Last week’s budget confirmed that some of the gold has been chipped off the Prime Minister’s gold-plated paid parental leave scheme. What is not clear is what the scheme will cost.
It is only a matter of weeks since the government was proposing to pay primary carers at their pre- birth wages up to a cap of $150,000 for a maximum of 26 weeks. A parent who took the full 26 weeks would have been eligible for a payment of $75,000. With the Prime Minister’s announcement that the cap will be reduced to $100,000, the maximum payment has fallen to $50,000.
The timing of this announcement might well be the reason why the additional cost of the proposed scheme has been buried in the $4.2 billion 2015-16 contingency reserve, which includes “decisions made too late for inclusion against individual agency estimates.”
If the PPL scheme is legislated, it will be lead in the government’s saddlebags on the road to surplus.
Worse than that, it is an income transfer that intentionally does what no other Australian income- support payment does – it will provide the greatest payments to those on the highest incomes.
The government’s original proposal was projected to cost $4.1billion in 2015-16 – considerably more than the $1.9 billion that the current PPL scheme is projected to cost taxpayers that financial year. The cap reduction will do little to alleviate the budgetary impact as only 3.3 per cent of women aged 18 to 39 have taxable incomes between $100,000 and $150,000, according to the 2011-12 taxation statistics.
If you think $50,000 sounds generous for an income support payment, you would be right. The maximum rate of Parenting Payment for primary carers who are single is $8558 for 26 weeks. For those whose partners have weekly earnings under $447, the maximum rate is $5531.
Such exorbitant rates of payment would never have been countenanced if all the major parties had not united behind the fallacy that statutory PPL is a workplace entitlement, not an income- support payment. This consensus is the only reason that the current maximum PPL payment of $11,198 is not means tested for primary carers who earn under $150,000, and the only reason that the government and the Greens can justify income transfers that involve higher rates to higher income-earners.
Feminist Eva Cox writes: “Inequality of earnings between women should not be the issue here: high-income women get more holiday pay than low-income women and, similarly, more sick pay if they have the flu, so why not more for parental leave?”
If this were said of a privately or collectively negotiated workplace entitlement, it would be true. Such conditions are generally paid at full wages, therefore high- income earners receive more.
But if the government’s PPL scheme is a workplace entitlement, it is a curious one. No other workplace entitlement is funded by taxpayers. The taxpayer does not pay for your sick leave or holiday pay – you do. You pay by trading off some of your financial remuneration in return for these conditions. We all have our individual level of labour productivity – depending upon the nature of the work we perform, our colleagues within our enterprise may contribute to this. Some of the remuneration for our productivity comes in the form of wages and salary, but some comes in the form of workplace entitlements.
Entitlements such as sick leave serve as a form of insurance. We don’t know if we are going to get sick, so we pool our risks with our colleagues. PPL is different because the employer can be fairly certain which employees will utilise their PPL entitlements.
Research undertaken using the Melbourne Institute’s Household, Income and Labour Dynamics in Australia survey found that, all else being equal, women who have access to private PPL entitlements have lower wages than those who do not. This suggests PPL workplace entitlements are self-financed by women and those with whom they bargain collectively – not by the taxpayer.
With this in mind, it is interesting that the Productivity Commission employed the “workplace entitlement” argument in recommending against a self-financing approach to PPL: “Self-financing is not compatible with the view that paid parental leave should be an employment entitlement like any other leave.”
A payment that is made out of general revenue – one not underwritten by the productivity of the individual – is not a workplace entitlement. It is a taxpayer-funded income-support payment. This is not to say that there is no argument for government intervention. It is predominantly women who incur these wage discounts, while both parents benefit from having their newborns cared for full-time. Most men incur neither the foregone earnings this full-time care entails nor the reduced earnings growth that follows.
Addressing the gender equity issue need not mean pushing the cost of wage-replacement PPL onto the taxpayer via an expensive income-support payment. There are more effective ways of providing gender equity while aligning the costs of PPL with those who benefit from it. A HECS-HELP-style loan scheme for parental leave would be a good place to start.
Matthew Taylor is a research fellow at The Centre for Independent Studies.
Home > Commentary > Opinion > The cost of PM’s gold-plated parental leave
The cost of PM’s gold-plated parental leave
Last week’s budget confirmed that some of the gold has been chipped off the Prime Minister’s gold-plated paid parental leave scheme. What is not clear is what the scheme will cost.
