Speaking yesterday the PM said his “Paid parental leave [scheme] will be refined so that help is better targeted towards the hundreds of thousands of low and middle income families across Australia.” But that "We will still have parental leave based on a woman's real wage. It will still include super."
There’s no amount of “refining” that will resolve the inherent unfairness of his policy.
To be clear, there is absolutely nothing wrong with PPL workplace entitlements paid at the parent’s replacement wage, and this is what many employers and employees negotiate where these workplace entitlements exist.
But as it stands, the government proposes to use taxpayer’s money to fund 26 weeks of leave at replacement wages up to a cap of $50,000.
This is significantly more generous than the current taxpayer-funded payment that provides 18 weeks of the minimum wage (totalling $11,539) for all eligible parents who earn less than $150,000. The PM’s scheme would pay $50,000 to all parents who earn more than $100,000.
Workplace entitlements might be mandated by the government but they are not paid for by taxpayers. The taxpayer does not pay for your sick leave or holiday pay. These are financed by employees by trading off pay in return for these conditions.
Taxpayer-funded PPL payments are a form of income support and for this reason should be tightly targeted and means-tested.
It is not yet clear exactly how the PM proposes to refine his scheme, but since he is committed to a wage replacement scheme, “better targeted towards... low and middle income families” can only mean lowering the cap on payments from $50,000or making payments only to those with earnings below a certain threshold.
Since under current policy taxpayers are making payments of as much as $11,539 to parents with incomes as high as $150,000,tightening eligibility to exclude high income parents would be a welcome move.
But this will not address the inherent inequity of making payments at replacement wages.
It is unfair to ask low income taxpayers to fund higher income earners’ payments — which would be more generous than those the lower-income parents themselves will receive.
And the unfairness is exacerbated, because high-income parents do not require this kind of support from the taxpayer.
High-income parents are those most likely to have already negotiated PPL entitlements with their employers. According to the latest statistics from the Household, Income and Labour Dynamics in Australia survey, three quarters of working women aged 19 to 45 who earned between $40,000 and $60,000 in the 2011-12 financial year had access to paid maternity leave as a workplace entitlement.
For those earning between $60,000 and $150,000 coverage was in excess of 80%.
The PM can reduce the cap and tighten eligibility but there is no getting around the fact that his policy will provide large payments to families who – for the most part – do not need them. In fact, he is yet to explain how he would prevent high-income earners with PPL workplace entitlements pocketing the cash from his scheme on top of their workplace entitlement.
The 1.5% levy on large firms will not mean that `business’ pays for the scheme. This increase in corporate tax will see companies cut back on dividends, which will reduce everyone’s superannuation balances — something low-income earners can least afford.
While it is too early to know what the cost of the PM’s revised policy will be, any new expenditure is inconsistent with the government’s rhetoric of a budget emergency.
The PM’s move in April to lower the cap on payments from $75,000 to $50,000 was never going to chip much gold off of his gold-plated scheme. Only 6% of those parents who received payments in 2012-13 had incomes that would have been eligible for the $50,000 payments (7,655 parents).
Reducing the cap to Average Weekly Earnings, as suggested by the Commission of Audit, would do more to reduce the proposed expenditure, as one fifth of eligible parents had earnings greater than this in 2012-13 (just under 30,000). But this will do little to address the underlying inequity.
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