Reactions on the baby bonus

Looking over the last few days, there have been some interesting classes of responses to our latest research on the baby bonus. Very few are thoughtful and many are worrisome. More to the point, it has caused more than a little soul searching on my part as to the role of economics in public debate. But let me recount the classes of reaction and respond to each.

The Official Reaction: The official reaction and, in many respects, the most silly (which is quite an achievement given the next one below), came from Mal Brough, the Minister for Family and Community Services:

“It’s a good thing that these men chose economics and not obstetrics,” Mr Brough said. “The timing of the birth of a baby is between a woman and her doctor and to suggest that a woman would put the life of her unborn baby at risk to get more money is an insult.”

We can also term this, the “bury your head in the sand” reaction. Kay Patterson (Health Minister in 2004) had the same reaction to news reports of delayed births at the time the baby bonus was introduced. She said she could not beleve that could occur. Of course, she had no evidence. Brough has two lots of evidence but appears to be in complete denial. As Andrew Leigh documented, both the AMA and the Royal Australian and New Zealand College of Obstetricians and Gynaecologists asked the government to do something about this in June 2006 citing health concerns. If they are worried about risks and there is clear evidence of delay, between parents (not necessarily just a woman) and their doctor there are potential risks being taken. And the only upside for them is the extra money dangled in front of them by the government. So if we are insulting anyone by this suggestion it is a group not an individual.

But, of course, it is ridiculous to suggest that such things represent an insult at all. Let’s get real here. Parents take risks all of the time. Just think about the travelling in a car with children while speeding. It happens. It isn’t good. And people aren’t necessarily bad people for doing it. But what Mal Brough is arguing is that it would be an insult to suggest that parents be forced to put their children in expensive car seats because they can’t be trusted to do that on their own. Oh wait, the government does force them to do that. What an insult this is to suggest that parents would not take perfect care and cacoon their children before getting into cars? The very policy of the government is precisely the ‘insult.’

What is really going on here as usual is an insult to the intelligence of every Australia in suggesting such things. Moreover, if you want to know what is really insulting, it is the government’s suggestion that a cash payment would cause people to want to have children at all. The idea that this is driving fertility would surely be more insulting to women. However, the Treasurer makes that claim all of the time. (That said, it may turn out to be true; something that is even more worrying than the implied insult in the baby bonus policy.)

When it comes down to it, I don’t think people are meeting with their doctors and deciding on a date knowing the risks (or at least I hope not). More likely is that they are doing this assured that a medical professional is signing off on it. The problem is that lots of other people are doing the same thing. So the risk I think comes from potential congestion in hospitals but whether such congestion is being created is unknown. My point is that I would like to know more before enacting a policy that encourages congestion. That is just plain commonsense.

Anyhow let me recount one of my own experiences. Our first born came out into my hands at 3am on a Monday morning. Up until 5 minutes before that time, there was no one in the delivery room with us. No nurses, mid-wives or doctors. Just the two of us like some sort of frontier birthing experience. Why was this the case? Well, it just so happened that at the same time as us, two other women were in the final stages (20 minutes) of labor. There just wasn’t enough staff to go around. In the last half hour, occasionally, someone would pop their head around and say, “you two seem to be doing OK” and then leave. In my mind, I could see the baby. It seemed to me that (despite what The Age seems to think) my ‘doctor’ title wasn’t equipped for that.

Now, everything went alright for us. But I have read enough about this process since then to learn how easily that might not have been the case. In that situation, critical minutes or longer might have been lost before I realised there was an issue and got someone in to deal with it.

My point here is that what we faced would have been faced many times over in the 1st July, 2004, and perhaps even on the 1st July, 2006. If anyone thinks that that is a good outcome of the baby bonus policy, I haven’t met them. No one on the ground is doing anything wrong, it is just the circumstances that can create risks. For a government policy to lead to conditions that create the kind of disruption we have documented is serious and should not be dismissed lightly.

