If you are looking for Tony’s signature PPL policy in the budget you will need “a scanning electron microscope” according to John Daly of the Grattan Institute. It only appears in one paragraph.
We are told that the government will cut the company tax rate by 1.5 percentage points (to 28.5%) from 1 July 2015. For large companies, the reduction will offset the cost of the Government’s 1.5% Paid Parental Leave levy but we are not told how much the levy will raise. We are told that provision has been made for PPL in the contingency reserve, a bucket of money reserved for decisions taken but as yet not announced by government, decisions too late to be included in portfolio estimates and so on, but no specific figures. We are told the cap reduction to $100,000 has made a small change in the cost, but not how much.
And that is the only thing that you will find in terms of references to paid parental leave – apart from a single line in the Treasurer’s speech – in literally hundreds and hundreds of Treasury documents about the budget.
Tony’s signature policy is written in invisible ink.
The official Treasury explanation is the Commonwealth is still negotiating with the states about their contribution to the scheme, and the funding is included in the budget’s contingency reserves. The same response has come from Treasurer Joe Hockey.
“We are still negotiating with the states about the scheme and, as you know, we’ve reduced the threshold from $150,000 to $100,000 in relation to the PPL,” he said. That might prove a little more difficult than expected considering how the Premiers are feeling right now.
Mr Daley does not buy this excuse.
“I would note that there are lots of other things about which there are uncertainties which, nevertheless, go into the budget, particularly at the point that they are formally government policy. What that doesn’t explain is why there is so little airplay for an important policy. Even if there are plenty of uncertainties around it, it’s already in the numbers in effect.”
When costing the Coalition PPL scheme, the Parliamentary Budget Office said that its estimate of the cost of the paid parental leave scheme is only of low to medium reliability because it is subject to assumptions including working women’s fertility rates, female labour force participation, the wages parents earn and how much leave parents take after the birth of their children.
The Productivity Commission found that PPL schemes like Abbott’s with “full replacement wages for highly educated, well-paid women, would be very costly for taxpayers and, given their high level of attachment to the labour force and a high level of private provision of paid parental leave, would have few incremental labour supply benefits”.
Studies done by the Grattan Institute showed that for every dollar you spend on paid parental leave, you would get double the impact on female workforce participation if you spent it subsidising child care.
A study last year by the OECD on drivers of female labour participation found PPL schemes definitely did improve participation, but the increase in participation from increased spending on such leave schemes is less tangible.
What it did find, however, was that the link between increased spending on childcare and improved female participation was “unambiguous”.
It compared spending on PPL and childcare and noted that “policies to foster greater enrolment in formal childcare have a small but significant effect on full-time and part-time labour force participation – and these effects are much more robust than the effects of paid leave or other family benefits”.
This reflects the work of the IMF last year, which found that “if the price of childcare is reduced by 50 per cent, the labour supply of young mothers will rise on the order of 6.5 to 10 per cent.”
But participation isn’t everything. If female participation is high, but women are mostly working in low-paying jobs with little chance for advancement, that is hardly a good result. A 2012 study attempted to examine the situation from a broader context.
It looked at the “inputs” each country had in place to improve female participation – from steps that governments and the private sector did to improve the economic position of women to the education attainment of women as well as maternity leave and childcare access.
It then looked at the “outputs” of women’s participation in the national economy – such as the ratio of pay between women and men, as the proportion of women among technical workers and also numbers of senior business leaders.
According to these measures Australia, it may surprise you to know, is ranked equal highest with Norway.
On the “Access-to-Work” input, which included pay childcare access and maternity leave provisions, Australia ranked 6th.
The current PPL scheme is not poor in comparison to most other nations. And some nations with smaller PPL schemes like Canada and New Zealand actually have higher female participation rates among 15-64 year olds than does Australia.
Currently 58.4% of all adult women participate in the labour force (ie. as workers, or looking for work); compared with 70.9% of adult men.
The reason for the gap is because of the decline in participation of women aged 25-34 compared to men.
In the early 1980s the drop in participation for women after 25 years of age could be up to 18 percentage points. And it would never recover. Now there is virtually no difference – in fact the age bracket with the highest female participation rate is the 45-54 age group.
The reality is that given our current position, any gains in women’s participation are always going to be at the margin – our big steps in women’s participation occurred in the 1980s and 1990s owing to societal changes as much as anything else.
Despite all the evidence suggesting that affordable childcare is far more important than increasing paid parental leave, the current review of childcare conducted by the Productivity Commission stipulates any recommendation must “consider options within current funding parameters” – ie. no extra funding.
It seems apparent that in this, like so many other areas, we are ignoring the advice and experience of experts to waste a lot of money satisfying the PM’s vanity.