-equity/

PMC -- Policy and Fertility: A Case Study of the Quebec Parental Insurance Plan (peer-reviewed; fertility lift estimates):
https://pmc.ncbi.nlm.nih.gov/articles/PMC11070327/

Yle News / Helsinki Times -- More fathers taking parental leave since Finland's 2022 law change:
https://yle.fi/a/74-20162964

Fast Company -- Deloitte and Zoom cut parental leave and other benefits:
https://www.fastcompany.com/91530300/deloitte-and-zoom-cut-parental-leave-and-other-benefits

PMC -- Reconceptualizing Parental Leave Benefits in COVID-19 Canada: 
From Employment Policy to Care Policy (EI vs QPIP comparison; self-employed eligibility history):
https://pmc.ncbi.nlm.nih.gov/articles/PMC8229861/

Hosted by Mike Moffatt & Cara Stern & Sabrina Maddeaux

Produced by Meredith Martin

Funded by the Neptis Foundation https://neptis.org/

Transcript

SPEAKER_01 0:00

Canada's total fertility rate hit 1.25 children per woman in 2024. Now that's a record low, and it officially lands us in the ultra-low fertility club alongside countries like Italy and Japan. Now, Statistics Canada did try to explain why, and one of the reasons they flagged was women's quote unquote greater participation in the labor market. And I do get why that shows up in the data, but I think it obscures more than it reveals. The tension is that parental benefits haven't kept up with how work has actually changed or with what it costs to take time off in 2026. So we end up with declining fertility, not because a lot of women have stopped wanting families, but because the math of building one keeps getting harder. And that's where the real story lives. Classonomics, hosted by Sabrina Mado and Mike Moffat. So, Mike, let's start with the foundation. When most Canadians think about parental leave, they picture something like you have a baby, you get a year off with some kind of pay. But what does the actual federal system look like and who is it designed for?

SPEAKER_00 1:02

Yeah, so the basic architecture is in part of our employment insurance system, and it has kind of a couple components stacked together. I'm gonna run through some numbers, but I'll try and uh keep that uh limited. So the the first part of it is that the birthing parent gets up to 15 weeks of maternity benefits. And then stacked on top of that, that either parent can claim parental benefits, and that's either 35 weeks at the standard rate or up to 61 weeks at a lower extended rate. Now, the rate is about 55% of your average insurable weekly earnings, and that maximum right now tops out at $729 a week, which isn't a lot of money. Now, the extended option, if you choose that, the rate drops to 33%. So overall, you're looking at a ceiling of somewhere around $38,000 a year, assuming that you're maxing out on the standard option. And the key thing to understand is that the system was born out of the uh EI framework uh going back to the 1970s. And it was designed to support a certain class of workers, you know, full-time, salaried, uh, with a steady employer. So think, you know, teachers, nurses, office workers, that kind of thing. And you need to have accumulated 600 insurable hours in the year before you claim. So it was never designed to support women who held multiple, often uh precarious jobs, which was a problem back in the 1970s, uh, and it's still obviously an issue today, but it certainly wasn't designed for today's gig economy or an economy where people are holding uh multiple jobs. So, Sabrina, you're in this cohort that the system is supposed to serve, but really isn't, or at least has gaps. You know, you're a millennial woman, you've watched your peers try and figure out the math of having kids while housing cost, you know, absolutely eat through your savings and contract work has replaced a lot of stable employment. So, what does this look like on the ground?

SPEAKER_01 2:56

Yeah, the framing I keep hearing is that declining birth rates are just women choosing career over family. But a 2023 CARTA study found that Canadian women without kids actually wanted an average of 2.2 children and only expected to have 1.9. So they're having fewer children than they desire. And I think that does play out. I see that in my own life with friends juggling affordability, the ability to take time off work, and that either delays having children, sometimes they don't have children, or they have fewer than they would have liked. So for my generation, the calculation goes something like this: you're in your late 20s, early 30s, maybe on contract or freelancer part-time, while you build something, and then you want to have a family. Then you do the math on what parental leave actually pays in a city where rent alone can be $2,500 a month for a one-bedroom condo, and it just doesn't add up at the end of the day. You can't imagine doing it and having any sort of financial stability.

SPEAKER_00 3:50

Yeah, so like let's think about those numbers for a sec. That the average woman uh wants to have 2.2 kids, they expect to have 1.9 uh because of these difficulties. And in reality, that's closer to 1.2 to 1.3 on average. Noting, as our producer Meredith likes to note, that you don't have fractions of children. These are uh averages. But if we go back to the financial math, like what does that look like uh for a woman or family uh thinking of having a kid?

