It’s all about getting well-qualified women back into the workforce, not a means-tested handout.
With the release of the government’s childcare policy in response to Labor’s policy announced in last year’s budget reply, the analysis will quickly turn to which is better for working families. But it’s the reform dimension that matters most for the nation’s future.
While well-off blokes complain about their top marginal tax rate of 47 per cent, KPMG analysis https://assets.kpmg/content/dam/kpmg/au/pdf/2019/case-for-further-investment-in-child-care-subsidy-october-2019.pdf reveals that under the current system mothers face workforce disincentive rates of anywhere between 75 per cent and 120 per cent.
It’s these punishing workforce disincentives that are holding back women’s participation in the workforce and the productivity gains they would deliver to the nation.
Both the Coalition’s and Labor’s policies reduce these disincentives, the Coalition’s policy for 268,000 mothers and Labor’s for more than one million mothers.
The Coalition’s policy abolishes the childcare subsidy annual cap for high-income households, which is a good move that improves work incentives for 18,000 mothers. Labor’s policy removes the cap for all mothers.
The Coalition’s policy applies only for families who have two or more children under the age of five in childcare whereas Labor’s applies to families with one or more children in childcare.
On the other hand, the Coalition’s policy increases the maximum subsidy to 95 per cent whereas Labor’s increases it to 90 per cent.
The time mothers spend out of the workforce explains much of the gap between women and men in pay, income and superannuation payouts.
These gaps are not closing fast under existing policy settings. Based on the recent rates of reduction in the gender pay gap, still at 20 per cent, it will take until 2046 for it to be eliminated.
As a society, we need to recognise that we undervalue the unpaid work of women – having babies, caring for children in their infancy, doing housework and looking after elderly parents.
Women should not be treated as inferiors in the paid workforce simply because they have wombs.
We encourage women to obtain a good education, so much so that 58 per cent of students in higher education nowadays are women, but then we punish mothers for working more than three days per week.
And when women take Commonwealth paid parental leave, we deny them superannuation contributions, ensuring the gender superannuation gap remains wide open.
It need not be this way. While Labor’s and the Coalition’s childcare policies are moves in the right direction, the ultimate reform is a shift to universality.
A universal system would boost GDP by twice the budgetary cost.
That’s because the women who are being held back by the current system are, on average, younger and better skilled than the general population.
By choosing to work more hours, unimpeded by high workforce disincentive rates, these young, skilled women would boost both workforce participation and national productivity.
No one questions the universal availability of state-run schooling of Australian children. If wealthy parents want to send their children to a state-run school free of charge they’d be perfectly entitled to do so.
Yet if the child is four years old, not five, we apply means tests to working mothers based not just on their incomes but on those of their partners as well.
Neither Medicare nor the NDIS is means tested. Neither are state school or university education a handout. So why is childcare support still considered a welfare payment bestowed on women through the benevolence of a paternal government?
Labor’s budget reply announcement envisaged a move to universality over time. The Coalition’s policy is still based on the philosophy that the childcare subsidy is welfare, the government having criticised Labor’s policy for delivering substantial benefits to high-income households https://www.afr.com/politics/federal/morrison-attacks-labor-s-childcare-policy-as-too-generous-for-the-rich-20201009-p563k9
Only by moving over time to a universal childcare subsidy can we expect to see the full potential of working mothers being unlocked for the economy, unhindered by high workforce disincentives.
Craig Emerson is managing director of Emerson Economics, a distinguished fellow at the ANU, director the APEC Study Centre at RMIT and adjunct professor at Victoria University’s College of Business.