Ideas@TheCentre
Why Europe is the wrong model for paid parental leave
You'd have to be living under a rock not to notice that the big tax and spend welfare states of Europe are coming under some, well ... pressure.
With budget cuts in Britain and French pension strikes, it is becoming apparent that the taxpayer funded 'cradle to the grave' welfare model is unsustainable.
Apparent to everyone, it seems, except the European Parliament. In the very same week that the British government promised to wind back 'middle class welfare' in the form of cash payments to families, the EU voted to increase maternity leave to 20 weeks at full pay.
Britain, which already requires employers to pay for six weeks' leave at 90% of a woman's salary, and then kicks in a smaller taxpayer funded statutory allowance for another 33 weeks, has vowed to fight the ruling all the way. Even if Britain wanted to offer the proposed allowance, it simply can't afford it.
There are some lessons in this for Australia. Our new paid parental leave scheme starts in January 2011. At 18 weeks at the minimum wage, it is more modest than the existing British scheme, and doesn't come close to the proposed EU model.
But both the Coalition and the Greens went to the last election pushing for a more generous payment. Once parental leave is in place, expect to see a lot of pressure to expand and upgrade it.
This might not necessarily be a problem. Paid parental leave now has bipartisan support, and surveys indicate that a majority of voters support it.
Where it will be a problem is if it is allowed to blow out the already bloated family payments budget. By 2011–12, paid parental leave is expected to add $1.3 billion to the budget.
This is on top of the billion dollars being spent on the Baby Bonus this year, and the staggering $17.8 billion on Family Tax Benefit.
If we can draw one lesson from the experience of Britain and the other European states now forced into austerity, it is that the cost of new entitlements and promises gradually add up—until suddenly the bill is simply too big to manage.
There has been an extensive public discussion about paid parental leave over the past few years. Now that we've decided we want it, let's have a discussion about where the money should come from—and what other spending we should cut to meet the cost. Otherwise, we risk ending up like Europe.
Jessica Brown is a Policy Analyst at The Centre for Independent Studies.
