Issue Analysis
Baby Steps Toward Self-Funded Parental Leave
Much has been made of the good that could come from giving Australian mothers paid maternity leave. But in the current debate, many of the assumptions about paid maternity leave have gone largely unchallenged.
This paper examines some of the complexities involved in implementing a taxpayer- or employer-funded scheme, and argues that while existing family payments can be justifiably absorbed into a minimalist maternity leave payment, longer periods of paid parental leave should be self-funded.
The means testing of the Baby Bonus and other family benefits signals that the government wants to cut back on cash payments for middle- and high-income families, and there appears to be quite strong community support for this. However, the introduction of a paid maternity leave scheme will lead to a fundamental contradiction in policy, which policymakers will need to address.
Compelling employers to fund maternity leave will add a cost to business that will ultimately result in lower wages or higher prices. Any scheme that is too onerous could result in employers discriminating against female employees.
To be equitable, any taxpayer-funded scheme will need to be payable to all new mothers, regardless of whether they are engaged in paid work up to the time of the birth.
Ideally, parents should be compensated for the cost of children through the tax system, but this is a long-term goal. In the short term, the Baby Bonus could be transformed into a minimalist paid maternity leave scheme, which could be funded without significant extra cost to taxpayers.
However, individual parents should be required to meet the cost of longer periods of paid parental leave.
A combination of savings and loans would be the best option for self-funded maternity leave.
‘Parental Leave Saver Accounts’ could allow parents to save for their parental leave, rolling unused savings into super or another asset. Matched savings could provide an incentive for low-income families to participate.
If families had not saved, or if their savings ran out, they could apply for an income-contingent loan. Repayments would increase as family income increases, ensuring that loan repayments did not have a significant negative impact on household budgets.
Introducing self-funding models for parental leave would nullify claims that public funding should be extended beyond fourteen weeks, while still supporting parents who choose to stay at home with their new baby.
Jessica Brown is a Policy Analyst at The Centre for Independent Studies.
