Opinion & Commentary
Not all mums need handouts
Means testing of Baby Bonus undermines calls for universal Paid Maternity Leave
The government has used the budget to try to reduce ‘middle class welfare’. Eradicating welfare churn is an obvious way to cut what the Prime Minister has called “profligate” government spending. As expected, the Baby Bonus - a $5000 lump sum paid to all new parents, rich and poor – will now be means tested for families with an annual income of $150,000 or more.
Family groups, business groups and others came out in support of this proposal. Why, they asked, should millionaires receive welfare handouts?
Both the Business Council of Australia and the Australian Industry Group signalled that they favour means testing of the Baby Bonus, in the interests of fiscal restraint. In March, a group of leading economists called for means testing, labelling the Baby Bonus “unbelievably expensive.” A Newspoll survey published in the Australian indicated that 65% of voters favoured means testing the Baby Bonus, and 64% favoured means testing Family Tax Benefit Part B.
The Federal Opposition was the lone voice defending the non-means tested system.
Now the government’s plan to reduce welfare to the middle class and wealthy is a reality.
Yet simultaneously, another public conversation has been taking place. The possible introduction of a universal paid maternity leave scheme has also been a topic of animated debate. Women’s groups, family groups, unions and business groups all support the introduction of a universal, taxpayer funded scheme.
The proposals vary. The ACTU, the Australian Industry Group and the Federal Sex Discrimination Commissioner advocate 14 weeks at minimum wage paid by the government. The National Foundation for Women advocates 26 weeks. Former public servant Julia Perry has put forward a proposal to fund 26 weeks by levying a new tax on employers and employees.
The one thing all these proposals have in common is that they assume maternity leave will be paid to all working women, regardless of income, and that it will be funded by taxpayers (either through general revenue or through a special levy).
But how will this be different from what we already had? Farewell the old non-means tested Baby Bonus; hello to a new non-means tested maternity leave payment. The only real difference is that the new payment will be even more generous. This will utterly undermine the government’s tightening of spending on cash handouts to wealthy families.
A taxpayer funded, universal paid maternity leave scheme will compound the problem of middle class welfare. Just like low income mothers, executives on six figure salaries who take maternity leave will receive a cash benefit paid for by the taxpayer.
Why bother cutting one non-means tested payment, only to replace it with another?
Paid maternity leave is not in itself a bad thing. Medical research supports the idea that new mothers should have a period of time at home with their newborn baby. This leads to the best health and welfare outcomes for both mother and child.
At the same time, anecdotal evidence suggests that some mothers are being forced into the workforce too early because of financial pressure.
Therefore it seems sensible to consider a scheme which would allow new mothers to stay at home with their newborns while they recover from childbirth, establish a breastfeeding routine and bond with their child.
But this proposition shouldn’t automatically lead to the conclusion that all working mothers are entitled to a new welfare payment from the government. There are several ways we can implement paid maternity leave schemes without relying on the government to pay.
Bruce Chapman from the ANU has proposed a HECS style scheme to allow parents to borrow to fund their maternity leave, and then begin to make repayments only when their income reaches a certain threshold.
The Centre for Independent Studies has previously raised the idea of ‘Personal Future Funds’, a superannuation style scheme which would allow individuals to save for periods of future unemployment, or health costs. This type of scheme could also be used to fund maternity leave.
Self funded schemes are much more equitable and efficient than taxpayer funded schemes, because they don’t include handouts for the wealthy and they reduce welfare churn.
Now that the Baby Bonus has been means tested, it would be contradictory to introduce universal paid maternity leave in its place.
The government has shown it is dedicated to cutting back middle class welfare, and public opinion seems to support them. So if the Baby Bonus is so bad, how can taxpayer funded universal maternity leave now be considered good?
Jessica Brown is a Policy Analyst at the Centre for Independent Studies