The ‘Hot Head’ Reaction: this reaction came from the majority of commenters on They were taking the opposite approach to Mal Brough. They weren’t just saying that births might be delayed, they were blaming the mothers and assuming that those mothers had taken cash for health risk. They were, to put it mildly, highly insulting to women. When I looked at these comments a couple of days ago, I had skipped over these as lunatics. Looking back over them, they are shocking and I am more than a little concerned that our research gave those people a forum to vent their prejudices.

But in response to all of that lunacy, let me say, first, as I said above, the decision to delay births involves at least three and possibly more people. Singling out mothers is ridiculous especially in the context where a doctor has to sign off on the situation. Second, there may be no health risks at the individual level. What this exposes is that there is a degree of latitude in birth timing. Chances are that a couple of days here and there do not matter. And once again, if there is crowding caused by this, then blame the people providing the incentives to make it happen, the government.

The Common Sense Approach: Smattered through the and other comment were lots of statements that reflected exactly the type of things being argued above. I am glad those views exist and that people felt passionate enough to express them as a minority in a much larger on-line crowd. I think they are summed up by this extensive post. This view highlighted the points that we need to debate and investigate — namely, what are the health risks and how is the system really working to allow economics and other stuff to seep in? After all, parents can’t just choose to delay. But what latitude do they have? Is it too much? Does it create risks for others? Having spent the last 18 months or so looking into this, there are many reasons to be concerned. So, aside from the issue of whether the jumps to the baby bonus are bad (of course, they are no good), there is an issue with respect to the operation of the industry that is being exposed here.

The Big Picture Approach: Finally, there are plenty who said that that problem is the baby bonus itself. I, personally, am very sympathetic to this. I think the goal of fertility for Australians is a poor one (relative to more immigration and global environmental concerns), (a) I don’t think cash payments can boost fertility, (b) if they can, it probably isn’t a good thing because it is putting a child into families for whom having a child was a marginal decision, and (c) a $1 billion per year transfer that is hard to get rid of politically is an indication that all of the good economic reforms that got rid of such stuff in the 1980s are being wound back. However, our research doesn’t speak to that issue, and so to make progress I would like to separate out the policy from the implementation. With 2008 looming, let’s get the implementation right.

On a final note, I am not too optimistic about 2008. One radio interviewer asked me whether we were going to do a follow-up study in 2008. I said that I hoped we would have nothing to study as the government of the day took our ‘no brainer’ advice and opted for a phased-in approach. At the moment, in the midst of this election campaign, the government have ruled that out and others have not mentioned it. The question is: when an economist finds clear evidence of poor policy and a clear amendment to that policy, if approaching politicians privately doesn’t help, can taking it to the public (as we have) do better? It didn’t in 2006. I really don’t want to be writing about this again in June 2008 and beyond.

4 thoughts on “Reactions on the baby bonus”

  1. Thanks for continuing the conversation Joshua.

    I wouldn’t argue with the BB being bad policy, but I didn’t go into that (and what policies are preferable) as I was going over length anyway. Let’s just say I’m in violent agreement with you on that one.

    A stupid (pork-barrel) policy, which in a few cases could lead to stupid outcomes. Conceivably. As your report points out, stuffing up the health system by flooding it at certain points is not good. But then again, shouldn’t hospitals be able to cope with peak events? Natural and unnatural disasters? Maybe this is a wake-up call of a different nature – for Abbott rather than Brough.


  2. I’ve been through a fair bit of government rhetoric on family spending – they are pretty careful in avoiding emphasising the fertility aspects of the baby bonus. It more reflects the PM’s general belief in supporting families.

    And yes, I think it should be abolished as well.


  3. Nice responses (esp the car seat comparison). Any thought as to whether you could potentially identify an actual (as opposed to likely) adverse health effect? I completely buy the idea that there could be problems, but having actual results would make it easier to accept – my guess is that the likely number would make it very hard to identify, though?

    Also, the research could be argued to be useful if it meant that hospitals were able to plan in advance for the likely spike in births next time around, and thereby avoid any adverse effects, albeit at the cost of overtime.


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