SPEAKER_01 4:18

Well, the federal government sets the ceiling on insurable earnings at $68,900, meaning that anyone earning above that gets an effective replacement rate below 55%. And so if you're earning $90,000, which isn't that high of a salary for a young person in a city these days, you're replacing closer to 42 cents on the dollar than at $100,000 of salary, around 38 cents, and the situation only gets worse from there. And in Toronto or Vancouver, $90,000 or even six figures just isn't that high of an income. It doesn't even qualify you to buy the average home.

SPEAKER_00 4:52

Yeah, that's wild. Like I don't know how many people, particularly living the GTA who are already struggling to get by, can afford to take a 60% pay cut, but it sounds like that's what we're asking of them if uh we want them to have a child.

SPEAKER_01 5:05

Yeah, we're asking for a massive sacrifice. That's just not even a sacrifice many can make in the current cost of living and financial circumstances people are facing. You know, that 90,000, 100,000, that's what a lot of nurses, teachers, and young professionals earn. We're not talking about the ultra wealthy here. Uh, these are people with perfectly ordinary salaries who are going to take an enormous pay cut, right? Also, when their costs are going to spike, because that's what happens when you have a child or more children. Diapers, a bigger space, formula, eventually childcare. And so that cap hasn't tracked with average wage growth broadly, but it's also not kept pace at all with housing costs, especially in the cities, where a lot of young Canadians are working and actually trying to raise children. So they're either leaving those cities, which is bad for the cities, and also bad for families to be away from their communities, their grandparents, their social circles, or they're just delaying or not having children or not having more children. But the key really is that women aren't just choosing not to have kids, they're really quietly having fewer than they wanted. And the system we have in place right now is making that decision for them. And basically, no one with the power to change the system is talking about it. We hear a lot about the right to choose when it comes to fertility. I've always said that goes both ways. It should also be about the right to choose to have a child or as many children as a woman or parents want as well. But I'd like to talk about who actually even qualifies for federal parental leave because that's a huge part of the problem here, too. You mentioned that 600-hour rule, but the nature of work has shifted significantly over the years and decades. So I'm curious how many women are now falling through the cracks.

SPEAKER_00 6:50

Well, the the number that really lands is that it's about one-third or about 30% of mothers in Canada who are eligible for paid parental leave. And that's not necessarily because they're not working, but because of how they work. Again, if you're part-time on a contract, gig worker, self-employed, so on, you're probably not accumulating enough insurable hours in the way that EI counts them. And the self-employed situation, I think, is a real good case study of how this works. So one of the last major federal updates to maternity benefits was back in 2010 under the Harper government, when self-employed women were finally allowed to access benefits for the first time. And then that was a big deal. You know, that was uh presented as a big step forward. And I certainly at the time thought it was. But if we look 15 years later, the uptake is pretty small, it's pretty dismal. Only about one in four self-employed women with a child under the age of one are actually accessing those government benefits. And compare that to about three in four uh employed mothers. So the program, like it exists on paper, but it's really just not reaching people the way it should.

SPEAKER_01 7:55

Yeah, I think those stats would shock a lot of people who assume that all women, no matter what type of employment you have, have access to these benefits. And technically on paper they do, but that's far from the reality we're seeing. So why is that?

SPEAKER_00 8:07

Well, it really comes down to how it's structured. Like to opt into this, you have to register with EA, you have to start paying premiums a full 12 months before you plan to make a claim. So you're really essentially required uh to plan your pregnancy a year in advance from a bureaucratic standpoint. Yeah, and that's not necessarily how all babies are born. You know, because you can't join after the fact, you can't join retroactively, unexpected pregnancies or any income volatility make it genuinely risky to commit to permanent EI contributions. And once you're in, you generally can't opt out as long as you're still self-employed. So it's a system designed for a stability of life circumstances and a level of planning that a lot of workers simply don't have and in many cases have never had.

SPEAKER_01 8:53

Yeah, and even for those who aren't necessarily long-term freelancers or contractors or small business owners, that 600-hour rule ignores the reality that a lot of young workers, especially in recent days, are more likely to experience work interruptions and often for longer periods. So we're seeing constant rounds of layoffs. We call it the forever layoff environment, uh, longer periods of unemployment and job searching, uh, less predictable career trajectories. It starts to feel like a system that's more designed to keep potential parents out than in these days. Although that obviously wasn't the initial intention at all.

