Possibly not, with my piece on this topic squeezed by Mandela’s death, the imminent demise of the auto industry here and other pressing matters.
But I had this article in yesterday’s The Australian on my dislike of Tony Abbott’s paid parent leave scheme. So as a Christmas treat – forget Sinc’s syrupy contributions (Boney M, I ask you?) – I am reproducing my article below:
When my children were teenagers, one of their favourite films was Ten Things I Hate about You. Based loosely on Shakespeare’s The Taming of the Shrew and starring a youthful Heath Ledger, I personally found the whole film rather mawkish and tedious.
You know the sort of thing. Girl pretends to loathe lad. Girl really likes lad. Girl and lad sort it out and live happily ever after. Throw in grumpy, obstreperous father of girl and that’s pretty much it.
But when it comes to Tony Abbott’s proposed paid parental leave scheme, I really do hate 10 things about it. And there won’t be any happily ever after, no change of mind – this girl (mother and grandmother, in fact) is not for turning.
The basis of the proposed PPL scheme is that eligible new mothers will receive 50 per of their pre-birth earnings for six months, capped at $75,000. The payment will be courtesy of the taxpayer – yes, we are all dying to chip in, or not – although large companies will be hit with a 1.5 per cent levy which will contribute to the cost.
For a government that is ostensibly committed to smaller government and the promotion of self-reliance – having a child is a private matter, after all – the very suggestion of this scheme is breath-taking. In fact, this government should be trying to whittle down Labor’s much more modest scheme that is currently on the books.
So that is the first thing I hate about the PPL – its profound inconsistency with small government and the promotion of self-reliance.
The second thing I hate about this scheme is its cost. While the figures will move around a bit, we are looking at the best part of $5.5 billion per year and rising, which compares with the current scheme’s cost of around $2 billion.
We are talking serious money for which there is a significant opportunity cost, either in terms of alternative government spending or lower taxes. Given the government’s commitment to some expensive new initiatives, such as the National Disability Insurance Scheme, it beggars belief that such large sums could be allocated to a scheme that will benefit perhaps 150,000 women, many of whom are well-off.
My third odious point about the scheme relates to the presumed benefit of lifting productivity. If we look at who currently returns to work after having children, it is the more educated and the more skilled. This makes sense because the cost of staying out of the workforce relative to the benefit of returning to work is largest for this group.
To the extent that the PPL does encourage more women to return to work after having children, it will be the less skilled and less educated who are disproportionately likely to return, thereby dragging down the average productivity of the workforce.
This point was made in the original Productivity Commission report which ushered in Labor’s version of a taxpayer funded paid parental leave scheme.
So when you hear various members of the government spouting on about higher productivity as one of the benefits of their PPL, don’t believe them.
My fourth issue is less hate and more doubt. It concerns the impact of the PPL on female labour force participation. It is of course paradoxical to think that paying women to take time off – indeed, more time off than they would otherwise take off – will increase labour force participation. In a very short run sense, the effect is the reverse.
There may be some women who will return to work after child number one in order to receive the PPL benefit when child number two arrives. But whether women, having completed their families, will be more inclined to return to work simply because the taxpayer has stumped up some funds to cover the first six months of their child’s life is highly debatable.
A taxpayer scheme is also very different from one privately funded by employers, which latter will often make the grant of paid parental leave conditional on the woman returning to work for a specified period of time. Moreover, there is a sense of attachment and obligation to the employer if that employer is actually paying for the parental leave of employees but which is absent from a taxpayer funded scheme.
In a weird way, this point of difference was acknowledged in one aspect of the current scheme because employers have been forced to launder taxpayer funds to ‘pay’ paid parental leave to their employees on leave. The idea is that this pretence would induce a degree of on-going attachment between employer and employee which is largely absent when the taxpayer is overtly picking up the tab for the cost of the leave.
It is interesting to note that this aspect of the scheme is being dropped as it has proved too costly and administrative complex for employers.
