Coalition's $5.5b scheme a first - but is it money well spent?

It is more than a decade since John Howard branded the daily juggle of working parents a ''barbecue stopper''. But this year's election campaign shows work and family are still potent politics.

Kevin Rudd targeted young families in his first campaign announcement. That $450 million boost to before- and after-school childcare is still the most expensive campaign policy unveiled by Labor. Then, on Sunday, Tony Abbott weighed in with his $5.5 billion a year ''signature'' scheme to pay women their full wage for six months after having a baby. It's dominated the campaign all week.

Paid parental leave is a recent arrival to the federal policy agenda. At the last election, Australia was one of only two members of the Organisation for Economic Co-operation and Development without universal paid parental leave, the other being the US. That changed in early 2011 when Labor introduced a relatively affordable scheme that pays working mothers the minimum wage for 18 weeks after the birth of a child. Now Abbott has promised Australia one of the most world's most generous parental leave policies.

The price tag - equivalent to the overseas aid budget - will vault paid parental leave onto the Commonwealth's 20 most expensive programs list. The cost will be similar to what the government spends each year on all childcare subsidies to parents.

Despite its generosity, women are yet to be won over by Abbott's plan. The Fairfax Nielsen poll conducted as debate raged over the policy this week found just 37 per cent of female voters thought the Coalition was the best party to handle paid parental leave compared with 49 per cent favouring Labor.

The bulk of the funding for Abbott's leave policy will come from a 1.5 per cent levy on big business and the abolition of the present scheme.

Abbott claims providing wage replacement for workers who have babies has become a necessity for contemporary households.

''The modern Australian family invariably needs more than one income to get by and this [scheme] means you can have more kids and keep paying the mortgage,'' he said.

Abbott's plan will encourage working women to have babies at a younger age because the financial impact of becoming a mother will be reduced by full wage replacement for 26 weeks. But experts don't expect that it would have a major impact on the fertility rate.

The policy is also likely to affect the job market by making small firms more attractive to female workers. Most small businesses can't match the maternity leave entitlements offered by the public sector and big firms. But a universal, government funded, wage replacement leave scheme will reduce, at least to some extent, that competitive advantage.

''Our policy ensures that small business for the first time is on a level playing field with big business,'' shadow treasurer Joe Hockey said.

Abbott's pitch has also zeroed in on the long-term financial benefits for women from the policy which, unlike Labor's scheme, includes superannuation. The Coalition claims a worker earning the average female full-time salary of $65,000 who has her first child aged 26 and a second child aged 29, will be around $50,000 better off in retirement under the Coalition plan.

Abbott's scheme has won support in unexpected places. Feminist academic Eva Cox praised the policy because it will go some way to reducing the disparity in the average life-time earnings of men and women. ''I think a lot of the stuff Tony Abbott does is appalling, but on this one he happens to have got it right,'' she said.

Abbott's scheme was also welcomed by breastfeeding advocates because it will allow working mothers to breastfeed their babies for longer. The 26-week duration of the Coalition's leave plan is equivalent to the period the World Health Organisation says is optimal for babies to be breastfed. A recent Productivity Commission report on paid parental leave said longer periods of breastfeeding made possible by this type of leave would reduce overall health costs.

But Abbott's plan has also attracted howls of complaint. Rudd has branded it unfair because the biggest payments go to women on high incomes. Under Labor's scheme all recipients receive the equivalent of the minimum wage for 18 weeks and those earning more than $150,000 are not eligible. ''It's a huge, humongous policy which gives $75,000 to millionaires,'' Rudd said.

Labor has also accused Abbott of pilfering the savings of retirees because shareholders won't receive franking credits on the 1.5 per cent business levy introduced to help fund the scheme. It claims this will cost shareholders about $1.6 billion.

''This is Tony Abbott's giant raid on Australia's investors to pay for his unravelling signature policy,'' the Treasurer, Chris Bowen, said.

Business figures, economists and even members of the Coalition have also been critical of the scheme.

Private sector economist Saul Eslake described it as a ''dreadful'' policy that would become a drag on a budget already under long-term stress, while doing little to improve workforce participation or boost productivity. ''It's a big spending entitlement program being brought in by a party that has spent years criticising the growth of entitlement spending,'' he said.

Economists have also drawn attention to a Productivity Commission finding that providing full replacement wages to highly educated, well-paid women would be costly and deliver ''few labour supply benefits''.

The diverse responses to Abbott's plan illustrate the complexity of the work and family policy challenge.

An expert in work and family policy, Professor Barbara Pocock, said aspects of the Coalition's scheme are good, especially extending the duration of paid parenting leave to 26 weeks. But she questions the overall cost.

''It's a big spend for a single moment in the work and family picture,'' she said. ''If I had $5.5 billion to spend I would do it in a more balanced way.''

Pocock said affordable childcare would have more impact on female workforce participation than paid leave when a baby is born. ''If your intent is to improve the labour market participation of women, then you would invest much more in childcare and in changing the cultures that resist workplace flexibility.''

Abbott's full wage replacement parenting leave scheme is so expensive it could suck resources away from other critical long-term measures that sustain female labour market participation, especially childcare.

''Like a lot of converts he's taken one piece of the picture and become ultra-zealous about it,'' Pocock said. ''The policy misses some important accompanying steps that are vital. Any mother knows that the maternity moment is really significant and leave from work is critical. In the long run it's having a flexible workplace and good quality childcare. The policy position he's adopted is unbalanced.''

Abbott has responded to the attacks on his paid parental leave policy by ramping up his rhetoric.

''Every social advance has its critics,'' he said. ''This … will be a watershed for the women of our country. For the first time … women will be given a real choice to have a family and a career at the same time … every single [working mother] is going to be better off under our policy.''

The story Coalition's $5.5b scheme a first - but is it money well spent? first appeared on The Sydney Morning Herald.

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