How To Make Parents More Productive


Amid the sound and fury of the parental leave debate, one aspect of the policy has largely slid under the radar. That is: will it do any good? Attention has so far focused on the costings, and how the Coalition plans to pay for what is an amazingly generous government benefit. Leaving the costings debate to one side, it’s worth asking what the productivity benefits of the scheme will be.

The logic behind the Coalition scheme is set out in the Liberal policy document for the scheme. Unlike so many other Coalition policies, this one is actually publicly available and reasonably detailed. It’s based on the idea of a replacement wage, so that parents leaving the workforce to have a child will be given a percentage of their salary for six months while at home caring for their newborn.

"Of the 34 countries in the Organisation for Economic Co-operation and Development (OECD), 33 offer paid parental leave schemes. Of these 33 countries, Australia is one of only two that fails to pay leave based on a replacement wage. By offering only minimum wage Australia is left economically behind its major OECD competitors. Due to this, we risk the productivity gains that come from greater participation by women in the paid workforce. 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."

Some have already poked holes in the assertion that 33 countries pay a parental leave benefit “based on the replacement wage”. Leaving aside the details; what about the economic argument, about increasing participation?

This is true, as far as it goes. Workforce participation is a key driver of productivity. As Australia’s workforce becomes steadily more equal and in some cases "feminised", the workers leaving it to have children are often amongst our most productive: highly skilled and educated women (and some men) in their 20s and 30s. Keeping those parents engaged in the workforce is those critical years certainly is an “economic driver”, and will contribute to Australian standards of living.

Australia already has a paid parental leave scheme, albeit one that is far less generous than the scheme the Coalition is putting forward. The choice here is not between no parental leave and a 50 per cent replacement wage, but rather between the current scheme of 18 weeks minimum wage (about $11,200) and the Coalition’s scheme, which goes all the way up to $75,000 for a woman earning $150,000 a year. Will that extra income help more women stay in the workforce? And if it does, are the incremental gains worth the added expense to the taxpayer? 

There’s no doubt that the introduction of paid parental leave has made a huge difference to Australia’s work-life balance. To give you an example, let’s take my own experience as a young parent.

When my partner Sarah-Jane and I had our daughter in 2010, she was a freelancer in the film industry, so she had no parental entitlement at all. Even with the baby bonus, we struggled. The introduction of paid parental leave means that if we have a second child, we will be much better off.

Under the operation of the Coalition’s policy, we would have been better off again. One of the unsung qualities of the Opposition’s scheme is that it adopts Labor’s work test, which does apply to freelancers and the self-employed. A tick to the Coalition scheme there.

But is the extra money going to increase workforce participation? The Productivity Commission, for one, doubts that it will. The reason is that highly-paid mums are already likely to be respected and catered to by their employers. As the Productivity Commission noted in its 2009 report, “full replacement wages for highly educated, well-paid women would be very costly for taxpayers and, given their high level of attachment to the labour force and a high level of private provision of paid parental leave, would have few incremental labour supply benefits.”

Then there are the people the Coalition scheme seems loathe to admit are involved in parenting: men. The Coalition’s policy is specifically geared to maternity leave – fathers who are primary carers will get a lower wage based on their partner’s salary, and fathers who are partners of fathers aren’t mentioned at all.

International research shows that the attitude of fathers is nearly as important when it comes to raising children as that of mothers. Caring for a newborn requires enormous reserves of energy and love. The idea that a father of a newborn can waltz back to a full-time job after just two weeks off is as old-fashioned as it is developmentally inappropriate.

The same can be said of a six-month old infant. Both the Government and the Coalition’s scheme ignore the obvious fact that a six-month old still needs full-time care. When parental leave is up, and the rent needs to be paid, one or both parents will have to return to work. That poses a big issue for mums or dads trying to juggle between work and care. 

The Coalition scheme, just like the current scheme, won’t help when that initial six months is up. What counts for workforce participation in the long-term is not just parental leave, but a whole range of factors that make it easier for parents to work and care. Two of the most critical are workplace flexibility and childcare.

As every working parent knows, the structure of full-time work is still amazingly inflexible for parents of young and school-aged children. A working day that ends at 5.30 – or 6, or 7 – is not compatible with a school day that ends at 3.30. When parents are not supported in the workplace – when it is tacitly understood that someone who leaves early will not “get ahead” – that is when working parents sometimes decide to drop out of the workforce. Changing the culture of our workplaces in a more family-friendly direction is not something the Coalition seems particularly keen to encourage.

It doesn’t help when childcare in many suburbs is either expensive, or simply not accessible. In many inner city areas of the capitals, childcare places have a long wait – months, if not years. And there’s the cost. For low income parents, a childcare bill of $80-120 a day practically wipes out the financial advantage of working. Even though Labor’s childcare subsidy does pay 50 per cent of childcare costs up to a cap of $7,500, it’s still a marginal equation for many parents.

It’s no wonder that many families rely on informal day care by grandparents or friends. But with baby boomers working longer to try and afford their retirements, a ready pool of family-based care is far less available than in past generations. 

For all of these reasons, childcare is critical. And not just childcare, either: after-school care is equally important, as many a parent finds when they transition from childcare to prep and primary school. Indeed, even conservative economist Judith Sloan has made this point. “For new mothers, the early months fly by,” she writes. “The real challenge for mothers re-entering the workforce is the availability and cost of child care. The Coalition should direct its efforts at these issues and leave paid parental leave alone.”

So if we’re talking about productivity, let’s face facts. The extra funding that the Coalition is spending on replacing the wages of well-paid mothers could be better spent on workplace participation outside of parental leave. Childcare, after-school care and an understanding of the needs of families in the workplace could all be better investments.

Ben Eltham is New Matilda's National Affairs Correspondent.