Paid Parental Leave: Robin Hood or piggy bank?

Parliament house flag post

Paid Parental Leave: Robin Hood or piggy bank?

Posted 10/05/2013 by Luke Buckmaster


Image source: fahcsia.gov.au
While there are numerous differences between the Labor and Coalition policies on parental leave pay, the most controversial is the rate of payment. While the current Government scheme is paid at the National Minimum Wage ($606.50 per week), the Coalition proposal is for parents to be paid at their full salary capped at an income level of $150,000.

The difference between the two approaches highlights the complicated relationship present in both schemes between the idea of Parental Leave Pay as a workplace entitlement and a payment made through the social security system.

Australia's current Paid Parental Leave scheme operates within the framework of social security benefits paid through the Department of Human Services (DHS). Those wishing to claim parental leave pay must apply through DHS and meet eligibility criteria, including work and means tests. Payments are made through the eligible person's employer. The Coalition plans to further entrench the link to the social security system by paying parental leave pay through DHS.

One aspect of the controversy over the Coalition's proposal is that payments made through the social security system are not and have never been intended to replace a person's entire previous income. The principle of income replacement is more associated with the contributory social insurance schemes (for unemployment, sickness, parental leave and so forth) operating in other OECD countries. The key principle here is that an individual is able to maintain their level of income across their life-cycle. This is sometimes known as the 'piggy bank' approach to welfare—mandatory savings to ensure that individuals are protected against the various risks to their incomes that occur throughout the life course.

The Australian system, on the other hand, is based around targeting flat rates of payment at those most in need. As the Henry Tax Review noted, 'the primary purpose of government assistance payments to individuals is to provide them with a minimum adequate standard of living'. A further value underlying the Australian system is that there should be incentives for private provision, with the benefit system seen more as a safety net. The Australian system is strongly focused on what is known as the 'Robin Hood' function of welfare.

So, in this respect, the Coalition's proposed scheme seems quite at odds with Australia's longstanding approach to government income support. However, as has been pointed out elsewhere, one way of justifying this is to think of parental leave pay not as welfare but as a workplace entitlement. Further, government involvement in providing this entitlement can be seen as necessary for achieving objectives such as improving gender equality (properly compensating women for time spent out of the workforce whilst caring for children) and workforce participation.

Indeed, most OECD countries treat parental leave pay in this way, providing benefits through mandatory social insurance or similar schemes at rates which either fully or substantially replace the mother's previous wage.

Liberal Party Leader, Tony Abbott's, recent explanation of his proposed scheme in terms of wanting to give women on higher incomes the opportunity to have children whilst maintaining their income was therefore consistent with the piggy bank approach to parental leave pay taken by most OECD countries.

Where the scheme differs most from those overseas is in the fact that direct beneficiaries are not required to contribute premiums towards the piggy bank. While the Coalition's scheme is to be paid for via a levy on Australia's richest companies, their 2010 policy document stated that they would prefer to pay for it from a 'Budget surplus'—that is, from general revenue—and would ultimately seek to reduce the burden on business through tax cuts. Again, this suggests a scheme that is something of a hybrid: an income maintenance scheme paid for through taxation revenue.

The current Government's scheme is much more in line with Australia's traditional Robin Hood approach in that it targets support at those most in need of support and seeks to retain space for private provision. The Productivity Commission report, on which the Labor scheme is based, expressed this as follows:
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.
In this sense, the current scheme is an attempt to use the existing principles of the income support system to promote parental leave pay as a workplace entitlement but by building on the existing framework of private provision. Supporters of the Coalition approach see this as insufficient and are proposing a piggy bank/income maintenance model to more decisively address gender equity and workforce participation goals.

Image source: fahcsia.gov.au




Comments

  • 21/01/2014 1:54 PM
    Buster said:

    Thank you for the explanation of the rationale behind the schemes. Should be required reading for anyone who wants to support or criticise one over the other!


Thank you for your comment. If it does not require moderation, it will appear shortly.

Add your comment

[Click to expand]

We welcome your comments, or additional information which is relevant to a post. These can be added by clicking on the ‘Add your comment’ option above. Please note that the Parliamentary Library will moderate comments, and reserves the right not to publish comments that are inconsistent with the objectives of FlagPost. This includes spam, profanity and personal abuse, as well as comments that are factually incorrect or politically partisan. We will close comments after three months.




