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

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:

Thank you for your comment. If it does not require moderation, it will appear shortly.
Facebook LinkedIn Twitter Add | Email Print


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

Parliamentary Library Logo showing Information Analysis & Advice




immigration refugees elections taxation asylum Parliament criminal law election results Australian Bureau of Statistics social security disability citizenship Indigenous Australians political parties United Kingdom UK Parliament Census statistics banking early childhood education Middle East Australian foreign policy OECD Australian Electoral Commission voting mental health Employment military history by-election election timetable China; Economic policy; Southeast Asia; Africa housing Speaker; House of Representatives; Parliament Productivity Defence income management asylum seekers High Court; Indigenous; Indigenous Australians; Native Title Senate ACT Indigenous education Norfolk Island External Territories leadership aid Papua New Guinea emissions reduction fund; climate change child care funding Electoral reform politics refugees immigration asylum Canada procurement Australian Public Service firearms Indigenous health constitution High Court e-voting internet voting nsw state elections 44th Parliament women 2015 International Women's Day public policy ABS Population Age Pension Death penalty capital punishment execution Bali nine Bali bombings Trade skilled migration Private health insurance Medicare Financial sector EU national security fuel China soft power education violence against women domestic violence Fiji India Disability Support Pension disability employment welfare reform Tasmania Antarctica China Diplomacy Australian Sports Anti-Doping Agency World Anti-Doping Agency Sport ASADA Federal Court WADA ADRV by-elections state and territories terrorism terrorist groups Bills corruption anti-corruption integrity fraud bribery transparency corporate ownership whistleblower G20 economic reform science innovation research and development transport standards Afghanistan Australian Defence Force NATO United States social media Members of Parliament Scottish referendum Middle East; national security; terrorism higher education Higher Education Loan Program HECS welfare policy pensions social services welfare ASIO Law Enforcement Australian Federal Police Australian Secret Intelligence Service intelligence community Criminal Code Amendment (Misrepresentation of Age to a Minor) Bill 2013 sexual abuse online grooming sexual assault of minors labour force workers

Show all
Show less
Back to top