In terms of the impact of taxpayer funded parental leave on female labour force participation, we already have some evidence from the current scheme, which has been running since the beginning of 2011. There is absolutely nothing in the figures to suggest that there has been an uptick in the workforce participation of new mothers.
As was the case before the scheme was implemented, a clear majority of mothers do not return to work before their baby turns six months and, in fact, a majority of new mothers have still not returned to work when their baby turns one.
But here’s a real kicker for the souped-up version of PPL being proposed by Tony Abbott – it is the delta (the change) that counts in terms of the policy impact. The key question is: what will be the additional impact on the participation of new mothers associated with the expenditure of the extra $3.5 billion per year? I can tell you the answer now, without even bothering to do the figures. The costs will greatly exceed the benefits.
My fifth worrisome point is that Tony Abbott’s PPL will completely crowd out all current paid parental leave schemes operating in the private and public sectors. Given the generosity of the PPL, there is no way that current arrangements (which cover over half of working women who have given birth) will continue for very long. This is a very damning point because these private schemes have additional benefits beyond the financial assistance given to new mothers.
My sixth issue picks up the importance of child care, both in terms of cost and availability, in driving mothers’ decisions about participating in the labour market. Most women will tell you that what happens in the first few months of a child’s life is all very well, but the much more significant issue when it comes to ongoing attachment to the workforce is childcare.
It is here the wheels have really fallen off the wagon as the previous government attempted to assist its union mates by pushing for unsustainable pay rises for childcare workers and over-regulating the industry to the point of strangulation. The Abbott government would be well-advised to concentrate its efforts sorting out the disastrous state of childcare, in terms of fees, availability and flexibility.
My seventh point of dislike is the uneven treatment of new mothers depending on their prior employment status. Is it really fair for taxpayers to be forking out $50,000 to one high-paid woman who has been working before having a child and a meagre baby bonus of between $1,000 and $2,000 to another woman who has been staying home looking after other children?
And note that the watered-down baby bonus is strictly means-tested – much more strictly means-tested than Abbott’s PPL. A woman earning $200,000 per year who gives birth will still receive $75,000 in paid parental leave. Their high income does not exclude them from the scheme.
If one of the aims of the PPL is to provide an environment conducive to the healthy early development of children, by allowing mothers to focus on their newborns, this wildly different financial treatment of the two groups of women is completely illogical.
Point eight is the supposed impact on fertility. Will the PPL persuade working women to have a child or more children? There is, of course, a prior question and that is whether governments, courtesy of the taxpayer, should be promoting fertility. On recent estimates, we appear to be heading towards a big Australia in any case. Moreover, any small change in fertility associated with this expensive PPL would have a very small impact on the ageing of the population.
My ninth issue relates to the scope for rorting within the system. Think self-employed and family companies. It would be relatively easy to funnel a significant salary to the expectant mother and claim the PPL benefit even if the expectant mother is not really gainfully employed. The compliance costs of tracking down these cases will be high and so a number of ‘undeserving’ cases will slip through.
Point number ten is about the levy on large companies. What is the Coalition thinking – raising the rate of company tax when all the pressure is to lower it? After all, Australia’s rate of company tax is high by international standards.
The argument that there will be an offsetting reduction in the company tax rate of 1.5 per cent is neither here nor there – the government should be motivated to decrease the rate of company tax for companies of all sizes. The net effect of the levy will be to reduce employment and investment.
And a related point – let us call it 10(b) – is that franking credits will not apply to the payment of the levy, so shareholders will also be asked to pitch in to fund this government boondoggle.
So there we have it – ten things I hate about Tony Abbott’s PPL. I am hoping the Commission of Audit might see the light and conclude that, in a list of possible items on which precious taxpayer funds can be spent, this souped-up PPL comes right down the bottom.
Maybe if we could afford it, maybe if the state of the budget were healthier, then some consideration could be given to improving the current version of PPL, although personally I would be cutting even this back.
But read my list of 10 things I hate about Tony Abbott’s PPL and think again. I’m sure the electorate would understand – in fact, I think they would be relieved. And unlike shrewish Katerina, I really mean it.