Here’s Joe having his two bob’s worth:
“It’s actually good for Australia’s economy, good for jobs, to have more women choosing to work.”
Now I am sure Joe does not have at the back of his mind the following equation:
GDP/head = GDP/hours worked x hours worked/head
If we convert this to growth rates, the story is basically that the growth of living standards is the product of the growth of labour productivity and growth of the rate of employment (which is closely related to the growth of the rate of participation).
(Come on Cats: you know this discussion is good for you.)
The argument becomes that if you want to raise living standards, one of the way of doing this is to raise the employment rate.
Now this is all well and good, but the case for spending taxpayer money on promoting the labour force participation of one group is actually more complicated. Indeed, it is entirely possible that the costs of promoting labour force participation of one group will be greater than the benefits.
(Note that the PC report on childcare and early childhood learning (yes, I can get with the program) finds quite trivial supply responses (that is, higher female labour force participation) from spending more taxpayer money on childcare fee relief.)
If a government wants to encourage a certain activity, it is always possible to establish incentives (aka bribes). If you want women to have more babies, give them more money for each additional child. If you want more women to participate in the labour force, one option is to increase the returns from working by reducing their costs of working (eg. by subsidising childcare) relative to the returns from not working.
Whether or not this makes policy sense is a moot point. The cost of these bribes is always borne by other groups whose participation may well be discouraged to a greater degree.
Take the Temporary (Cats: stop that laughing) Budget Repair Levy – the increase in the marginal tax rate will reduce work efforts (and indeed induce retirement) of many high income earners.
The way to think about this is that the participation decision of people is very individual. They weigh up their circumstances and make a calculation based on net pecuniary and non-pecuniary benefits of working relative to not working. (Note that this may include an investment calculation: I may not make much now, but it is worth hanging in because there will be rewards down the track.)
From a policy point of view, we should be concerned about government-imposed distortions which make it difficult for people to make optimal decisions. (The interaction between family tax benefits and child care subsidies makes it a difficult financial decision for many women to work beyond 2 or 3 days a week. Mind you, working 2 or 3 days per week may suit many underlying preferences.)
The policy implication is that governments need to be as neutral as possible when it comes to people making labour force participation decisions. The government should not have a view that the participation of one group should be pumped up by taxpayer subsidies, which is inevitably at the expense of others.
By the same token, making it too easy for people to collect taxpayer income while not working is not a good idea.
Here endeth the economics lecture!