Captcha
Generate a new image
Type characters from the image:

Facebook LinkedIn Twitter Add | Email Print

FlagPost

Flagpost is a blog on current issues of interest to members of the Australian Parliament


Parliamentary Library Logo showing Information Analysis & Advice

Archive

Syndication

Tagcloud

Refugees asylum climate change immigration Australian foreign policy parliament social security welfare reform welfare policy elections school education Australian Defence Force health financing higher education emissions trading indigenous Australians women private health insurance people trafficking Employment illicit drugs gambling health reform federal election 2010 Sport Australian Bureau of Statistics statistics United Nations Asia Afghanistan disability income management Middle East Medicare health forced labour Australian Sports Anti-Doping Agency World Anti-Doping Agency United States federal budget Industrial Relations Carbon Pricing Mechanism politics dental health WADA criminal law transport aid child protection environment poker machines Australia in the Asian Century steroids National Disability Insurance Scheme detention aged care 43rd Parliament slavery health system ASADA Law Enforcement Australian Federal Police Fair Work Act Australian Public Service governance labour force people smuggling debt taxation international relations constitution New Zealand food Australian Crime Commission pharmaceutical benefits scheme corruption pensions public service reform children's health Aviation Australian Electoral Commission federal election 2013 foreign debt gross debt net debt defence capability parliamentary procedure Senate Senators and Members ALP Newstart Parenting Payment multiculturalism Youth Allowance sea farers mental health Federal Court terrorist groups science social media Higher Education Loan Program HECS federal state relations accountability Papua New Guinea youth paid parental leave same sex relationships coal seam gas customs planning doping OECD crime health risks International Women's Day Gonski Review of Funding for Schooling sex slavery Special Rapporteur Northern Territory Emergency Response social policy violence against women domestic violence China ADRV terrorism transparency research and development welfare ASIO intelligence community Australian Security Intelligence Organisation carbon tax mining High Court military history electoral reform employer employee renewable energy regional unemployment fishing by-election European Union family assistance skilled migration banking United Nations Security Council Australian economy forestry food labelling vocational education and training Drugs UK Parliament welfare systems Indonesia children Constitutional reform local government codes of conduct terrorist financing homelessness Parliamentary remuneration money laundering Trafficking in Persons Report energy social inclusion human rights paternalism disability employment Tasmania integrity standards NATO Australian Secret Intelligence Service sexual abuse World Trade Organization Australia public health housing affordability bulk billing political parties water productivity health policy Governor-General US economy trade unions export liquefied natural gas foreign bribery firearms question time speaker superannuation public housing election results expertise public policy climate Intergovernmental Panel on Climate Change leadership voting Department of Agriculture Fisheries and Forestry regulation Pacific Islands reserved seats new psychoactive substances synthetic drugs UNODC carbon markets animal health middle class welfare Census Indigenous constitutional recognition of local government referendum consumer laws PISA competition policy royal commission US politics language education baby bonus Leaders of the Opposition citizen engagement policymaking Australia Greens servitude Trafficking Protocol forced marriage Population rural and regional alcohol entitlements ministries Hung Parliament social citizenship maritime Iran ANZUS regional students school chaplains federal budget 2011-12 salary Medicare Locals primary care Building the Education Revolution China soft power education Fiji India Disability Support Pension Antarctica Diplomacy by-elections state and territories Bills anti-corruption fraud bribery corporate ownership whistleblower G20 economic reform innovation Members of Parliament Scottish referendum early childhood education Middle East; national security; terrorism social services Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 online grooming sexual assault of minors ACT Assembly national security smoking plain packaging tobacco cigarettes Asia; Japan; international relations Work Health and Safety Migration; asylum seekers; regional processing China; United States; international relations fiscal policy Racial Discrimination Act; social policy; human rights; indigenous Australians Foreign policy Southeast Asia Israel Palestine asylum refugees immigration political finance donations foreign aid Economics efficiency human rights; Racial Discrimination Act employment law bullying asylum seekers Animal law; food copyright Australian Law Reform Commission industry peace keeping contracts workplace policies same-sex marriage disorderly conduct retirement Parliament House standing orders prime ministers election timetable sitting days First speech defence budget submarines workers financial sector Canada Somalia United Kingdom GDP world heritage political engagement leave loading Trade; tariffs; safeguards; Anti-dumping public interest disclosure whistleblowing Productivity Commission limitation period universities Ireland cancer gene patents genetic testing suspension of standing and sessional orders live exports infant mortality honorary citizen railways disciplinary tribunals standard of proof World Health Organisation arts international students skilled graduate visas temporary employment visas apologies roads Italy national heritage NHMRC nutrition anti-dumping Rent Assistance obesity evidence law sacrament of confession US presidential election international days DFAT UN General Assembly deregulation Regulation Impact Statements administrative law small business Breaker Morant regional engagement social determinants of health abortion Members suspension workplace health and safety marine reserves hearing TAFE Victoria astronomy resources sector YMCA youth parliament Korea fuel rebate Australian Greens presidential nomination Racial Discrimination Act political parties preselection solar hot water Financial Action Taskforce Horn of Africa peacekeeping piracy Great Barrier Reef Stronger futures political financing political education Social Inclusion Board early childhood National Quality Framework for Early Childhood Education and Care Murray-Darling Basin sanctions Norway hospitals republic President Barack Obama Presidential visits qantas counselling Korean peninsula Work Choices biosecurity hendra environmental law federalism federation preselection therapeutic goods Therapeutic Goods Administration plebiscites computer games pests suicide nuclear COAG Ministerial Councils floods ADHD stimulant medication advertising electricity extradition conscience votes poverty preventative health rural health coastal erosion Parliamentary Budget Office work-life balance

Show all
Show less
Back to top