Coalition’s paid parental leave: Good for high earners but what about the economy? | Women's Agenda

Coalition’s paid parental leave: Good for high earners but what about the economy?

Yesterday Tony Abbott confirmed that if the Coalition is elected, women who give birth after July 2015 will be paid their existing salary, up to a cap of $150,000, for 26 weeks. Under the current paid parental leave scheme, introduced by Labor in 2009, a child’s primary carer is entitled to 18 weeks’ pay at the minimum wage.

The Coalition’s proposed plan is substantially more generous but it comes with a correspondingly substantial price tag; it will cost over $5 billion which will be funded by a 1.5 % levy on companies earning more than $5 million.

Maire Coleman, president of the National Foundation for Australian Women, says you cannot criticise the policy objectives.

“Mr Abbott says, sincerely, that he wants to encourage women to have children and to participate in the workforce because that is the basis on which they can build economic security,” Coleman told Women’s Agenda. “You cannot argue with those policy objectives but the question is, is this the most cost effective way to achieve those objectives? I don’t think it is.”

Coleman is not alone. A report prepared by the Productivity Commission in 2009, which formed the basis of Labor’s PPL, concluded that a scheme paying full replacement wages, like the Coalition is planning, would be very expensive and garner “few incremental labour supply benefits”.

This is partly because the women who this type of scheme will benefit most, those that are highly-educated and well-paid, already have a high attachment to the workforce, were more likely to have paid parental leave entitlements from their employer and were to continue working regardless.

Coleman says in an ideal world all women would be entitled to generous parental leave but in the real world, when resources are limited, economic decisions need to be rationalised on the basis of returns.

“I would love to see a fully paid, generous paid parental leave program where all mothers are paid at their own wage, but when we’re in a tight financial position as a nation we have to think about our policy objectives and our priorities in achieving those with a degree of equity,” she says.

As a matter of priority Coleman says there is persuasive evidence that investing in childcare would procure better results.

“Female workforce attachment is highest in countries with affordable and accessible childcare,” she says. “If the policy objective is to get women back to work, then investing $5 billion in childcare is a much better option than improving the income position of women earning between $80-150,000. It is essentially a statement of priorities.”

This is substantiated by a Grattan Institute report released last year, Game-changers: Economic reform priorities for Australia. That report concluded that 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”.

The Coalition’s policy is an attractive proposition to anyone planning to have children and would, as Tony Abbott said yesterday, undoubtedly relieve the financial stress of taking time off work to have a baby.

“The fact is very few families these days can survive on a single income,” Tony Abbott said. “Just about every family needs more than one income to survive. So if we are serious about allowing women to have kids and a career we’ve got to have a fair dinkum paid parental leave scheme.”

The financial implications of raising children obviously extend beyond the first six months of a baby’s life. If a family requires more than one income to survive then presumably it is going to need that income for longer than 26 weeks. The only way that can be achieved is if there is adequate infrastructure to facilitate parents returning to work. Long term, that is where any government is guaranteed to get the most bang for buck.

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