Parental leave: The Abbott thought

With the parental leave policy slowed in implementation due to the non-recession, Tony Abbott decides to lob a thought bomb into that sphere. He wants to potentially move to full salary parental leave. In my opinion, unless the policy really gives both parents equal rights there are some dangers in this, but in reality his speech identifies several things that are true. First, the Federal government’s proposed approach (while a step forward) is piecemeal relative to what we see elsewhere. Second, his plan which is to levy big business rather than require businesses to foot the parental leave bill themselves is a better way to do this. Third, he seemed careful to avoid favouring one parent or another although the speech did make International Women’s Day so there is some ambiguity there.

That said, this is far from an actual policy commitment but it does move Abbott to the left of the government and not necessarily in a way that brings with it stupid economics (unlike other areas we could mention). Nonetheless, let me remind all that, if we are happy to use public funds, then parental leave tax credits may be a funding route with far better incentives and something that will improve outcomes for women in the labour market.

9 thoughts on “Parental leave: The Abbott thought”

  1. Yes – but Tony is “on the nose” with women –  according to the opinion polls – which makes it hard to see this as anything but a cynical attempt to gain some traction with them.  It shows how much the Libs hate being in opposition – they will do and say anything to regain power.  Is this a core promise – or perhaps one of those grand ideas that will be discarded when he gets “better” information – after the election?


  2. Paid parental leave, great!  More hypothecated taxes and class exemptions (only “big” business pays), not so great.  Why can’t this just be funded out of consolidated revenue?  What is it with hypothecated taxes?  Are voters really fooled by them?
    I bet that, at the same time, Abbott will be arguing for lower corporation taxes.


  3. Roger, can you point to some evidence that Abbott is unpopular with women? The opinion polls seem pretty ambiguous on that question.


  4. It is a bold and risky political move – a lot of Labor (and Liberal) voters would love a parental leave program that is funded by ‘big’ business levies. I guess that Abbott is calculating that business will stick with the Liberals in whatever case.

    The HECS option mentioned in the paper on parental leave is a good alternative to levies. As my wife discovered, it is generally not the paid leave that is an issue but it is the perception of how serious the parent is abouting returning to the workforce. Instead of levying companies we should perhaps ‘incentivize’ firms (via the tax system or otherwise) to take women – and men – back into the workforce after a reasonable leave period, e.g. 12 months.

    Also mentioned in the paper on parental leave, the problem of adverse selection is a real one. I directly observed examples of of relatively new employees (working in a role less than a year prior to birth) departing on company-funded parental leave. This doesn’t sell the idea of company-paid leave to other employees from an equity perspective. As far as I know there is no legislative protection on the subject for companies currently and if they choose to enforce their own rules they could be subject to workplace discrimination, e.g. accidents do happen.


    Pinning it as making big business pay is just politics, its standard populist tactic.
    The key thing with paid parental leave is that the company shouldn’t have to pay for their own employee since that skews the employment incentives and frankly makes small companies nervous about hiring women of a certain age.
    Similarly eligibility for it should not depend on how long you have been at said employer, otherwise you end up with the perverse incentive of people staying just so they qualify for leave (possibly spending months/years trying is not uncommon).  I know quite a few places you need to have been employed for 3 years to qualify for the full benefits they offer.


  6. M,

    Agree with most of your comments. However the point about eligibility being a perverse incentive is true of every employee benefit on offer. Drucker called it the “golden handcuffs”. 


  7. Not sure why big businesses don’t count as businesses. But more importantly, what is the point of having the Henry tax review if the Labor Party won’t release the review, and the Liberal Party think that tax policy is best made via ridiculous thought bubbles from the Leader of the Opposition. I suppose it could be worse – at least Barnaby Joyce has learned to shut up.


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