The Centre for Independent Studies (CIS) has released a new report arguing to replace the Abbott Government’s paid parental leave (PPL) scheme with an income-contingent loan modeled on the Higher Education Contributions Scheme (HECS).
According to the CIS, the Government’s proposed PPL scheme is inequitable, as it “provides parents with incomes in excess of $100,000 with payments of $50,000 for 26 weeks of parental leave. This is almost three times the $16,667 that a parent who works full-time for the minimum wage would receive”.
Instead, the CIS proposes “an Income Contingent Loan (ICL) Scheme similar to the Higher Education Contributions-Higher Education Loans Program (HECS-HELP) used to fund tertiary education”, which would meet “the objectives of a PPL scheme and aligns the cost of PPL with those that benefit from it”:
This Parental Leave Contributions Scheme (PLCS) would provide parents with PPL payments when family incomes are low and enable them to defer repayment until family incomes are higher.
This scheme would capture the social benefits of parental leave by alleviating the financial constraints faced by low-income parents who are unable to finance their own leave or do not have access to parental leave workplace entitlements.
The CIS proposes that the PLCS would be repaid once “the full- time minimum wage ($33,332)” is reached, which “would ensure that only parents with a capacity to make repayment would have to do so, and a progressive repayment schedule would ensure that repayments were not burdensome for low-income parents and families”, with outstanding balances indexed to inflation, as is the case with HECS/HELP [proposed repayment schedule below].
The CIS estimates that its PLCS would cost the Budget around $657 million in 2016-17, or about 12% of the Abbott Government’s proposed scheme, which is expected to cost around $5.7 billion.
Overall, the CIS’ proposal is a dramatic improvement over the Government’s PPL scheme, providing significant Budget savings that could be reinvested in alternative programs that provide far bigger equity/productivity returns.
