Paid parental leave: Is a HECS-style loan the answer? - Women's Agenda

Paid parental leave: Is a HECS-style loan the answer?

If you’ve had or have a HECS debt, you know the drill. Each pay, depending on how much you earn, a small portion of your salary is withheld to pay off those university fees you encountered what seems like a lifetime a go.

Now, imagine racking up a new debt. One with no guarantees of a qualification that may actually help pay it off but that instead accumulates at the same time that you’re bringing a new baby into the world.

Given the debate regarding paid parental leave and the fact Prime Minister Tony Abbott’s generous scheme looks unlikely to pass the upper house in its current form, new ideas are emerging regarding how to best manage bringing newborns into the world with work.

And the Centre for Independent Studies, which produces ‘ideas for a better Australia’ has come up with a novel approach, suggesting an optional loan new parents can take in order to pay for their stints out of the workforce. Such a loan would be gender neutral, equal to their pre-baby wage, and capped at $50,000 for 26 weeks. The bulk of the loan would then be paid off by parents once they return to work and earn more than the minimum wage.

According to the Sydney Morning Herald today, the CIS believes this approach would help parents “self-finance” their parental leave and that high-income families would have the loan paid off in four years. Report author Matthew Taylor says it’s a fairer and more equitable approach to managing parental leave than the Coalition’s current policy that would pay primary caregivers their current salary — capped at $100,000 — for six months. The CIS has estimated the loans scheme to cost $657 million a year, as opposed to the Abbott government’s scheme, expected to cost $5 billion.

The Fairer Paid Parental Leave report says asking new parents to fund their leave through ‘Income Contingent Loans (ICL)’ means those who pay for such leave are ultimately the ones who benefit. You want it or need it, you pay for it.

It also claims such a loan scheme would help meet gender equity objectives in two ways: firstly, by making such loan liability the responsibility of both parents (regardless of whether they’re together or not); secondly, by offering women an alternative to having to give up their salary for paid parental leave. It believes the scheme would see some employers choose to pay off such loans on behalf of their employees.

Needless to say, we see a few holes in the proposal. Notably that having a new baby is NOT the time to be accumulating another debt, that having to pay off such loans will merely see women suffering even more financial disadvantage in the future (even if both parents have to pay), and that this proposal appears to remove what Tony Abbott claims is the very point of his policy — to get and keep more women in the workforce.

We also can’t see how parents are the only beneficiaries of bringing children into the world.

A HECS-style loan is one idea for managing paid parental leave. But it’s not a good idea.

What do you think? Are HECS-style loans the answer?

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