ARPA: Policy re-born? The Productivity Commission's paid maternity leave proposal

On 29 September 2008, Australia may have moved a step closer to a universal paid parental leave scheme. On this day, the Productivity Commission released its draft report Paid Parental Leave: Support for Parents with Newborn Children. The Commission recommended eighteen weeks of paid maternity leave at the adult minimum wage, with an additional two weeks of paternity leave reserved for the father (or same sex partner). The same day, Prime Minister Rudd said:

Although some groups argued for a longer duration of paid leave at a higher rate of pay, the Productivity Commission proposal was, for the most part, received positively. Working women, community groups, unions, and sections of the business community supported in principle the broad shape of the scheme. Some details were to be clarified but it seemed that Australia would finally take its place with the rest of the developed world (excluding the United States) and introduce a paid parental leave scheme.

In early December, however, Deputy Prime Minister Julia Gillard and other members of government started to speak in more qualified terms, saying that an initiative like paid maternity leave would have to be considered in light of the financial crisis. At the time of writing, the situation is still uncertain. The Productivity Commission is completing its second round of community consultations and will make a final report to the government in early 2009. There is no doubt that the two Commissioners conducting the inquiry, Robert Fitzgerald and Angela MacRae, support the introduction of a paid parental scheme for Australia.

THE CURRENT STATE OF PAID MATERNITY LEAVE IN AUSTRALIA

It comes as a shock to many Australians and to most overseas scholars that Australia does not provide universal paid maternity leave. At present, sections 265 to 297 of the Workplace Relations Act 1996 (Cwlth) provide for unpaid ‘parental leave’ only. This is a period of 52 weeks available to be shared between a mother and her spouse at the birth or adoption of a child, with a guarantee of employment protection. The ten new National Employment Standards (NES) which will establish a floor of minimum employment conditions for all Australians, effective from January 2010, will increase this to 104 weeks per employee couple. If not shared between the parents, the primary carer will have the right to request an additional 52 weeks unpaid leave. However, there is no provision for paid maternity, paid paternity or paid parental leave in either the current Workplace Relations Act or the forthcoming National Employment Standards.

Under the current regime, access to paid maternity leave depends entirely on employer provision, with most of the public sector having access to between twelve and fourteen weeks paid maternity leave. Due to the different ways in which statistics are gathered, differing estimations of the provision of paid maternity leave exist. There is also a difference between data on the provision of paid maternity leave entitlements, and the actual use of paid maternity leave.

On provision, the Australian Bureau of Statistics (ABS) (2007) reports that 45 per cent of female employee said they had access to paid maternity leave. Based on these ABS figures, the Productivity Commission derived an ‘adjusted’ figure of 53 per cent of female employees having access to paid maternity leave (2008, xvi). This figure was arrived at by proportionally re-allocating the ‘did not know’ responses to ‘yes’ and ‘no’ responses (personal correspondence, Productivity Commission, 15 December 2008). Meanwhile, newly analysed data from the Workplace Research Centre’s data base of enterprise agreements, found that just 22 per cent of enterprise agreements include a paid maternity leave clause, and 16 per cent have a paid paternity leave clause (Baird et al. forthcoming). Finally, the Equal Opportunity for Women in the Workplace Agency (EOWA) (2008) reported that 48.9 per cent of organisations with 100 or more employees provide paid maternity leave.

On the actual use of paid maternity leave, data collected in 2005 found that paid maternity leave was used by just one-third of mothers at work. The Parental Leave in Australia Study found that 33.7 per cent of all mothers employed in the twelve months before the birth took some paid maternity leave (Whitehouse et al. 2006). In the same year, a survey by the ABS (2005) found that 34 per cent of mothers-to-be used paid maternity leave.

Overall then, conservative estimates suggest that about half of the female workforce does not have access to any paid maternity leave at all and approximately one-third of women actually use the entitlement. Further, the most significant distinction in entitlements is between the public and private sectors, with the diffusion of paid maternity leave to the private sector slow and piecemeal. Research also demonstrates that paid maternity leave is concentrated in the industries of finance, insurance, education and utilities and is largely absent from the female-dominated and low paid industries of retail and accommodation, cafes and restaurants (Baird et al. 2002; Baird et al. forthcoming).

