The likely distributional impacts of Parental Leave

Abstract

Parental Leave Pay (PLP) provides $12,000, to just under 170,000 families every year. At an annual (gross) cost of $1.97 billion PLP provides $672.60 a week for up to 18 weeks that the primary claimant , 99.4 per cent of whom are birth mothers, remain on parental leave after the birth of a child.

In Budget 2015-16 the Abbott government courted controversy by proposing a dollar-for-dollar reduction in PLP for every dollar of PLP claimant’s Primary Carer Pay (PCP) workplace entitlements. In the wake of wide spread concern about the design of the Removing Double-Dipping from Parental Leave Pay budget measure it was abandoned and replaced with a week-for-week reduction by the Turnbull government in the Mid-Year Economic and Fiscal Outlook 2015-16. More recently the government has signalled its intention to follow through with PLP reform while providing a two week increase in PLP entitlement as a sweetener to get the reforms through the Senate.

In light of the soft means testing of PLP, a sudden death taper at $150,000 of mother’s annual pre-birth income, it is hardly surprising that the government sees this as the low hanging fruit of budget repair. Despite recent developments its passage through the Senate is far from certain.

This seminar will present recent Australian data on PCP workplace entitlements from the Household, Income and Labour Dynamics in Australia survey and length of PCP used by mothers from the 2011 ABS Pregnancy and Employment Transitions Survey. It will be argued that few low-income households are likely to be impacted by PLP reform on account of low access to PCP entitlement among mothers in these households. The seminar will then explore some arguments for, and against, allowing concurrence of PLP and PCP entitlement.

Matthew Taylor is a Research Fellow in the ANU Centre for Social Research and Methods. His research interests include economic modelling, applied econometrics, labour economics and social policy. He has a Bachelor of Economics with Honours from Monash University with specialisations in economics and econometrics and has expertise in the development of micro-simulation models to assess the fiscal and distributional impacts of alternative tax and income support policies. Matt’s opinion on public policy has been published in The Australian, The Canberra Times, The Drum, Business Spectator and Spectator Australia among other publications. He has also appeared on the SBS panel show Insight. Before joining the ANU Matt worked for the Classical Liberal think-tank the Centre for Independent Studies and a number of government agencies and universities including the National Centre for Social and Economic Modelling at the University of Canberra and the Australian Institute of Family Studies.