Woeful waste or welcome change: leave scheme divides critics

The daily juggle of working parents, branded a "barbecue stopper" by John Howard more than a decade ago is still potent politics, as the 2013 election campaign shows.

The daily juggle of working parents, branded a "barbecue stopper" by John Howard more than a decade ago is still potent politics, as the 2013 election campaign shows.

Kevin Rudd targeted young families with his very first campaign announcement. That $450 million boost to before and after-school childcare is still the most expensive campaign policy unveiled by Labor. On Sunday, Tony Abbott weighed in with his $5.5 billion a year scheme to pay working women their full wage for six months after having a baby. It's dominated the campaign all week.

Paid parental leave is a recent arrival to the federal policy agenda. At the last election Australia was one of only two members of the OECD without universal paid parental leave, the other being the United States. That changed in early 2011 when Labor introduced a relatively affordable scheme that pays working mothers the minimum wage for 18 weeks after the birth of a child. Now Tony Abbott has promised Australia one of the world's most generous parental leave policies.

The price tag - equivalent to this country's overseas aid budget - will vault paid parental leave onto the Commonwealth's 20 most expensive programs list. The cost will be similar to what the government now spends each year on all childcare subsidies to parents.

Women are yet to be won over by Abbott's plan. The Age/Nielsen poll conducted as debate raged over the policy this week found just 37 per cent of female voters thought the Coalition was the best party to handle paid parental leave compared with 49 per cent favouring Labor. Men were more evenly split on the question, with 45 per cent favouring Labor to the Coalition's 42 per cent.

The bulk of the funding for Abbott's leave policy will come from a 1.5 per cent levy on big business and the abolition of the current scheme.

Abbott claims providing wage replacement for workers who have babies has become a necessity. "The modern Australian family invariably needs more than one income to get by and this [scheme] means you can have more kids and keep paying the mortgage," he said.

Abbott's policy will encourage working women to have babies at a younger age because the financial impact will be significantly reduced by full wage replacement for 26 weeks. But experts don't expect his leave plan to have a major impact on Australia's overall fertility rate.

The policy is also likely to affect the jobs market by making small firms more attractive to female workers. Most small businesses can't match the generous maternity leave entitlements offered by the public sector and big firms. But a universal, government-funded, wage-replacement parental leave scheme will reduce that competitive advantage. "Our policy ensures that small business for the first time is on a level playing field with big business," shadow treasurer Joe Hockey said.

Abbott's pitch has also zeroed in on the long-term financial benefits of the policy, which unlike Labor's scheme includes superannuation. The Coalition claims a worker earning the average female full-time salary of $65,000, who has her first child aged 26 and a second child aged 29, will be around $50,000 better off in retirement under the Coalition plan.

Abbott's scheme has won support in unexpected places. Feminist academic Eva Cox praised the policy because it will go some way to reducing the disparity in average lifetime earnings between men and women. "I think a lot of the stuff Tony Abbott does is appalling, but on this one he happens to have got it right and I'm prepared to say that," she said.

Abbott's scheme was also welcomed by breastfeeding advocates. The 26-week duration of the Coalition's leave plan is equivalent to the period the World Health Organisation says is optimal for babies to be breastfed. A recent Productivity Commission report on paid parental leave said longer periods of breastfeeding made possible by this type of leave would reduce overall health costs.

But Abbott's plan has also attracted howls of complaint. Kevin Rudd has branded it unfair and extravagant because the biggest payments go to those on high incomes. Under Labor's scheme, all recipients receive the equivalent of the minimum wage for 18 weeks and those earning more than $150,000 are ineligible. "It's a huge, humongous policy which gives $75,000 to millionaires," Rudd said.

Labor has also accused Abbott of pilfering the savings of retirees because shareholders won't receive franking credits on the 1.5 per cent business levy introduced to help fund the scheme. It claims this will cost shareholders about $1.6 billion. "This is Tony Abbott's giant raid on Australia's investors to pay for his unravelling signature policy," Treasurer Chris Bowen said on Wednesday.

Business figures, economists and even members of the Coalition have also been critical of the Coalition's leave scheme. Economist Saul Eslake described it as a "dreadful" policy that would become a major drag on a budget already under long-term stress, while doing little to improve workforce participation or boost productivity. "It's a big spending entitlement program being brought in by a party that has spent years criticising the growth of entitlement spending," he said.

Economists have also drawn attention to a Productivity Commission finding that providing full replacement wages to highly educated, well-paid women would be costly and deliver "few labour supply benefits".

The diverse responses to Abbott's plan illustrate the complexity of the work and family policy challenge. One of Australia's leading experts in work and family policy, Professor Barbara Pocock, says aspects of the Coalition's scheme are good, especially extending the duration of paid leave to 26 weeks. But she questions the overall cost. "It's a big spend for a single moment in the work and family picture," she said.

Pocock said affordable childcare and "changing the cultures that resist workplace flexibility" would have a bigger impact on female workforce participation than paid leave.

Abbott's scheme is so expensive it could eventually suck resources away from other critical long-term measures that sustain female labour market participation, especially childcare. "Like a lot of converts, he's taken one piece of the picture and become ultra-zealous about it," says Pocock. "The policy really misses some important accompanying steps that are vital."

Abbott has responded to criticism by ramping up his rhetoric. "Every social advance has its critics," he said while campaigning in Brisbane on Wednesday. "For the first time in our history, women will be given a real choice to have a family and a career at the same time."

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Join the Conversation...

There are comments posted so far.

If you'd like to join this conversation, please login or sign up here

Related Articles