Abbott’s parental leave policy is a blunder: Kohler

Tony Abbott’s parental leave policy is a dismal confirmation that there is no-one sensible in the coalition’s leadership group.

Abbott, Leader; Joe Hockey, Shadow Treasurer; Barnaby Joyce, Shadow Finance Minister; Julie Bishop, Deputy Leader. All dills.

The policy is a disaster because it shows that the Coalition has abandoned its basic free-market philosophy and careful policy approach in favour of populism and guesswork. It unfortunately appears to be becoming unelectable.

It’s especially unfortunate because Kevin Rudd seems to be losing his way as well. Last week he left open the option of delaying the release of the Henry Tax Review until after the election, which is an indication of growing panic and threatens to undermine the excellent health policy.

But Tony Abbott’s idea of mandatory full pay for 26 weeks, funded by a 1.7% levy on taxable income above $5 million, will give him the unique distinction of being a conservative political leader opposed by the entire business community. Where was the shadow cabinet member saying: “Whoa! Let’s just think about this”?

Mandatory, taxpayer funded paid parental leave is not a fundamentally bad idea, but as the Productivity Commission concluded, the only sensible role for government is to provide a safety net. The rest can, and should, be left to the market.

Taxpayer-funded leave on full pay for all is simply too expensive, especially for six months. Nor is it sensible to pass a law requiring companies to pay for it, since that would tend to institutionalise workplace discrimination against young women, although many countries do that and most companies already provide some kind paid of parental leave.

The most generous scheme in Australia is BHP Billiton’s full pay for 18 weeks, uncapped, which means a primary carer working at BHP paid $1 million a year, gets $346,000 to stay at home for four and a half months – not that there would be many people in that category.

Tony Abbott’s plan to put a “levy” of 1.7% on taxable income of more than $5 million to pay for his scheme would cost BHP about $300 million. A spokesperson for the company (who is pregnant, as it happens) wouldn’t comment on how much BHP’s existing scheme costs, but we can be sure it is a long way short of $300 million. The leader of the Liberal Party is asking BHP to subsidise a large number of small companies.

The same applies in spades to other big companies that already pay parental leave. Apart from BHP, the most generous Business Spectator could find yesterday was 14 weeks on full pay. There are a few clustered at 12 weeks, or twice that on half pay, and the average seems to be around 8-10 weeks.

Germaine Greer made an interesting and, dare I say it, germane point in an article in the Fairfax newspapers on Monday to coincide with the 40th anniversary of the publication of her book The Female Eunuch.

She said: “The most important change in the past 40 years is the gradual and apparently irreversible collapse of the patriarchal family. This was not triggered by a book, but by economic change. Wage-earners found themselves unable to finance the improvement in their standard of living, otherwise known as the rise in their level of consumption. Hire purchase of vehicles, whitegoods, furnishings and the other trappings of the good life increased the burden of debt on every household.

“Even married women of child-bearing age had to go to work to service the family debt. Most of the work they did was insecure, underpaid drudgery.”

That has gradually solidified in the past 40 years as girls asserted their superiority at school and university. As a result the talent pendulum in most professions has now swung towards women and away from men.

This has forced companies to provide paid parental leave to lock in their best people. The alternative of having to go through the expense and disruption of recruitment every time a valued staff member gets pregnant is far worse. In that context, paid parental leave is a market-driven response to the competitive challenge posed by changing demographics.

But the idea of taxpayer-funded parental leave for all on full pay as an entitlement, rather than the minimum wage safety net recommended by the Productivity Commission, goes too far – especially with the growing burden on the health system as those born during the post-war baby boom, and who read The Female Eunuch, approach their high-maintenance years.

And to cap it off, funding it with a new levy on the profits of big businesses simply gives small businesses an unnecessary free ride.

SMEs can, and do, provide paid parental leave because they can’t afford to lose good staff to large competitors, and because they can afford it.

In other words, the market is already working, which is what the Liberal Party is supposed to believe in.

This article first appeared on Business Spectator