Paid parental leave – the policies side-by-side

Australia has lagged behind much of the rest of the world when it comes to paid parental leave (the US being a notable exception). Countries as diverse as Japan, Israel and the UK all have schemes, varying in terms of amount and duration. Sweden’s paid parental leave scheme, for example, lasts for up to 15 months. Various groups have been agitating for Australia to institute a scheme of our own.

Now, after years of failed attempts, we have two policies to choose between at this election. Both of these policies have been around for a while, but they haven’t come in for a lot of scrutiny until this week.

So let’s have a look at them side by side. The devil is definitely in the details here.

The ALP’s policy is fairly straightforward. New parents (including those who adopt a newborn) will be able to receive 18 weeks’ parental leave, set at the federal minimum wage (currently $544 per week). People in casual or contract work, or who are self-employed, will also be eligible. The scheme will also allow parents to share the period of leave according to their needs – for example, if both parents wish to spend time as primary carers, they will be able to do so.

Funds for the scheme were set aside in the 2010 budget.

The immediate objection that is likely to be raised is that people taking leave under this scheme may well incur a pay cut. The median gross wage in 2009 for males aged 25-34 was around $1100 per week, and $913 for females (sourced from ABC Diamond). Unlike the normal weekly income, however, paid parental leave is expected to be tax-free, which narrows the gap.

There is also the question of whether 18 weeks is a sufficiently long period. Opinions from experts in early childhood development differ wildly on how much time is ideal, to the point that there is no consensus. In the end, though, personal circumstances are likely to be more important to any family than suggested figures. Parents also have the option of taking their normal holiday leave entitlement after paid parental leave ends if necessary, negotiated with their respective employers.

The most attractive part of the ALP policy has to be its application to both genders. In 2003, men were the primary carers in only 3.4% of families. The major reasons given for this were economic, and many fathers stated they would prefer to spend much more time with their babies. The male median wage is still approximately 20% more than the female, meaning that a man would likely face a greater pay cut if he chose to stay home under the ALP scheme. He would, however, have the option.

The Coalition’s policy as it currently exists on the Liberal Party website is out of date. This week, a press conference with Tony Abbott in Mackay and interviews with Sharman Stone (via news.com.au) and George Brandis (on Sky News AM Agenda program of July 27) have confirmed that the details I’ll outline here now form the policy that the Coalition will take to the election.

Under the Coalition’s scheme, a mother will receive 26 weeks’ paid leave at her normal pay rate (up to $50,000) or the minimum wage, whichever is greater. As with the ALP policy, this includes casual and self-employment. A father will be eligible to receive two weeks’ paternity leave at his normal pay rate. If he becomes the primary carer, however, he will be paid at the mother’s rate.

The scheme will be funded through a levy on businesses earning over $5 million a year.

The original policy referred simply to a ‘primary carer’ as a recipient of paid parental leave, without any mention of different rates for each gender. The change to the current scheme was defended by Sharman Stone, who said it was simply ‘too expensive’ to pay men their full wage for six months. Tony Abbott’s defence focused less on the figures, and more on ideology. The policy is, Abbott said, ‘fundamentally designed to allow mothers to bond with their newborns’ (my italics). It was ‘very good for mothers, very good for women, for families and ultimately our economy as well’.

The policy is deliberately discriminatory. It is designed on the assumption that the primary carer of a baby should be the mother, and effectively penalises a father who wishes to stay at home. There is no provision for shared care – the presumption is that only one parent will be the primary carer during the early weeks of a child’s life. Finally, there is no mention in the Coalition’s policy of adoption, so presumably a family who adopts a newborn baby would not be eligible. This discriminates against couples who are unable to have children through natural conception or IVF. It also discriminates against same-sex couples, particularly males, who may adopt under Australian law.

I should point out that these comparisons operate on the assumption that both parents are working at the time a child is born, and receive the median wage. Neither policy addresses a situation where only the father works, and then takes parental leave. This may be for a number of reasons, including illness related to pregnancy and birth, postpartum depression, existing illness or disability and other family circumstances. As a matter of pure speculation, the ALP policy would likely still apply as is, since the mother’s wage is irrelevant. What would happen under the Coalition’s policy, however, is unclear, since the mother’s wage is the determining factor for the rate of payment.

Purely in financial terms, the Coalition’s policy is likely to be better for some fathers who stay home. Six months at 80% of a normal wage is a higher rate than 18 weeks at approximately 60-70% – so families who are economically disadvantaged would theoretically be better off under the Coalition’s policy. In practical terms, however, women in low-income families tend to earn below the minimum wage – so the end result is that neither policy would be of greater benefit to them. Unless a parent earns below the minimum wage, they would no better off under either policy. The real winners would be high income families, where the mother was earning well above the median wage, since high income families tend to have greater savings and greater economic capacity to adapt to changing circumstances. Under the Coalition policy, moreover, they would be less likely to need to spend those savings.

The ALP’s policy assumes that a level playing field is the best possible outcome in terms of fairness, while the Coalition’s is aimed at preserving the family’s before-baby economic status quo – no matter how this might discriminate against some parts of Australian society.

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