Is Outdated Parental Leave to Blame for Canada's Fertility Crisis?

Canada's parental leave system no longer matches modern work and housing realities, causing people to have fewer children than they want.

Canada’s parental leave system was built for a 20th-century workforce, and it shows. While the cost of living climbs and the definition of a career shifts, our policy framework has remained stubbornly stuck in the past.

In this episode of Classonomics, Sabrina Maddeaux and Mike Moffatt break down why the "Baby Gap", the widening disconnect between Canada’s parental benefits and the reality of modern life, is a primary driver of our record low fertility rates. From the rise of the gig economy to the erosion of employer top-ups, we explore why so many Canadians are struggling to afford the families they want.

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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.

Sabrina Maddeaux: Canada’s total fertility rate hit 1.25 children per woman in 2024. That’s a record low, and it officially lands us in the ultra-low fertility club alongside countries like Italy and Japan. Statistics Canada did try to explain why, and one of the reasons they flagged was women’s greater participation in the labour market.

I do get why that shows up in the data, but I think it obscures more than it reveals because it implies there’s some kind of mass trade-off happening that women are actively choosing work over wanting babies, and maybe that’s true in some cases, but that’s not really what’s going on for a lot of women. Women largely do want to work and have kids. That’s not the tension here. 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.

Mike, let’s start with the foundation. When most Canadians think about parental leave, they picture something: 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?

Mike Moffatt: The basic architecture is in part of our employment insurance system, and it has a couple of components stacked together. I’m going to run through some numbers, but I’ll try and keep that limited.

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, 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.

The rate is about 55% of your average insurable weekly earnings, and that maximum rate now tops out at $729 a week, which isn’t a lot of money. The extended option, if you choose that, drops the rate 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.

The key thing to understand is that the system was born out of the E.I. framework going back to the 1970s, and it was designed to support a certain class of workers: full-time, salaried, with a steady employer. So think teachers, nurses, office workers, that kind of thing. And you need to have accumulated 600 insurable hours in the year before you claim. It was never designed to support women who held multiple, often precarious jobs, which was a problem back in the 1970s and is still obviously an issue today, but it certainly wasn’t designed for today’s gig economy or an economy where people are holding multiple jobs.

Sabrina, you’re in this cohort that the system is supposed to serve but really isn’t, or at least has gaps. You’re a millennial woman. You’ve watched your peers try and figure out the math of having kids while housing costs absolutely eat through your savings and contract work has replaced a lot of stable employment. So what does this look like on the ground?

Sabrina Maddeaux: The framing I keep hearing is that declining birth rates are happening because women are choosing career over family. But a 2023 Cardus 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. For my generation, the calculation goes something like this. You’re in your late 20s, early 30s, maybe on contract or freelance or 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.

Mike Moffatt: Let’s think about those numbers for a second. The average woman wants to have 2.2 kids; they expect to have 1.9 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 averages. But if we go back to the financial math, what does that look like for a woman or a family, thinking of having a kid?

Sabrina Maddeaux: 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 $0.42 on the dollar, then at $100,000 of salary, around $0.38. 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.

Mike Moffatt: I don’t know how many people, particularly living in 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 we want them to have a child.

Sabrina Maddeaux: We’re asking for a massive sacrifice. That’s not even a sacrifice many can make with the current cost of living and financial circumstances people are facing. 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. These are people with perfectly ordinary salaries who are going to take an enormous pay cut. Also, their costs are going to spike, because that’s what happens when you have a child or more children. Diapers, a bigger space, formula, and 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 choice when it comes to fertility. I’ve always said that goes both ways. It should also be about the choice to have a child, or as many children as a woman or parents want.

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.

Mike Moffatt: 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 work, or self-employed, you’re probably not accumulating enough insurable hours in the way that E.I. counts them.

And the self-employed situation is a really 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 that was a big deal. That was 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 dismal. Only about 1 in 4 self-employed women with a child under the age of one are actually accessing those government benefits. And compare that to about 3 in 4 employed mothers. So the program exists on paper, but it’s really just not reaching people the way it should.

Sabrina Maddeaux: 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?

Mike Moffatt: It really comes down to how it’s structured. To opt into this, you have to register with E.I.; you have to start paying premiums a full 12 months before you plan to make a claim. So, from a bureaucratic standpoint, you’re essentially required to plan your pregnancy a year in advance. And that’s not necessarily how all babies are born. Because you can’t join after the fact or retroactively, unexpected pregnancies or any income volatility make it genuinely risky to commit to permanent E.I. 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.

Sabrina Maddeaux: 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. Longer periods of unemployment and job searching, 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.