SPEAKER_00 9:28

Yeah, and like absolutely. So you can think of a young person, they lose their job and they want to get increased their qualifications, you know, maybe go get an MBA or something. Again, if they haven't been employed for a while, they're they're really gonna fall through the cracks here.

SPEAKER_01 9:43

And I also want to talk about the private sector's role in this because that's the whole other element. There's this general assumption that parental benefits have gotten better over the years and that things have generally moved forward. And for a while that was true. Um, there's that idea as well that sure, maybe government benefits have stalled, but employers are now carrying that burden. But when you look at what's actually happening with employer top-ups, the picture is kind of the opposite, isn't it?

SPEAKER_00 10:08

Yeah, it really is. And I think it's one of the more unappreciated uh parts of the story uh that there is this widespread impression that, yeah, okay, maybe the government benefits don't work so well, but the private sector, they've been stepping up, they've been filling in those gaps, uh, particularly through employer top-up plans, you know, supplemental EI benefits, uh, and so on. And that may be true for a while, and it may still be true for some employers. But when you look at the federal evaluation data, the trend is clearly going in the wrong direction. You know, back in 2007, about 16% of EI maternity and parental leave claimants were receiving some kind of employer top-up. By 2019, that had fallen from to 10%. So we went from 16 to 10. And notably, the federal government hasn't done a comparable evaluation since then. So we really don't even have a full picture or know where things stand today. You know, what we do know from other indicators is that that trend really hasn't reversed. All signs point to that we're going in the wrong direction.

unknown 11:08

Yeah.

SPEAKER_01 11:08

So what else are we seeing in terms of what companies are doing? I know there's been some big headlines lately that suggest the trend is still going in that wrong direction.

SPEAKER_00 11:17

We're actively seeing companies uh cutting parental leave and not just holding the line. So Deloitte, uh, for instance, they announced they're cutting parental leave in half or a segment of its U.S. workforce, going down from 16 weeks to eight. So the United States had always been known as a country that didn't have particularly generous benefits, and now they're even moving farther in that direction. Zoom, uh, which uh I think we all got used to using in the pandemic, you know, they cut their benefits last year. And what happens is with that when one of these large companies moves, like a Fortune 500 company moves, it kind of sets a standard, uh precedent that if they're able to do that without a lot of societal blowback, it kind of creates a permission structure uh to allow other companies to go, okay, well, you know, Deloitte did it and they didn't get into too much trouble, so let's us do it itself. Google has pointed that this out, that their former head of HR put it pretty bluntly that when these cuts were announced, that it legitimizes that action for everybody else. So at the same time, here in Canada, when more women are working in the kinds of jobs that EI doesn't really adequately cover in the first place, the private sector that is supposed to kind of take charge and top up uh and fill in those gaps, they're moving in the other direction. So women here are getting squeezed from both sides.

SPEAKER_01 12:37

Yeah, and we've talked a lot about what's bad, but we actually have some evidence of what better looks like or could look like. Quebec actually has its own parental insurance system, and countries like Finland have recently overhauled how they structure leave entirely. What do those examples tell us?

SPEAKER_00 12:52

So I'm glad you asked that question because we're often accused here at the missing middle. And I I think with some merit uh that we overfocus on problems, maybe enough, not enough on solutions. So let's talk about some of those solutions. And the nice thing is we have a bit of a controlled experiment uh here in Canada because we have differences in systems between Quebec and our other nine provinces. So the Quebec Parental Insurance Plan, uh also known as QPIP, it was launched in 2006. Now it and it's much different than how EI runs. It has a much lower eligibility threshold, it has higher income replacement rates of up to 75%, and it has automatic coverage for self-employed workers. So you don't have this like 12-month opt-in period like the Canadian program. And since the QPIP launched, Quebec's fertility rate has been consistently higher than Ontario's, and that gap is widening over over time. So it appears to be working. And we've seen studies of this. A 2024 peer-reviewed study estimated that the program was associated with meaningful increases in fertility across education levels. And the effect is actually biggest for women with post-secondary education. You know, it's not a silver bullet. Quebec's done other things like subsidizing childcare. And it's often difficult to disassociate, you know, how much of this effect is from one program versus another program. But we have a really consistent pattern here. Better leave access correlates, not surprisingly, with more births.

SPEAKER_01 14:29

Mm-hmm. And making being a parent more affordable broadly. So, what's happening in Finland?

