Abbott’s Baby Bonus in disguise – Anne Summers

Abbott’s baby bonus in disguise

If Tony Abbott is serious about wanting to boost women’s workforce participation, there are more effective and less expensive ways to accomplish this than via his paid parental leave scheme, which has been forecast to cost $5 billion a year by the Parliamentary Budget Office.

”Paid parental leave is an important economic reform, very important economic reform, that will boost participation and productivity,” Abbott said this week on ABC’s /AM/ program.

Actually, Mr Abbott, no it won’t. Or at least not nearly as much as other measures, ones that are needed by women much more and for far longer than the first six months after the birth of their babies.

I am talking about childcare.

There is plenty of high-calibre research on the reasons – and the remedies – for women failing to return to work after they have had babies. For instance, ”Game-changers: Economic reform priorities for Australia” released last year by the Grattan Institute. It devotes a chapter to the overall economic benefits to Australia of lifting our woefully low, by OECD standards, rate of workforce participation by women.

The report says if Australian women did as much paid work as women in Canada – which would entail an extra 6 per cent of women in the workforce – our gross domestic product would be boosted $25 billion (think what that would do for the budget bottom line).

All the research shows that the two main factors influencing female workforce participation are marginal tax rates and the net costs of childcare. Canada’s female workforce participation ”increased substantially above trend levels when [in 1997] marginal taxes and the net costs of childcare were reduced”.

Paid parental leave is a factor, of course, but it is not nearly as crucial as Abbott seems to think. International experiences suggests, according to the Grattan Institute, that ”government support for childcare has about double the impact of spending on parental leave” in influencing women’s workforce participation.

This makes perfect sense.

The availability and cost of suitable childcare is a continuing parental nightmare and for many families is the tipping point for deciding whether or not a mother returns to work.

The Grattan Institute has had modelling done by NATSEM (National Centre for Social and Economic Modelling) that shows ”take-home rates of pay after childcare costs, tax and foregone welfare benefits are the primary drivers in the female workforce participation rate”.

And women, particularly mothers of young children, are treated harshly by our tax system. The effective marginal tax, welfare and childcare rates are, the Grattan Institute reports, ”exceptionally high – in [many] cases, above 100 per cent”.

So where is the incentive to return to work?

Having six months leave after childbirth, even at full salary, does nothing to address the far more intractable problem of how to find, and fund, full-time childcare for the first five years, and then before and/or after-school care for up to a further decade.

The government has put a lot of money into childcare, principally in assisting with the costs via the childcare benefit and the childcare tax rebate, which pays 50 per cent of costs to a cap of $7500 per child per year and which is no longer indexed.

But these measures, while welcome, barely make a dent in the costs for some parents and are not applicable at all to others.

Some Sydney parents pay more for childcare than they do for private school fees. We are talking about $25,000 a year.

Then there are those who have to hire home help because centre-based childcare does not suit their hours of work. These mothers might be shift-workers (police officers, emergency workers, nurses) or they might be high-paid senior executives. Either way, the tax system does not help with the cost.

The whole question of tax deductibility for childcare is pretty much a no go-area or both political parties, on equity and cost grounds. The calculations show that a family earning $75,000 would be worse off, receiving considerably less back from tax deductibility than they now get from the direct government payments and rebate, but a family earning $150,000 would receive substantially more than the maximum of $7500 they are entitled to.

Given the critical importance of childcare for enabling mothers to return to work, it is time we had a conversation about how to reduce the costs for all working mothers, not just those fortunate enough to be able to use centre-based care.

The Grattan Institute recommends that the Family Tax Benefit be treated as income in the hands of the family’s first wage earner, and that childcare costs be a deduction in calculating tax and eligibility for welfare benefits. This model, rather than straight out deductibility of costs, would seem to be more equitable and might be effective in removing the current disincentives to mothers returning to work.

There is no question that, rather than wasting billions on a paid parental leave scheme that leaves mothers stranded after six months, the policy debate should be around how to improve our chaotic childcare system so that it facilitates, rather than blocks, women’s return to work.

But Abbott does not have a childcare policy. Not yet anyway. He will refer the whole mess to the Productivity Commission and let it sort it out. Mothers who would like to return to work will need to wait several years under a Coalition government until it develops a policy.

Which raises the question: is Abbott’s scheme in fact a natalist policy masquerading as economic reform?

Perhaps Abbott, a Rhodes scholar let’s remember, did not misspeak when he said: ”We do not want educated women, at the higher degree level, to deny them a career. If we want women of that calibre to have families – and we should – well we’ve got to give them a fair dinkum chance to do so and that’s what this scheme of paid parental leave is all about.”

If his scheme is ”all about” raising the fertility rate of highly educated Australian women, this perhaps explains why he is willing to pay them up to $75,000 to have a baby but not address what happens when the six months is up.

Despite all the talk of ”economic reform”, it’s the babies he wants.

Leopard and spots come to mind.

*Twitter: @SummersAnne*

Read more:

http://www.smh.com.au/opinion/politics/abbotts-baby-bonus-in-disguise-20130517-2jrmf.html#ixzz2TbRVDcm