In June 2002, in this very journal, I welcomed the Human Rights and Equal Opportunity Commission’s (HREOC) (2002a) discussion paper on paid maternity leave and endorsed its proposal to introduce a paid maternity leave scheme for all Australian working women. Later in the year, HREOC (2002b) recommended 14 weeks paid maternity leave. The then Howard Federal Government (1996–2007) rejected the proposal and advocated workplace bargaining as the means to gain paid maternity leave. A welfare payment of a ‘baby bonus’ was introduced for all new mothers. That payment was arguably pro-natalist and more about rewarding domesticity and fertility than recognising women’s market based work. As a result, the debate about the absence of a genuine paid maternity leave scheme which was related to employment and participation in the paid workforce in Australia continued and became an election issue.

The newly elected Rudd Labor Government moved early to announce a Productivity Commission inquiry into paid parental leave. After extensive public consultation and receiving many submissions, the Commission has recommended a paid parental leave scheme for Australia in its draft report. It is this model that I now review.

THE PRODUCTIVITY COMMISSION’S DRAFT PROPOSAL

The Productivity Commission intends its model for a paid maternity leave scheme to meet three objectives: ‘child and maternal health and wellbeing’, ‘female labour market attachment’, and ‘work/life balance and gender equity’. With these objectives, the Commission has signalled that they consider that paid maternity (and parental) leave is an employment-related entitlement and not a welfare payment. Thus, other elements of the proposed model follow: the proposed link with an employment related eligibility test, inclusion of a superannuation component, setting the employer as paymaster and developing some link to the NES.

Duration

The Productivity Commission’s draft report recommends eighteen weeks funded leave, with the noteworthy comment that longer leave is preferable and that employees would be able to access and combine with other types of leave to form a six to nine month period of paid maternity leave. In addition, the Commission recommends two weeks paid paternity leave. Significantly, in Australia, the issue of paid paternity leave has been far slower than paid maternity leave to enter the public debate and few men’s groups (if any) lobby for it. By introducing a paternity leave component the Commission extends the scope of the model beyond any proposed before in Australia.

Whether intended or not, the proposed period of leave has some coherence with existing Australian provisions and international standards. It is true that in the submissions to the Commission, some groups argued for much longer periods six to twelve months, while others, such as the Australian Council of Trade Unions argued for fourteen weeks. The quantum of paid maternity leave in Australian enterprise agreements currently falls into distinct groups of 6, 8, 12 and 14 weeks (Baird et al. forthcoming). Interestingly, fourteen weeks is now the most common duration in negotiated agreements, with nine weeks the most common duration in the private sector (Equal Opportunity for Women in the Workplace Agency 2008). The World Health Organization endorses sixteen weeks and the International Labour Organization endorses fourteen weeks, with a recommendation to increase to eighteen weeks. On 3 October 2008, the EU amended the Maternity Leave Directive (92/85/EEC) to eighteen weeks at 100 per cent income replacement, which is binding on member states.

The available research evidence from infant and maternal health and welfare studies provides a consistent and valid basis for the development of a parental leave policy that aspires to a period of 52 weeks paid leave (Berger & Belsky 2005; Gregg & Waldfogel 2005; Ruhm 2000; Tanaka 2005). In brief, the research shows that to reduce infant mortality and to best meet the health and welfare needs of infants and mothers, a period of sixteen to 26 weeks paid maternity leave is required. Additional leave up to one year further enhances child health and behavioural outcomes and maternal wellbeing. On the basis of these studies, health researchers and international bodies regard 26 weeks paid maternity leave as acceptable, because this is the point at which the health outcomes for baby and mother are more positive than negative. Most recently, the UNICEF (2008) report card puts one year’s paid parental leave at 50 per cent of wages as the first criteria of a country’s necessary early childhood services.

An additional period of pre-natal leave may also be necessary for some mothers, especially those in physically demanding jobs. The issue of pre-natal leave was not included in the Commission’s draft recommendations, but comparative study shows that many countries build in an option to take leave before birth. For example, in the United Kingdom, eleven weeks may be taken prior to the expected birth date; in Belgium, six weeks, and in Canada, between eleven and seventeen weeks. Some countries make pre-birth leave compulsory, but this would be against the spirit of Australian legislation. However, it is worth considering the option of including a period of ante-natal leave into the total entitlement. To maintain a reasonable period of post-birth leave, the total length of leave would need to be extended to at least twenty weeks, and preferable 26 weeks, allowing for the option of 20 weeks post birth and six weeks pre-birth leave.