Mike Moffatt: Absolutely. So you can think of a young person, they lose their job, and they want to increase their qualifications and go get an MBA or something. Again, if they haven’t been employed for a while, they’re really going to fall through the cracks here.

Sabrina Maddeaux: And I also want to talk about the private sector’s role in this, because that’s the whole other element. There is 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. There’s that idea that 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?

Mike Moffatt: It really is. And I think it’s one of the more unappreciated parts of the story, that there is this widespread impression that maybe the government benefits don’t work so well, but the private sector, they’ve been stepping up, and they’ve been filling in those gaps, particularly through employer top-up plans, supplemental E.I. benefits, and so on. And that may have been 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.

Back in 2007, about 16% of E.I. maternity and parental leave claimants were receiving some kind of employer top-up. By 2019, that had fallen 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. What we do know from other indicators is that that trend, it really hasn’t reversed. All signs point to that we’re going in the wrong direction.

Sabrina Maddeaux: 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.

Mike Moffatt: We’re actively seeing companies cutting parental leave and not just holding the line. So Deloitte, for instance, they announced they’re cutting parental leave in half for a segment of its U.S. workforce, going down from 16 weeks to 8. So the United States had always been known as a country that didn’t have particularly generous benefits. And now they’re even moving further in that direction.

Zoom, which, I think we all got used to using in the pandemic. They cut their benefits last year. And what happens is when one of these large companies moves — like a Fortune 500 company moves — it kind of sets a standard that if they’re able to do that without a lot of societal blowback, it kind of creates a permission structure to allow other companies go, “Okay, well, Deloitte did it, and they didn’t get into too much trouble, so let’s do it ourselves.”

Google has pointed out that their former head of HR put it pretty bluntly: when these cuts were announced, 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 E.I. doesn’t really adequately cover in the first place, the private sector that is supposed to take charge, top up, and fill in those gaps, is actually moving in the other direction. So women here are getting squeezed from both sides.

Sabrina Maddeaux: 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 has its own parental insurance system. And countries like Finland have recently overhauled how they structure leave entirely. What do those examples tell us?

Mike Moffatt: I’m glad you ask that question, because we’re often accused here at the Missing Middle, and I think with some merit, that we over-focus on problems, maybe 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 here in Canada, because we have differences in systems between Quebec and our other nine provinces.

So the Quebec parental insurance plan, also known as QPIP, was launched in 2006. It’s much different than how E.I. 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 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 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. It’s not a silver bullet. Quebec’s done other things like subsidizing childcare, and it’s often difficult to disassociate 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.

Sabrina Maddeaux: And making being a parent more affordable broadly. So what’s happening in Finland?

Mike Moffatt: You know, we are often asked about Finland, in the case of housing and homelessness policy, but there’s actually other things the country can teach us. And the area of 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 six months. And it’s mostly nontransferable. So for fathers like me, we either have to use it or lose it. And over the last two years, fathers’ share of parental leave days has nearly doubled. So they’ve gone from 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.

Sabrina Maddeaux: 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 they 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.

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

Sabrina Maddeaux: 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.

The Canadian Centre for Policy Alternatives has proposed dropping the threshold to $2,000 in annual earnings, which is modelled 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 OECD average is headed.

Mike Moffatt: It’s funny, a lot of the things we’ve talked about in this episode remind me of things that we’ve talked about on other shows about how government systems and policies don’t necessarily work. Sometimes because they’re based on assumptions that simply aren’t true, or they were built in a different era and societal changes and economic changes have happened, but we haven’t had the system reforms to keep up with that. Do you think parental leave is just another version of that?

Sabrina Maddeaux: I mean, what really strikes me about this in particular is how sharply the outcomes have disconnected from the intention. E.I., 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, 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.

Mike Moffatt: If you have any thoughts or questions about things we can learn from Finland, please send us an email to [email protected].

Sabrina Maddeaux: We’ll see you next time.

Additional Reading/Listening that Helped Inform the Episode:

Statistics Canada -- Canada’s total fertility rate reaches a new low in 2024

Statistics Canada -- The Daily: Fertility and baby names, 2024

The Hub / Cardus -- Stop dismissing falling fertility rates as a choice (2.2 children wanted stat)

Canadian Centre for Policy Alternatives -- Support for parents in a post-pandemic world (EI reform; replacement rate, eligibility threshold proposals)

Policy Options / IRPP -- Parental leave benefits need to be more practical and equitable (1 in 4 self-employed stat; top-up decline)

PMC -- Policy and Fertility: A Case Study of the Quebec Parental Insurance Plan (peer-reviewed; fertility lift estimates)

Yle News / Helsinki Times -- More fathers taking parental leave since Finland’s 2022 law change

Fast Company -- 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)

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