The perils of means-testing paid parental leave - Women's Agenda

The perils of means-testing paid parental leave

The Coalition Government wants to save $1.2 billion by cutting the government parental leave payments going to new parents who have access to employer schemes.

Many working women are offended at being accused of ‘double dipping’ as it implies they are acting improperly by combining the 18 week government scheme with their employer scheme (usually about 3-14 weeks) to care for their small babies.

The proposal has also been criticised for making cuts to what is already the bare minimum and ignoring the international standards that we should be aspiring to. Twenty-six weeks paid parental leave is widely accepted to be the level that is advantageous but not harmful to women’s workforce participation and consistent with the World Health Organisation’s recommendations about breastfeeding. Australia already trails other OECD countries when it comes to the generosity of our PPL scheme.

The proposal faces a tough path through Parliament. The Labor Party and the Greens have indicated that they will not support the proposed cut to PPL. One Nation and Senator Derryn Hinch are likely to support it.

Consequently, the decision in all likelihood lies with the Xenophon team. Last week, Nick Xenophon himself floated the idea of means-testing PPL on the basis of household income, rather than the income of the claimant. This approach would undermine the fundamental principle of a PPL scheme – to tackle gender inequality.

Undermining gender equality

Currently, the PPL scheme provides 18 weeks of government-funded pay for parental leave at the rate of the National Minimum Wage. To be eligible, the individual claimant (usually a woman) must also have earned less than $150,000 in the financial year preceding the birth.

Means-testing the PPL scheme on household income would effectively mean that a woman’s entitlement to this important workplace right – a right that we know improves her labour market participation, career progression, income and retirement income through life – becomes dependent on the income of her partner.

Introducing a household means-test would mean that women of all income levels, if they are in relationships with high income men (and if they don’t have access to an employer scheme), would miss out on this right.

Also, we know that there are all sorts of complexities in the distribution of resources within households. For example, studies show that who earns the money and how will affect how it is spent.

Means-testing the PPL scheme on household income would mean that more women would now be forced to rely on their partner’s income while they are away from work bearing and rearing infant children. This has the potential to limit their financial autonomy at a time when many already feel isolated or vulnerable.

As PPL is fundamentally a gender equality measure, many countries provide government PPL schemes to all women, regardless of income. Means-testing the PPL scheme on household income would see high income and many low and middle income women excluded from entitlement.

Not a safety net

Over the last few weeks, the language being used by the Coalition to describe the PPL scheme has shifted. Social Services Minister Christian Porter now describes PPL as a ‘safety net’ that should be reserved for ‘those who need it’. But PPL at its core is not about meeting the needs of the vulnerable. It is about promoting workforce equality and the health and wellbeing of mothers, infants and families. Means-testing the PPL scheme on household income is in danger of playing into this misleading language of ‘welfare’.

It also mixes up two issues. It takes away the right of some women to PPL because of the view that the household is getting more than their ‘fair share’. If the unfairness of income distribution is the concern, a better solution would be to adjust household tax rates, while still providing women with the important right to PPL, with all the benefits it entails for their workforce participation and health and wellbeing.

The reasons that PPL in Australia has trailed the rest of the OECD are complex. But one is our distinctive industrial relations system, which has had a heavy focus on the ‘family wage’, or a wage sufficient for a male worker to support the needs of himself and his family (enshrined in the famous Harvester judgement of 1907). Historically, this has relegated Australian women to ‘secondary earners’. The legacy of that ruling lives on.

Over the last few decades, there have been concerted efforts in Australia to recognise women’s status as workers in their own right and to enable them to participate in the workforce on the same terms as men. The introduction of paid parental leave, while slow, has played an important part in these efforts. A household means test could undo some of this important work.  

In Australia, the existing PPL scheme was always meant to be a starting point that could be built upon, yet the Coalition’s policy would take us backwards. Some women are lucky enough to have access to an employer scheme that brings them up to the standard of paid parental leave enjoyed by their counterparts in other Western countries. The focus should be on improving the circumstances of those who don’t have access to employer schemes rather than reducing the benefits of those who do.

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