SPEAKER_00 14:34

So, you know, we are often asked about Finland uh in the case of uh housing and homelessness policy, but there's actually other things uh the country can teach us. Uh, and the area of uh parental leave policies is one of them. Back in 2022, they restructured their leave programs to give each parent an equal individual quota of leave of roughly about six months, and it's mostly non-transferable. So for fathers like me, we either have to use it or lose it. And over the last two years, father's share of parental leave days has nearly doubled. So they've gone from like 13% to 21%. And the reason that this matters is not just an issue of gender equality, though that is important, but it's also that when women absorb almost all of the career penalty of having a child, that penalty factors into how many children they're willing to have. So kind of sharing those expenses around both parents really kind of changes the calculus here.

SPEAKER_01 15:31

Yeah, that makes sense. And there's also a flexibility piece in Finland's reforms that addresses an issue I don't think gets enough attention. Under their 2022 reform, parents can actually split their leave up into four separate chunks so they can take some time off, return to work, maybe for a busy season or whatever reason, and then just pick up where you left off without facing any sort of financial penalty. But Canada's system was never designed that way. There's a fixed eligibility window, and whatever weeks you haven't used when that window closes are just gone. And then in some provinces, returning to work even briefly can actually end your job protected leave entirely. So parents end up making an all or nothing call rather than a flexible one. And a lot of them either come back a lot earlier than they wanted to because the system doesn't give them a real alternative. And that means not accessing their full benefits financially, which is a big thing, but also less time spent with their new kids, which is a social issue as well.

SPEAKER_00 16:28

So, you know, we we've had this discussion here. We've looked at a lot of problems, we've looked at a couple best practices globally, one from Quebec, one from Finland. So, in your view, like what does meaningful reform actually look like? Where do we start? You know, how much can we learn from these two examples? And what are the other things that we should be doing?

SPEAKER_01 16:46

Yeah, we can learn a lot. And, you know, we have a system in place. So it's not about creating net new everything, it's about updating it so that it makes sense with current realities. And I'd start with eligibility because right now you can debate the benefit rate all you want, but if a third of mothers can't access the program, that conversation is somewhat beside the point. So the Canadian Center for Policy Alternatives has proposed dropping the threshold to $2,000 in annual earnings, which is modeled directly on Quebec. And so that would bring in a huge chunk of those part-time contract and gig workers currently locked out. And then self-employed workers should also be automatically enrolled, not required to pre-register a year ahead of time, which just doesn't make sense for a lot of people. It's not realistic. And then secondly, that replacement rate needs to move way up. So 55% of earnings has been the number since 1990. And as we talked about, 55% is actually higher than what a lot of mothers and parents end up getting. So Quebec is already paying up to 75%. And raising the federal standard to 75% or more would meaningfully change that financial math for lower and middle income families, but also higher income families as well, and would get us closer to where the OCED average is headed.

SPEAKER_00 18:05

Yeah, and it's funny, like a lot of the things we we've talked about in this episode uh remind me of things that we've talked about on other shows about how uh government systems and policies don't necessarily work well, you know, sometimes because they're based on assumptions that simply aren't true, or they were built in a different era and you know, societal changes and economic changes have happened, uh, but we haven't had the system reforms to keep up with that. You know, do you think parental leave is just another version of that?

SPEAKER_01 18:35

Yeah. I mean, what really strikes me about this in particular is how sharply the outcomes have disconnected from the intention. So EI parental benefits were designed to give parents real financial security during one of the most expensive periods of their lives. And instead, now a third of mothers can't access them. And those who can are often taking a massive pay cut, so severe that it's actually factoring into whether they have another child. So the program hasn't failed because the goal was wrong or the intentions are bad. It's failed because nobody has bothered to update it. There are other pieces of this puzzle too, like childcare, baby bonuses, um, and broader incentives to make having kids financially possible and even comfortable. That shouldn't be too much to ask. So we could do a whole episode on any of those, and maybe we will at some point. But parental leave is different because the program already exists. Canadians already pay into it. There's already public buy-in for the basic principle. And a lot of people, I think, would be really surprised at how badly it's failing parents. You don't have to sell people on the idea. You just have to modernize something that's been running on autopilot for 30 years. And if there's a definition of low-hanging fruit in federal policy, this is it. Thank you so much, everyone, for watching and listening. And to our producer, Meredith Martin, and our editor Sean Foreman.

SPEAKER_00 19:52

If you have any thoughts or questions about things we can learn from Finland, please send us an email to missingmiddlepodcast at gmail.com.

SPEAKER_01 19:59

And we'll see you next time.