Tuesday, May 14, 2013

Lavish parental leave has nothing to do with need

There's an easy test to see if a politician is spouting nonsense:  they use the word ''productivity'' a lot.

Productivity is an old standby.  It sounds intelligent.  Economists say it's important.  Yet productivity is the most abused word in the political dictionary.

The Coalition says its paid parental leave scheme is first and foremost about productivity.  Mothers would receive a payment at their full salary for 26 weeks, up to the maximum annual salary of $150,000.  The taxation office says the average income for an Australian woman in 2010-11 was $42,000.  (You can see the tax tables here.)

How will this generosity boost productivity?  It's not clear.

The Coalition's plan would completely upend the Australian welfare settlement.

It would be a wholehearted, full-throated embrace of the Scandinavian system of middle-class welfare.  It would be a rejection of the bipartisan principle that social security should be a safety-net.  And, as it would blur the distinction between earned income and government assistance, the Coalition's scheme would entrench the entitlement culture that has been so harmful to so many economies around the world.

That's the big picture.  Let's start with the productivity canard.  The Coalition's official parental leave document makes two claims about leave and productivity.  Both are apparently drawn from a Productivity Commission study published in 2009.

First, their paid parental leave scheme will encourage mothers to stay at home to breastfeed their babies, which will result in health benefits for those babies, and ''likely long-run productivity benefits'' for the workers they grow up to be.  Nobody disputes the value of breastfeeding.  The Productivity Commission found enormous benefits accrue to both breastfeeding mother and child.  But it only vaguely hypothesised — with no supporting documentation — that, perhaps, parental leave could ''translate to ... subsequent productivity improvements'' down the track.

It's dubious to pin Australia's long-run economic growth on this unexamined chain of causation.  Well, if we care about evidence-based policy.

The second argument is not much more convincing.  The scheme ''would keep some of the most productive people and potentially productive people more engaged in the workforce''.  But if parental leave is designed to stop mothers dropping out of the workforce entirely once they've had a child, that seems to contradict the first claim:  that lengthy maternal care is essential for future productivity.

The Productivity Commission recognised that the interactions between the changed incentives to work or take parental leave were highly complex.  The Coalition's proposal does no such thing.

The extreme generosity of the Coalition's plan suggests another productivity argument.  Highly productive women are less likely to take time out to have children, due to the opportunity cost of their higher wages.  Yet highly productive women might have highly productive children.  That's what Tony Abbott meant when he said ''women of calibre''.  It's not a nice argument.  But it appears to be one implicit goal of the Coalition's policy — to encourage well-paid women to become mothers.

On this, Abbott has been more candid in the past.  He wrote in his book Battlelines that ''maternity-leave schemes are better thought of as a means of encouraging more women to keep the most traditional role of all:  that of mother''.

The Coalition insists their plan isn't welfare — it's a ''workplace entitlement''.  Yet we usually think of workplace entitlements as part of an employment contract and included in a salary package.  Sometimes workplace entitlements are required by law, like annual leave, but they are always provided by employers, and paid for by employers' money.

Financial assistance provided by government, financed by taxation, and delivered by Centrelink certainly isn't a workplace entitlement.

The Opposition's doublespeak conflates private earnings with government transfer payments.  Yet the distinction matters.  It really matters to conservatives, for whom self-reliance and responsibility are moral virtues.

One of the most influential theories of welfare states was devised by the Danish sociologist Gøsta Esping-Andersen.  In his 1990 book The Three Worlds of Welfare Capitalism, Esping-Andersen divided welfare states into three categories according to their philosophical foundations:  liberal, corporatist and social democratic.

Liberal regimes are tightly means tested and focused on transition from welfare to work.  Welfare is designed to be unappealing.  Australia has a liberal welfare regime, as does the United States, Britain and Canada.  Corporatist regimes — like France's — are designed to preserve class and status.  In social democratic regimes, access to welfare is universal, plentiful, and explicitly designed to buy off the middle class.  (Esping-Andersen later added a fourth.  In a Mediterranean regime, welfare distribution is embedded into traditional gender and family structures.)

Full-blown social democratic regimes are rare, and concentrated in Scandinavia.  In the Drum yesterday, Emma Alberici emphasised just how lavish their parental leave entitlements are.  Tony Abbott's policy compares favourably to those of Finland, Norway, Sweden, Germany, and Iceland.

In other words, the Coalition's policy is a Scandinavian scheme for a liberal country.  Like a good Scandinavian scheme, it will co-opt the middle class, who benefit the most.  Like a good Scandinavian scheme, it will blur the distinction between work and welfare.  And like a good Scandinavian scheme, it has nothing to do with need, and everything to do with the privilege of citizenship.

If this paid parental leave scheme becomes law, we won't be at the end of the Age of Entitlement.  We'll be at the beginning.

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