It is only a matter of weeks since the government was proposing to pay primary carers at their pre- birth wages up to a cap of $150,000 for a maximum of 26 weeks. A parent who took the full 26 weeks would have been eligible for a payment of $75,000. With the Prime Minister’s announcement that the cap will be reduced to $100,000, the maximum payment has fallen to $50,000.
The timing of this announcement might well be the reason why the additional cost of the proposed scheme has been buried in the $4.2 billion 2015-16 contingency reserve, which includes “decisions made too late for inclusion against individual agency estimates.”
If the PPL scheme is legislated, it will be lead in the government’s saddlebags on the road to surplus.
Worse than that, it is an income transfer that intentionally does what no other Australian income- support payment does – it will provide the greatest payments to those on the highest incomes.
The government’s original proposal was projected to cost $4.1billion in 2015-16 – considerably more than the $1.9 billion that the current PPL scheme is projected to cost taxpayers that financial year. The cap reduction will do little to alleviate the budgetary impact as only 3.3 per cent of women aged 18 to 39 have taxable incomes between $100,000 and $150,000, according to the 2011-12 taxation statistics.
If you think $50,000 sounds generous for an income support payment, you would be right. The maximum rate of Parenting Payment for primary carers who are single is $8558 for 26 weeks. For those whose partners have weekly earnings under $447, the maximum rate is $5531.
Such exorbitant rates of payment would never have been countenanced if all the major parties had not united behind the fallacy that statutory PPL is a workplace entitlement, not an income- support payment. This consensus is the only reason that the current maximum PPL payment of $11,198 is not means tested for primary carers who earn under $150,000, and the only reason that the government and the Greens can justify income transfers that involve higher rates to higher income-earners.
Feminist Eva Cox writes: “Inequality of earnings between women should not be the issue here: high-income women get more holiday pay than low-income women and, similarly, more sick pay if they have the flu, so why not more for parental leave?”
If this were said of a privately or collectively negotiated workplace entitlement, it would be true. Such conditions are generally paid at full wages, therefore high- income earners receive more.
But if the government’s PPL scheme is a workplace entitlement, it is a curious one. No other workplace entitlement is funded by taxpayers. The taxpayer does not pay for your sick leave or holiday pay – you do. You pay by trading off some of your financial remuneration in return for these conditions. We all have our individual level of labour productivity – depending upon the nature of the work we perform, our colleagues within our enterprise may contribute to this. Some of the remuneration for our productivity comes in the form of wages and salary, but some comes in the form of workplace entitlements.
Entitlements such as sick leave serve as a form of insurance. We don’t know if we are going to get sick, so we pool our risks with our colleagues. PPL is different because the employer can be fairly certain which employees will utilise their PPL entitlements.
Research undertaken using the Melbourne Institute’s Household, Income and Labour Dynamics in Australia survey found that, all else being equal, women who have access to private PPL entitlements have lower wages than those who do not. This suggests PPL workplace entitlements are self-financed by women and those with whom they bargain collectively – not by the taxpayer.
With this in mind, it is interesting that the Productivity Commission employed the “workplace entitlement” argument in recommending against a self-financing approach to PPL: “Self-financing is not compatible with the view that paid parental leave should be an employment entitlement like any other leave.”
A payment that is made out of general revenue – one not underwritten by the productivity of the individual – is not a workplace entitlement. It is a taxpayer-funded income-support payment. This is not to say that there is no argument for government intervention. It is predominantly women who incur these wage discounts, while both parents benefit from having their newborns cared for full-time. Most men incur neither the foregone earnings this full-time care entails nor the reduced earnings growth that follows.
Addressing the gender equity issue need not mean pushing the cost of wage-replacement PPL onto the taxpayer via an expensive income-support payment. There are more effective ways of providing gender equity while aligning the costs of PPL with those who benefit from it. A HECS-HELP-style loan scheme for parental leave would be a good place to start.
Matthew Taylor is a research fellow at The Centre for Independent Studies.
• Subscribe
Subscribe now and stay in the loop with our giving appeals, event alerts, newsletters and research updates.
We are always pleased to hear from you. If you have any questions or feedback, please contact us here: