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The case against paid maternity leave

By Leon Bertrand - posted Wednesday, 25 June 2008


Lately, I have read about many calls by left-wing groups, particularly feminists, for paid maternity leave to be enshrined in law. To be sure, the proposed models for paid maternity leave vary significantly with some, such as the ACTU’s, proposing that all working women be paid the same amount for 14 weeks, usually equal to the full time minimum wage, while others want working women to be paid the full salary they normally earn for six months, no matter how high their normal incomes.

Some models want to include all women, whether they work or they don’t, while others want only women who have worked immediately before they give birth to be included. Some want the scheme to be fully funded by the government, while others want employers to be forced to contribute.

Why have a paid maternity scheme?

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Often overlooked in the debate is the most basic part of it - why have a paid maternity scheme? Some advocates say that it will benefit women, others say it will encourage women to have babies.

I find neither of these arguments persuasive. First, often not given enough consideration is that it is always someone who must pay for such schemes. If it’s the government, then people will have to be taxed more to fund the scheme. The more generous the scheme, the greater the tax hike. Since most women who have children are married or are in de facto relationships, the net effect will not be that it will benefit these women. Rather, couples will effectively have to fund a portion of their own paid maternity leave through taxes.

On the other hand, if employers are compelled to fund the scheme, the result will be that women will become less employable. Many smaller and medium-sized businesses struggle, and need to save every dollar they can to keep trading. The last thing they need is an employee taking several weeks off work at their expense. So while feminists would see paid maternity leave as a great advancement for women it would, if funded by employers, effectively encourage discrimination against women. Separate from this, there would also be negative effects on inflation and employment generally - businesses would either employ less people or push the extra costs onto consumers.

Second, serious doubt has been cast on the ability of the baby bonus to increase the birth rate. The vast majority of people who want children are willing to make the necessary sacrifices to realise their ambitions.

Distributive effects

So paid maternity leave would represent an overall distribution of income away from single people and childless couples and in favour of couples and single mothers who have children. On the whole, it is therefore only very marginally pro-women. It’s far more pro-big governments, higher taxes and big spending.

As Jessica Brown pointed out it also flies in the face of the Rudd Government’s other policies:

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The one thing all these proposals have in common is that they assume maternity leave will be paid to all working women, regardless of income, and that it will be funded by taxpayers through general revenue or through a special levy.

But how will this be different from what we already had? Farewell the old non-means-tested baby bonus; hello to a new non-means-tested maternity leave payment. The only difference is that the new payment will be even more generous.

It’s just as well that a woman was able to point this out, since any male doing so would run the risk of being labeled anti-women and/or a misogynist.

As Brown correctly points out, there is an undeniable contradiction here: two-thirds of voters favoured means-testing the baby bonus, while most people seem in favour of paid maternity leave. I believe this contradiction exists because few people have given enough thought about how to pay for such a scheme. Indeed, one survey suggested that this was the case, with its finding that an overwhelming majority of women want a paid maternity leave scheme, but at the same time didn’t want to pay extra taxes to fund it.

Moreover, there are very regressive aspects to the idea of paid maternity leave. In order to demonstrate my point, I will compare paid maternity leave proposals to what the unemployed and underemployed receive from the government, including those who have children. Note that under most paid maternity proposals, these women will not be entitled to receive paid maternity.

An unemployed single person with a child receives $546.80 a fortnight (with an $18.80 supplement) in parenting payment. If coupled, the payment immediately drops to $394.40 a fortnight, irrespective of the partner’s income. However, just to get these maximum payments, the recipient’s income from employment must be no more than $62 a fortnight AND the partner's income must be no more than $751 a fortnight. Furthermore, the recipient’s income reduces by the rate of 50 cents for each dollar between $62 and $250, and by 60 cents for each dollar above $250 a fortnight. Meanwhile, if the partner earns over $750, the amount received drops by 60 cents for each extra dollar.

While it is true that Family Tax Benefits do supplement these low rates of pay, they are also often available to far wealthier families.

In contrast, feminists, including Sex Discrimination Commissioner Elizabeth Broderick and Deputy assistant secretary and spokeswoman on women's affairs Amanda Tattersall are suggesting plans where mothers would receive two-thirds of their pre-maternity incomes for 14 weeks. In most cases, that would be almost twice what single people who are not in work immediately before having their baby would receive.

