Framing ECEC reform as a cash grab for women is a distraction

Framing child care reform as a cash grab for high-earning women is a distraction

And it misses the point.
child care reform

The Opposition leader, Anthony Albanese, and Shadow Minister for Early Childhood Education and Care, Amanda Rishworth, have published a new online calculator to allow families to see how much they would save under Labor’s proposed changes to the way child care is subsidised.

The policy was flagged in the Budget Reply, that the Labor leader delivered in October. Making early childhood education and care (ECEC) more affordable, and ultimately universally accessible, was the central theme of Albanese’s vision for Australia’s recovery from COVID19.

“It’s not welfare, it’s structural reform,” is how Albanese put it. Yet viewing proposed changes to how early childhood education and care is funded through the prism of ‘welfare’ remains prevalent.

And so it is today.

The criticism that Labor’s plan to make child care more affordable for 97 per cent of families in the system will “mostly benefit the rich” is telling and overlooks the systemic role that ECEC plays in relation to women’s workforce participation and a few key peculiarities in Australia.

It’s telling because when discussing policy matters that might financially benefit “rich mums” there is an incredulity and suspicion that’s not apparent when issues like tax cuts or franking credits – that overwhelmingly benefit very wealthy men – are mooted.

Giving rich men greater access to their hard earned salaries and bonuses is not only sensible but desirable. But giving women greater access to their wages is somehow shocking.

It’s relevant that reforming ECEC is not being pursued specifically to give “the rich” a helping hand. That high income women would benefit is a consequence of, not the rationale for, the reform.

And the reason it would benefit higher-income women the most is because it would address a strange and punitive flaw in the way secondary income earners are taxed. The way the current childcare subsidy interacts with the personal tax system and the family tax benefit, means that higher-earning women end up paying to work additional days.

As Craig Emerson wrote in an October column in the Financial Review: “Many men consider a top personal tax rate of 47 per cent excessive, unjust, even punitive. But it seems an effective marginal tax rate for higher-income working women of 120 per cent is OK.”

An effective taxation rate of 120% means a family budget shrinks by 20¢ for every extra dollar the mother earned by increasing her working days. Effective taxation rates of upwards of 95% are not uncommon.

Australia has a peculiarly low female workforce participation rate and we know that one of the structural explanations for this is because the high out of pocket costs for ECEC and the punitive tax rate secondary earner face is a barrier for lots of highly qualified, well-paid women in Australia from working additional days.

Is it really a ‘windfall’ if a woman is even $10,000 better off in a year because her marginal effective taxation rate has been reduced from 120% to something more palatable like 47%? Windfall or a necessary correction?

If it’s not more aptly a necessary correction is increasing the taxation rate of male CEOs or male pilots or male engineers to 120% something we’ll start discussing? I’m doubtful.

Framing the reform of ECEC to make it more affordable, and ultimately universally accessible, for all families as a cash grab of sorts for rich women is a distraction. And it misses the point.

Australian families pay some of the highest out of pocket costs for ECEC in the world. Australia invests considerably less in early childhood education as a percentage of GDP than other OECD countries. Australia’s participation in early childhood education is lower than the OECD average. Australia’s female workforce participation rate is dramatically low compared to OECD countries. Increasing women’s workforce participation is a significant opportunity to boost Australia’s GDP.

Women aged over 55 are the fastest growing group of homeless people in Australia because of the structural barriers that make retiring with financial security so difficulty.

For every dollar invested in pre-primary education Australia gets a $2 return. Children who attend high quality early childhood education and care have an advantage when they arrive at school and it stays with them throughout their schooling life and beyond. The gap between children who don’t attend high quality ECEC before school and those who do is significant and stubborn – throughout their schooling lives and beyond.

These are not “subjective” positions. They are matters of fact. And they all point to reforming high quality early childhood education and care to make it more affordable and accessible for every family as a sensible and compelling economic policy. That it will benefit some high-earning women is a two-bit sideshow compared to the raft of economic and social benefits it will deliver children, families, the economy and Australia’s future.

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