Tony Abbott, Paid Parental Leave and the Productivity Commission

In the past month Tony Abbott has been very big on the glories and wonders of the Productivity Commission. He wants them to look at whether the Government should subsidise nannies. Such a suggestion is not of course a “policy” because it binds him to nothing, but it nicely gets out the impression he might do something. He also makes sure that it’s only in the fine print that he says he won’t increase overall funding, which of course means if people can get nannies subsidises, some child care that is currently available will be either removed or cut. Mr Abbott is not big on talking about that aspect. And if asked he’ll deflect (as he always does) by saying we need to be more creative to help out mums whose lives don’t fit in the standard working hours etc etc. On this he’ll also ignore that the Government does currently offer subsidised nanny care for such people, as the Dept of Employment's website states:

Eligibility for In Home Care

To be eligible for In Home Care, a child must have no access to existing child care services and/or their circumstances mean that an existing child care service cannot meet their needs, and the child meets one or more of the following criteria (as set out in subsection 10 (1C) of the Eligibility Determination):

(a) the child, or any other child with whom the child lives, has an illness or disability

(b) the individual in whose care the child is, or the individual’s partner (if any), has an illness or disability that reduces the individual’s, or the partner’s capacity to care for the child

(c)  the child lives in a rural or remote area

(d) work hours of the individual in whose care the child is, or the individual’s partner (if any), are (or include) the hours during which no other approved child care service (other than an approved in home care service) operates that could otherwise provide care

(e) the individual in whose care the child is or the individual’s partner (if any) is caring for three or more children (including the child) who have not yet commenced school, or

(f) any other circumstances determined by the Secretary in relation to the child.

DEEWR will continue to have discretion to allow exemptions to the eligibility criteria for a child in exceptional circumstances.

Now sure the number of places is capped – but the Government has actually quite significantly increased them (should they increase them more – sure, but that ain’t the debate we’re having)

He’s good at politics is Tony – and he knows the media will lap-up such statements, because (especially the Sunday papers) statements about welfare for mums will always be a good seller.

But given he’s such a supporter of the greatness and creativity of the Productivity Commission, let’s see what they had to say about Paid Parental Leave schemes such as the one he is proposing. And remember Abbott always promotes his scheme because it will lift participation and then lift productivity.

Payment at a flat rate would mean that the labour supply effects would be greatest for lower income, less skilled women — precisely those who are most responsive to
wage subsidies and who are least likely to have privately negotiated paid parental leave. 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.

So we have the Government's paid parental leave improving the labour supply affect the precise group of women who are most likely to be lost to the work force after having children. And we have Tony Abbott suggesting a policy which will be “very costly” and which will have “few incremental labour supply benefits”.

I guess the Productivity Commission is only worth listening to when it says what you want to say.