Being forced to negotiate on Tony Abbott's paid parental leave would be good news for all Australians | Women's Agenda

Being forced to negotiate on Tony Abbott’s paid parental leave would be good news for all Australians

Yesterday the Prime Minister Tony Abbott hinted that he might be open to negotiating his signature paid parental leave policy. Personally I think this is welcome news.

At a press conference which took place yesterday, during a week where the overriding message from the federal government is that cutting back is the unequivocal fiscal priority, Abbott was asked whether he would trim his generous PPL scheme accordingly.

“Well obviously it has to get through the parliament and that may well involve some negotiation,” the PM replied. “But I am committed to the scheme that we took to the election. And believe that’s a fair scheme.”

There is no question that Abbott’s proposed PPL is generous. What is less clear is whether we can afford it. Or, more specifically, given the cost – estimated to be $5.5 billion a year – whether it is going to deliver sufficient value for money. Spending $5.5 billion becomes more palatable and a lot more affordable if that expenditure is going to deliver a substantial economic benefit.

In crude terms, when measuring the efficacy of a paid parental leave program the big issue is whether it will sufficiently increase the workforce participation of women to the extent that it will deliver a productivity boost. Productivity is the bang we need for the public purse’s buck. In a world where resources are finite achieving a clear economic return has to be the overriding objective of any public expenditure on a PPL program.

At this point two things are relevant. First, Australia has a legitimate workforce participation problem. According to the World Economic Forum we educate women to a higher standard, in larger numbers, than any other country in the world. Yet we rank 52nd in the world for female workforce participation, a position that is slipping backwards. That gap is telling and very expensive. Beyond the lost productivity it represents it shows we are getting an abysmal return on the money we invest educating women.

So why does this gap exist? In short, because, as a country, we do not have the sufficient infrastructure to support parents continuing in the workforce. Affordable, accessible childcare is a very real roadblock in this regard. Paid parental leave is another vital piece of infrastructure but there is plenty of research that when considering productivity and the need to increase labour supply, improving the access and affordability of childcare trumps an expensive PPL program.

In 2009 the Productivity Commission found that more generous PPL program does not sufficiently lever workforce participation.

By contrast the Grattan Institute has found the marginal tax rates and the net costs of childcare were the most important economic factors influencing female workforce participation. Earlier this year Anne Summers reported that Canada’s female workforce participation ”increased substantially above trend levels when [in 1997] marginal taxes and the net costs of childcare were reduced”.

This is why Tony Abbott’s PPL hasn’t received a unanimously rapturous welcome. In an ideal world a generous PPL would be happily embraced but this world isn’t ideal. In this world, where childcare remains unaffordable and inaccessible to far too many Australian families and where the participation of women in our economy is tenuous, we need to scrutinise where every cent goes and what every cent achieves.

On that basis Abbott’s PPL doesn’t cut the mustard. If he had consulted on his PPL policy he would have learned that pretty quickly. Let’s hope being forced to negotiate opens his eyes to the bigger picture.

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