Paid family leave

On the back of a report from Australia’s Productivity Commission it looks like paid maternity leave may soon be on its way down under. If that sounds odd, it’s because it is – Australia and the United States are the only two OECD countries who don’t have state funded maternity leave (see chart below). So although some people are covered through their workplace, a sizable 51 per cent of employers don’t have any provisions for their employees. (One might note this isn't an entirely fair comparison though, for Australia have been paying a baby bonus of $5,000 for several years).

The PM today said he was prepared to ‘bite the bullet’ and accept the principle of maternity leave (though fudging the precise parameters).

What does the report actually say?

• It recommends paid 'parental leave' of 18 weeks, shared by either parent who is deemed the primary carer. This would be quite a progressive and welcome measure, for most countries provide maternity leave which clearly reinforces a gender bias and takes no account of modern family dynamics. However, either the media have failed to read the actual report (perhaps understandably given it's another gruellingly long 300+ pager) – or have failed to pick up the difference in what the PM is saying – for he has cannily and subtly said he’ll accept the report but switches into the language of ‘maternity’ rather than ‘parental’ leave.
  


• It recommends making all family types eligible, including same sex couples. Again to be welcomed, although may well get challenged by a number of the Opposition and fringes of the Labor party in the legislative phase.
  


• Suggests paying a rate equal to the minimum wage of $540 per week. This seems rather stingy compared to most European countries (who pay a rate based on a proportion of pre-birth income), but there are some decent arguments advanced for the flat rate e.g. that it’s more equitable, and many higher income families will have privately negotiated family leave benefits. It also means the scheme can be introduced at a relatively low cost to the taxpayer – establishing the principle which could be scaled in future.
  


• Estimates it’ll cost $530m per year – $450m picked up by the taxpayer and $75m by employers. Indeed, all that employers are being asked to pick up are employees' superannuation (pensions contribution), though business groups are still calling it an ‘excessive and unnecessary burden’.
  

Buried on page 248, the Commission rejected an interesting rival proposal from economist Joshua Gans for a 'return to work' credit – providing tax benefits to employers tied to family leave schemes. This would theoretically be more attractive because it incentivises effective return to work and also because the more income-based reward would encourage more men to take parental leave – but was ultimately rejected because of potential deadweight costs and uncapped cost exposure. A shame because they'll no doubt be a lot of deadweight in the preferred version and it's not as though costs would be that exposed. After the birth rate is pretty predictable and it's unlikely that many would go to the lengths of having a baby and manipulating income records solely to extract a few extra hundred dollars from the Government...