Thursday, December 12, 2013

Lindsay Mitchell: Paid Parental Leave extension unwarranted


The government is reportedly reconsidering its opposition to extending Paid Parental Leave from 14  to 26 weeks. This comes despite Treasury advice that there would be "minimal benefit from increasing the length of parental leave."

Last year Treasury analysed who was using paid parental leave, labour market outcomes, and child health outcomes. It found that, "...there is not a strong evidence-based argument to support extending the length of paid parent leave."

Treasury's report states, "...the majority of mothers return to work when the baby is six months old...". Marginal benefits to labour market participation and child health and well-being would therefore be small. Additionally, it notes, "...the most vulnerable children are likely born into families where parents are not eligible for paid parental leave...".
In a discussion about improving income adequacy it found that the arguments are "weak" as "the current access group are likely to be middle and high income women with stable employment." Of the 32,000 paid parental leave recipients in 2011/12, 58 percent were earning over $40,000; 27 percent were earning over $60,000.

Treasury also noted a possible negative impact for employers, particularly small to medium enterprises, as their costs are, "...likely to be more significant as the length of parental leave increases." This could give rise to greater discrimination against child-bearing age females in the labour market.

The implementation of 26 weeks  Paid Parental Leave will cost $327 million by 2015/16. Unchanged, the cost would be $176 million in 2015/16.  An annual increased expenditure of $151 million for "minimal benefit" seems highly questionable. The benefit to the government may lie in gaining electoral favour in 2014.

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