The Opposition’s recently announced Paid Parental Leave (PPL) scheme is very bad policy and is a continuation of the worst aspects of recent government policy setting. Not only is the policy incredibly generous and expensive to the Australian taxpayer, but it does not appropriately address the problem it is purporting to be addressing. It seems to be policy as a function of public relations rather than policy with the betterment of the nation at heart.
The Conversation summarises the PPL as providing:
Mothers with 26 weeks’ paid leave, at 100% replacement wage up to a maximum annual salary of $150,000, or the minimum wage if greater, and will include superannuation contributions. The proposal would also allow two out of the 26 weeks to be dedicated paternity leave, paid at the father’s replacement wage (up to the same maximum of $150,000) or the minimum wage if greater, plus superannuation.
This makes the PPL one of the most generous in the industrialised world. The supposed reason for this generosity? According to the Opposition’s policy statement: the nation risks the productivity gains that come from greater participation by women in the paid workforce. The statement goes on to say:
There’s no doubt, a ready way to increase Australia’s productivity is to increase the participation (part-time and full-time) of women in the paid workforce which is why paid parental leave is an economic driver and should be a workforce entitlement, not a welfare payment.
Leaving aside the apparent misunderstanding of the productivity concept, the policy paper provides little justification for how it will improve the nation’s economic outcomes and certainly no reasonable justification as to why Australia should have one of the most generous PPL schemes in the world.
There are a range of questions the PPL utterly fails to address. They include: Is Australia’s relatively poor workforce engagement of females of childbearing age a result of the lack of parental leave? Surely not. If that was the case you might well expect a higher rate of return of women to the workforce after having children. How does the money being spent on the PPL compare with that being spent on subsidising childcare? And, what received the largest amount of attention during the election campaign, how is it going to be funded?
My personal concerns are not how this policy will be funded, but that it feels grossly paternalistic. It also seems that one favoured political group, women having children, are being favoured against the interests of everyone else.
The worst aspect of the policy is not the policy itself. It is that it will create a new entitlement at a time when the financial stimulus from the mining boom is rapidly fading.
Any reasonable incoming government would focus on rolling back the expansions to middle class welfare that the mining boom has enabled, from first home buyers grants to baby bonuses and so on. No one likes you taking away something they feel they are entitled to.
Creating a new entitlement will make it all the more difficult, if not impossible, to roll back these entitlements.
The second worst aspect of the policy is how it seems to be in response to a perceived polling problem by the opposition leader (check out this story as an example: http://www.thepunch.com.au/articles/abbotts-women-problem-is-with-what-they-think-of-him/. Tony Abbott feels deeply passionate about this issue, apparently. However, it cannot help but see it as policy developed to shore up a demographic weakness.
In defence of the PPL
A cannot leave without commenting on the way in which the cost of the PPL was defended by Barnaby Joyce. Distinguished economist Saul Eslake, Bank of America Merrill Lynch’s Australian Chief Economist, released some considered costings of the PPL that suggested the Federal Opposition had quite a few questions to answer. Saul estimated, based on reasonable assumptions grounded in the information available at the time, that the PPL would add to the $30 billion in additional savings the Opposition would need to cover its promises.
In an outstandingly bad case of defending a position by establishing a ridiculous straw man, Barnaby Joyce did not defend the PPL but attacked Saul’s CV. The transcript from the interview is hilarious:
EMMA ALBERICI: Barnaby Joyce, today the respected economist Saul Eslake – I’ll put this to both of you – that actually an independent economist has done his own costings on the Coalition’s policy and Barnaby Joyce, he reckons you’ve got to come up with another $30 billion in savings, not $70 billion, to fund your promises. Do you have any reason to dispute his figures?
BARNABY JOYCE: Yeah I do and first of all, Saul’s a good bloke, he was a former junior politician aspirant, I can never quite remember the business that Saul ran but I’m sure he’s very competent in his academic role.
EMMA ALBERICI: He’s an economist actually.
BARNABY JOYCE: What business did he run?
JOEL FITZGIBBON: He is the ANZ bank’s chief economist.
BARNABY JOYCE: Good luck to him.
JOEL FITZGIBBON: He was the ANZ bank’s chief economist.
BARNABY JOYCE: He is not privy to all the details there for the costings of the Coalition policy so what he’s basically put on the front page of the paper is his assumptions about costings, not the reality of the costings. I remember having discussions…-
OK. So Saul is not a business person and so cannot comment on the PPL scheme. I would like to help Barnaby out with some other reasons why Saul cannot quantify the cost of the PPL:
- Saul is bad at knitting;
- Saul does not know how to polka;
- Saul cheats at golf;
- Saul is an economist.
Other than the last these reasons are all speculation.
I personally do not care that this particular policy is funded. What is of concern is the deep fiscal shortfall that exists in government revenues and that the money will have to come from somewhere to cover it. Embedding another entitlement is the worst possible way to meet this financial challenge.