It seems the lovechild of Prime Minister Tony Abbott, his $5.5 billion a year Paid Parental Leave (PPL) Scheme, has few friends.
Yesterday, The AFR reported that former Treasury Secretary, Ken Henry, cautioned against the Scheme, questioning whether it was appropriate as the Federal Budget comes under increasing pressure as the nation’s population ages.
And today, The AFR has reported that former Treasurer, Peter Costello, has advised Hockey not to support the PPL Scheme, claiming that it was “excessively expensive at a time when the government was looking for structural savings”. In 2010, Costello also described PPL as “silly”, noting that it would reduce the competitiveness of Australian business, whilst contravening the Liberal Party philosophy of low taxes.
The same AFR article also notes strong opposition from former Howard Government minister, Peter Reith, who describes PPL as “one of the ‘bad decisions’ Mr Abbott made in the cause of defeating Labor”, as well as the Commission of Audit, which has reportedly criticised the Scheme in its initial report to Government.
Despite the growing opposition to PPL, Abbott continues to push the merits of the Scheme, last week using a series of events to mark International Women’s Day to highlight the so-called productivity and equity benefits, and in the process sending the strong message to critics that he will not back down.
But there is no getting around the fact that the PPL Scheme is the wrong policy at the wrong time.
As argued beautifully by The Guardian’s Greg Jericho on Monday, the PPL Scheme, despite its huge cost, will likely “fail to achieve any significant lift in women’s participation in the workforce”, while at the same time necessitating cuts to spending on childcare, “which is much more likely to achieve this aim”:
…the Productivity Commission found that PPL schemes like Abbott’s with “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”…
[The OECD] compared spending on PPL and childcare and noted that “policies to foster greater enrolment in formal childcare have a small but significant effect on full-time and part-time labour force participation – and these effects are much more robust than the effects of paid leave or other family benefits”.
This reflects the work of the IMF last year, which found that “if the price of childcare is reduced by 50 per cent, the labour supply of young mothers will rise on the order of 6.5 to 10 per cent”…
And given the government has placed spending limits on any new childcare policies, it is a case of their constraining the most likely performer in order to blow money on a policy much less likely to succeed.
The PPL Scheme is a policy failure. Abbott should doff his hat at his political master in John Howard, who knew when to execute a dignified reversal.
