“Of the 34 countries in the Organisation for Economic Co-operation and Development (OECD), 33 offer paid parental leave schemes. Of these 33 countries, Australia is one of only two that fails to pay leave based on a replacement wage.” – Liberal Party paid parental leave policy.
The Coalition’s policy for paid parental leave would provide mothers with 26 weeks’ paid leave, at 100% replacement wage up to a maximum annual salary of $150,000, or the minimum wage if greater, and will include superannuation contributions. The proposal would also allow two out of the 26 weeks to be dedicated paternity leave, paid at the father’s replacement wage (up to the same maximum of $150,000) or the minimum wage if greater, plus superannuation.
This means that the maximum payment under the Coalition’s policy will be $75,000 over the 26 week period. This stands in contrast to the government’s current scheme, which pays a flat-rate benefit equivalent to the minimum wage for 18 weeks or around $11,200 before tax.
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The accuracy of the above claim depends on how one interprets “leave based on a replacement wage”. Appendix Two of the Coalition policy is a table downloaded from the OECD Family Database, which among many other indicators of family policies and outcomes includes analysis of “Key characteristics of parental leave systems”.
It shows that the USA is the only OECD country without paid parental leave, and that Hungary and Australia are the only countries that pay flat rate entitlements. All other OECD countries base their payment on the previous salary of the mother, so the Coalition is right on this fairly narrow point.
But the relative generosity of different schemes depends on the proportion of salary replaced, whether there is a ceiling on payments, how high that is, and also on the length of time payments are made.
Nine OECD countries pay full replacement wages without a ceiling: Austria, Chile, Estonia, Greece, Germany, Mexico, Poland and Slovenia. Norway also pays 100% for nine weeks, but this is part of a broader parental leave scheme, where the replacement rate varies with the total leave taken. In all of these countries, paid maternity leave is for a shorter period than the proposed Coalition scheme, although Estonia and Poland are nearly as long.
Nevertheless, it is fair to say that these nine countries could have more generous schemes than the Coalition proposes for a small number of very high income mothers.
In the case of Chile and Mexico, this generosity is probably more apparent than real, because the majority of mothers are not in the formal labour market, so in Chile 52% of payments go to the richest fifth of women and just 5% to the poorest fifth.
There are three countries – Italy, Japan and Portugal – that pay less than 100% but also have no ceiling. But in Japan a mother would have to earn the equivalent of more than A$465,000 to get as much money as under the Coalition proposal.
There are eight countries that pay 100% of the mother’s wage but with ceilings like the Coalition proposes. However, the ceilings are lower, so they are less generous schemes. There are 11 that pay less than 100% but also have ceilings, so they are definitely less generous the Coalition’s proposal.
For example, New Zealand bases payments on previous salary and pays 100% but up to a very low maximum of around NZ$460 a week or a maximum payment of NZ$6420 over 14 weeks. Canada pays a replacement rate of 55% of the mother’s salary for up to 18 weeks with a maximum payment of CAN$485 per week or a maximum payment of around CAN$7,760. Both of these payments are well below the level currently paid in Australia of A$11,200.
Generally speaking, the payment ceilings in other countries are well below the Coalition’s proposed level in Australia. For example, the Netherlands has 100% replacement of salary, but the maximum payment over 16 weeks is under 22,000 euro and the ceilings also produce a maximum payment over 16 weeks of around 13,000 euro in Spain and 12,000 euro in France.
The highest payment amount in countries with 100% replacement but also a ceiling on the amount appears to be Luxembourg, where the maximum payment over 16 weeks is around 36,000 euro – approximately A$53,000, so still less generous than the Coalition proposal.
Verdict
If you interpret “leave based on a replacement wage” as one with some relation to the previous salary of the mother, the Liberals are right. But if the intention of the statement is to indicate that Australia will simply become like most other OECD countries, it is incorrect. The maximum level of assistance under the Coalition proposal will be one of the highest in the OECD.
Review
The article is correct in saying that if interpreted narrowly, Australia’s current paid parental leave scheme is one of only two in the OECD that fails to pay leave based on a replacement wage. To clarify, this is referring to a woman’s replacement wage. Thus, while the scheme is called a paid parental leave scheme, it is for the most part based on the assumption that the mother will take the leave.
As the article points out, only two countries have a flat rate maternity leave payment. Many of the countries have different arrangements, ranging from a proportion of the mother’s salary (55% to 95%) to a mix of 100% for a period of time, plus a flat rate for another period, often capped at a smaller amount.
Of the nine countries that base their payment on 100% wage replacement without a ceiling, the duration for each of these countries’ schemes is less than the 26 weeks proposed by the Coalition: Norway’s is nine weeks, Germany 14 weeks, Slovenia 15, Austria 16, Greece 17, Mexico and Chile 18, Estonia 23, and Poland 24 weeks. In total, therefore, mothers could be receiving less in these countries if we could compare their incomes directly with Australian mothers.
It is difficult to directly compare generosity of schemes because of the differing architecture of the schemes. One other element that has rarely been mentioned, but which is central to understanding how inclusive schemes are, is the eligibility requirements for schemes. This is not compared in the OECD table or the author’s article. – Marian Baird.
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Peter Whiteford receives funding from the Australian Research Council.
Marian Baird receives funding from the Business School at The University of Sydney.
This article was originally published at The Conversation.