Meanwhile, feminist Julia Perry’s proposal would have women on six-figure salaries being paid their entire wages by the government for six months. Her plan involves little more than poor people paying for the lifestyles of the wealthy.

In fairness, the ACTU wants all women to be paid the equivalent of full time minimum wage earnings, which would be a little more than $500 per week. That is less regressive. But it still does involve families who don’t need assistance getting equal levels of it at the expense of the ordinary taxpayer.

Think about what some of these proposals would mean in practice. The extremely wealthy and the middle classes would be getting more money from the government, even though they are the least needy. The income tax paid by couples with one person working for a very modest income and the other staying at home and not eligible for the paid maternity leave would subsidise the choice of wealthier couples having children, many of whom would have combined incomes of over $100,000 before one of them takes time off. In many cases, paid maternity leave would mean a regressive distribution of income away from those who are poor towards those who are far less in need of it.

Even if you look at it from the Left’s own criteria, the plan is absurd. Those people that the Left consider to be in special classes of their own, including gay couples (who rarely have children) and career-driven women with no interest in having children, will be the biggest losers in such a scheme. Like the poor (the Left’s supposed primary concern), they will be forced to heavily subsidise the choices of others.

Why we need to reduce churn

With the expansion of the welfare state under the Howard government it seems that people have forgotten welfare’s original purpose. Once upon a time, welfare was something which was only intended for people in need. Nowadays, millionaires are happy to queue up at Centrelink in order to receive the baby bonus, or Family Tax Benefit B, or some other handout they think they need, because they want private education for their kids, private health, two cars, a McMansion and so forth, with the help of other taxpayers.

The main problem with this is “churn”: it is extremely inefficient for governments to tax people excessively, and then give them back their own money in the form of handouts. In business, it is often wise to cut out the middle man in order to maximise efficiency. Governments are often so silly and inept that they often create the need for a middle man in order to complicate things and buy votes for elections. This political strategy often works because people don’t realise that the money they are lining up to receive is the same money they originally paid to the government via taxation. The government is effectively robbing us with one hand, and giving with the other.

I look forward to the day when a federal government decides to reform our taxation and welfare systems to ensure that people are taxed minimally, and that welfare payments are well-targeted. At the moment, we have a dog’s breakfast which imposes compliance costs on businesses and administrative costs on governments. But in the end, we all pay for this stupidity.

What we need instead is an efficient, streamlined welfare service that gives to those in need while also promoting self-reliance. Unfortunately, the current federal government is yet to make a tough decision and is unlikely to care about responsible expenditure, given its penchant for subsidising Japanese firms in the manufacturing industry.

Having children is undoubtedly expensive. All parents can testify that time taken off work and money spent on clothes, prams, books, toys and much more, all add up. But why should the rest of society pick up most of the tab? The benefit of having children is primarily enjoyed by the parents concerned, not by outsiders. It is therefore logical that parents, not the state, should be the ones funding such choices.

We need to stop this wasteful churn and encourage an ethic where people who are doing quite well stop looking to the government as a contributor to their incomes.

All this is certainly not to say that paid maternity leave which is voluntarily funded by employers is a bad thing, or should be prohibited. Recently, some very large companies, such as Westpac, News Ltd and Woolworths have decided to provide paid maternity leave to female employees who have been with them for a while.

If employers offer this, it is generally because it is in their commercial interests. For example, paid maternity leave often enables higher rates of staff retention, a big priority for many workplaces given the current competitiveness for employees in the labour market. High retention rates save firms the costs associated with re-advertising, re-hiring and re-training, and also maximise productivity. Such arrangements therefore represent win-win outcomes, and should be encouraged. However, every business and industry is different, so such arrangements should never be made compulsory.

In the meantime, I hope that those who believe in paid maternity leave being forced upon businesses and taxpayers stop and think about the real effects of their policies. If feminism is really about gender equality, it shouldn’t treat women who have children as a special class that is automatically entitled to income from others, regardless of need.

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About the Author

Leon Bertrand is a Brisbane blogger and lawyer.

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