It's the economy, stupid!

We’ll be getting more expensive kids

Who isn’t happy to see a new-born? Well soon enough, if the polls and betting markets are to be believed, the taxpayer will wince every time a new baby comes into the world. An Abbott government will be nationalising a private cost.

To be sure there are good reasons to celebrate children - they bring joy to their parents, they grow up to be taxpayers who will pay off our burgeoning debt, and so on. It is also true that motherhood imposes huge costs on women. In addition to the physical risks associated with pregnancy itself, time-out from the workforce can lead to reduced lifetime earnings and reduced superannuation accumulation.

While these costs are not trivial it isn’t clear that the public should bear the burden of the gender distribution of labour. In other words, the costs and benefits of having children are largely private costs and private benefits.

That isn’t to say that paid parental leave is a bad idea - clearly it isn’t. Many employers already have paid parental leave schemes in place - competition to attract talented female staff ensures that employers have to provide some measure of parental leave. The question is whether Australia should have an expensive one-size-fits-all paid parental leave scheme?

The leave scheme on offer actually undermines the efforts of those organisations that already have in place generous leave schemes in place. Those organisations that did the early running in competing for female staff on the basis of parental leave will have their reputational capital undermined by this policy. To the extent that they are likely to be large firms, they now also get to pay the laggards’ parental leave bill. Insult to injury.

What is the policy objective here? That more women should have more children. But the incentive will be for women to have children at a later stage in their career - the benefit increases with salary. So if a women plans to have two kids it now pays her to delay the pregnancies until later in her career. We might end up with the same number of more expensive children.

I’m sure many economists and observers are going to argue that the policy is too expensive, too generous and the like. It’s all true. My point here is that even if we accept the expense as being money well spent (it isn’t) the policy is unlikely to succeed in actually boosting fertility.

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