Prime Minister Tony Abbott confirmed over the weekend that he will use the parliamentary summer break to review his paid parental leave (PPL) scheme, which has so far proven to be a large political liability.
However, Abbott shouldn’t waste his time and taxpayers’ money on a review. His PPL idea doesn’t need reviewing. It needs scrapping.
This is not because there is no need for PPL: it is because Australia already has an effective and equitable scheme. It is quite consistent with schemes in other OECD countries, notwithstanding their enormous diversity, as the ANU’s Peter Whiteford has previously pointed out.
What’s so good about the existing scheme
The existing scheme began at the start of 2011 and so is just four years old. There are costs associated with the establishment of any program and with its break-up and replacement with something else. In the age of austerity and budgetary constraint – as we are continuously reminded – these are important considerations.
But the current PPL scheme is clearly delivering good results across a range of measures. These should be at the forefront of considerations in whether it should be replaced.
The existing PPL pays everyone the same rate: A$641 per week before tax. That adds up to the national minimum wage for a 38-hour week. It is paid for 18 weeks, which is in line with schemes in other comparable countries, according to a recent OECD report. It should be noted that the information about Australia in the report is out of date.
While the Coalition’s original PPL proposal made much of the “replacement” wage for women – which would particularly benefit middle and higher-income earners – it provided little evidence that such women are motivated by higher-level maternity leave payments in relation to the time taken off work. Also, as Whiteford points out, the “replacement wage” in other OECD countries is open to interpretation.
The existing scheme pays the same rate for low-earning women in casual and part-time work as women on incomes up to $150,000. Women working around one day a week in ten of the previous 13 months before the birth are eligible. This is a great boon for women with other children or locked into short-hours work who cannot work full-time. Women who are self-employed and not earning very much from a business are also eligible.
An important finding of the review of the current paid parental leave scheme, which was released in June, is that it has encouraged women on low incomes, in casual work and those self-employed to stay at home with their newborn babies for longer and, at the same time, encouraged them to return to work in the longer term. It has also had positive effects on employers’ retention of mothers on their return to work.
These are very desirable outcomes in terms of equitable life chances for babies and equitable treatment of mothers at a vulnerable point in their lives. The evaluation associated with the review found:
… an improvement in mothers’ and babies’ health and well-being and work-life balance particularly amongst those for whom PPL made the most difference – mothers least likely to have access to employer-funded parental leave, and those with least financial security due to precarious employment.
The review indicates that there are community concerns about PPL, such as in some of the eligibility criteria. However, its report card indicates that this program has very considerable positive social impacts for Australian women and there is no justification for it to be scrapped and replaced.
What Abbott needs to focus on
As Abbott is very concerned about women’s advancement and retention in the workforce – he has the women’s portfolio, with Michaelia Cash as the minister assisting – he has many policy possibilities to consider over the summer break.
As well documented, women participate in the workforce on very different terms than men. This results in a gender pay gap and lower retirement income. A troubling and significant gender wealth gap is also coming to light.
By any measure, PPL is just one plank in the raft of measures that contribute to women’s employment participation and economic equality. A PPL scheme facilitates women’s return to work but does nothing to help their ongoing capacity to do those jobs.
As the National Foundation for Australian Women points out, accessible and affordable child care goes hand in hand with PPL. This has actually overtaken PPL as the defining issue for women in the workforce. The question of child care is to be rolled into the review of Abbott’s PPL scheme.
Finally, there is the question of funding for Abbott’s PPL scheme. The original proposal was to be funded through a 1.5% levy on around 3000 of Australia’s largest companies and to be offset by a modest company tax rate cut. The levy and related company tax cut amount to forgone revenue that could be better used to bolster the budget, whether or not anyone believes there is a budget emergency.
There are a lot of outstanding needs across social programs generally. But to bolster women’s employment participation as Abbott so desires, some better funding for child care would be a good way to go.