Baby Bonus on ABC Online

Lots of press on the baby bonus. I also did an opinion piece for ABC Unleashed (click here for one with nice picture) or read on for the text. (Note also that the AMA came out in favour of phased-introduction in 2006.
Australia’s Biggest Birthday

Joshua Gans

ABC Unleashed, 9th November, 2007

According to the Sydney Morning Herald, the Minister for Family and Community Services, Mal Brough, thinks it’s a good thing that I am not an obstetrician. Actually, technically, I have delivered two babies (of my own) but there was a trained specialist at my side. That is, of course, another story.

But he has a point. If I were an obstetrician, it is unlikely that I would have spent the last week looking at ABS birth statistics. Instead, being an economist, my ANU colleague, Andrew Leigh and I seized upon them. The reason was to see whether the government had done it again. By poorly implementing the baby bonus had they caused potential disruption to maternity wards?

It turns out that the answer was, “yes and in a significant way”. Last year, we studied the introduction of the $3,000 baby bonus on the 1st July, 2004. That introduction made that day the biggest birthday in Australian history and the only day to have over 1,000 births. Indeed, statistically, 1167 births were shifted from June to July that year. It is also the case that the babies born were larger. Not surprisingly, we were concerned given that the bonus was to rise again on 1st July, 2006 by $834.

So Mal Brough may think it unseemly to think that parents would put the life of their unborn baby at risk. I think so too. But that doesn’t mean it doesn’t happen. Moreover, it is not the delay of one birth I am worried about but the cumulative impact of this as maternity hospitals become unnecessarily congested. I happen to believe that the goal of health policy is to keep economics out as much as possible from health decisions. Certainly, governments shouldn’t put it there for no reason.

We raised concerns directly with the government in June last year and then, when we were ignored, released the paper publicly calling for a phased-in increment to the baby bonus. We weren’t the only ones. The Royal Australian and New Zealand College of Obstetricians and Gynaecologists approached the government but were similarly ignored. And so, in 2006, the baby bonus increased.

There was always some hope that the smaller jump would mean less disruption. Perhaps parents wouldn’t care about $834? It turns out that hope is naïve. This is no small amount of money to parents just about to get an income shock. Statistically, just under 700 have shifted their births from the last week of June to the first week of July, 2006. Here is a link to our research.

In July 2008 it is all scheduled to happen again when the baby bonus jumps to $5,000. The policy response is clear. If you need to increase the baby bonus (and it is unclear why that would be the case), do it gradually. If the jump was over the course of a few weeks, the extra outlays for the government would be a couple of million dollars. That may seem like a lot but in the context of over a $1 billion in payments every year on the baby bonus alone, it is a drop in the ocean.

It is the role of an economist to look for potential problems even if we don’t like to think they are there. Parents avoid having babies on the 1st April and 29th February seemingly because they are worried about awkward birthdates for their children. That is statistical fact. Similarly, in June, 2004 and July, 2006, they delayed births if they could to get extra cash. The government dangled the carrot on that occasion and parents responded. Perhaps there were no adverse health outcomes but I don’t think it is worthwhile for governments to role that dice for no gain.

Note: Joshua has written about the 2004 and 2006 events on his blog, as has his ANU colleague Andrew Leigh.

One thought on “Baby Bonus on ABC Online”

  1. Hi!

    Do you realize it is not physically possible to delay a birth? Once labor has started, it cannot stop.

    The only thing that would have changed is that people who were going to have their labor induced decided not to. That’s a good thing. It’s unnatural to induce labor.

    A woman can induce labor before her due date, but she cannot stop herself from going into labor. Labour is started by hormones, secreted by the baby, and the woman has no control over when it starts.(unless she induces it first, for the sake of convenience)

    So your article has no basis. Of course women would cancel their inductions for the sake of more money. Thats a healthy thing. It is not putting a child at risk to let labour happen the way it should, naturally.

    Thanks for reading, Jessica


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