Issue Analysis
Million Dollar Babies: Paid Parental Leave and Family Policy Reform
In February 2008, the federal government asked the Productivity Commission to recommend a national paid maternity, paternity, and parental leave scheme. In September, the commission released its draft report, calling for eighteen weeks of parental leave and two weeks of paternity leave. Mothers who did not qualify for parental leave would be eligible for a maternity allowance equal to the existing Baby Bonus. The commission will make its final recommendation in February 2009.
Paid parental leave has become an important symbolic issue for many women, and support for its introduction has been so vocal that rather than being a means to an end, paid parental leave has become the end itself. The result is that the Productivity Commission has been limited by the inquiry’s narrow terms of reference. Rather than being given a set of objectives and a brief to design policy to meet them, the commission has been asked to design a set of objectives that justify the desired policy.
This paper critiques the Productivity Commission’s draft recommendations and evaluates how well the stated objectives will be met. It argues that:
- The evidence in favour of a paid maternity leave scheme is most compelling in regards to improving child and maternal health, but it doesn’t necessarily follow that such a scheme will achieve this objective better than the existing system of a cash payment plus unpaid parental leave entitlements.
- Women’s workforce participation may be more effectively increased by reforming existing family payments to remove disincentives for mothers to work.
- Requiring employers to participate in the scheme puts an unnecessary strain on business and ‘crowds out’ employer-paid entitlement schemes.
- The proposed scheme would add another layer of complexity to the family payments system, and contribute to tax–welfare ‘churn.’
- Rather than being designed to promote a particular social goal, family policy should enable individuals to make choices about work and family based on their own situation and preferences.
To best achieve its stated objectives within a simple and equitable framework, any parental leave policy needs to be considered within the context of the entire system of family payments and family taxation. The upcoming ‘Henry Review’ of the tax-transfer system is the appropriate place for this.
Jessica Brown is a Policy Analyst at The Centre for Independent Studies.