International research is unequivocal about what is required to enable fathers to participate in child-rearing: a period of designated paid paternity leave. The Commission has recommended two weeks designated paid paternity leave for Australian fathers. For a proportion of fathers this would double their current entitlement (of one week) and for the majority it would introduce a completely new entitlement.

In sum, the Commissions recommended leave periods compare reasonably well with international conventions and other countries. Although some groups have argued for longer paid maternity leave, an extension of the maternity leave component may not be advantageous. Evidence suggests longer periods of gender-specific maternity leave lead to bias against women and further entrench the inequitable distribution of labour in the home and the labour market (Himmelweit 2007). Having sounded that warning, however, mechanisms or plans for the extension of paid parental leave periods for all employees would not necessarily have the same effect, so long as schemes are funded at income replacement levels.

Payment level

In its draft report the Productivity Commission recommends that during the leave period all eligible parents be paid at the equivalent of the federal, adult, minimum wage which at present is $543.78 per week. Juniors and trainees would receive less. To meet the labour market objectives of the scheme, the recommended rate of payment is set above welfare payments, and would be treated as income and so taxable. Employers would be expected to contribute the superannuation component of parents on leave, but this is the only compulsory contribution expected from employers.

The Commission calculates the net cost to the government of such a scheme at $450 million per year. While the Commission has taken into account the offsets from reduced social welfare payments (including removal of the baby bonus for employed parents using the scheme) and the tax revenue from paid leave, other offsets such as reduced need for subsidised child care may also be expected.

The proposed minimum, flat rate scheme is not surprising given that government funding is the primary source. As the Commission calculates, those most in need are low income workers, and for many the level of payment at the minimum wage would equal, or even exceed, their current earnings. The rationale here is to ensure that there is an advantage in remaining attached to the workforce and not an incentive to move to welfare based payments.

There is considerable consensus in the international research on the impact of maternity and paternity leave policies on gender equity. While there is less specific research on class equity, again, the findings are consistent. In brief, leave taking is highly gendered and is taken by women more than men. Leave taking is also class-based, with low income earners having less chance of taking longer leaves, principally for financial reasons. The Parental Leave in Australia Study (Whitehouse et al. 2006) also found that the two main reasons women returned to work were lack of paid leave and financial need.

Income replacement is the most effective way of addressing equity issues and although it does not eliminate class and gender inequities, it does address them. Most current negotiated agreements and company-initiated policies currently ensure wage replacement. To ensure that this is maintained, a system of employer top-ups will need to be encouraged or enforced, otherwise some women will be worse off if the proposed scheme is introduced. Moss and O’Brien (2006) note that it is only when part of a family’s paid parental leave entitlement is designated for fathers only, and the rate of benefit is high, do fathers appear to take the leave to any great extent. It is widely recognised that men will not, or cannot, take leave unless there is a high level of income replacement, and so if gender equity is to be a goal of Australia’s model, then mechanisms to ensure this, also need to be in place.

Eligibility

One of the aims of any scheme should be to provide all working women with access to paid maternity leave. In particular, a scheme must reach the estimated 50 per cent of working women who currently have no access to paid maternity leave. The Productivity Commission recommends that women who have worked an average of 10 hours work per week with any number of employers over the previous 12 months should be eligible. The employment test would include casuals, self employed and contract workers.

In the Australian labour market women work in higher proportions than men in casual and part-time jobs, and so any criteria that exclude certain groups could be detrimental to women’s access to paid maternity leave. The relatively broad eligibility criteria suggested by the Commission would mean that the proposed scheme would cover many female employees. However, some categories may still be overlooked. For example, one submission points out that to cover cadetships and traineeships and to align with other government policies the average hour requirement should be reduced to 8 hours per week (Milroy & Cutcher 2008). The economic downturn also highlights the precarious nature of many people’s employment and the anticipated reduction in average hours may preclude some women from accessing paid maternity leave if the draft recommendations became effective.

Funding

One of the most controversial and most frequently commented on aspects of paid maternity leave schemes is the funding. The Productivity Commission recommends the scheme be funded by the federal government with a small contribution made from employers in the form of superannuation to eligible employees while on leave. Submissions to the Commission suggested alternative funding arrangements, such as fully employer funded and pooled funding schemes, but the Commission decided in favour of simplicity and security of approach (p. 2.9).

Any direct comparisons with funding arrangements in other countries need to be made with caution. Cross-country comparisons are difficult to make because the quantum of the maternity leave benefit differs according to each country’s tax regime and other social security measures. Paid maternity leave systems in most other countries are funded via social insurance schemes run by the state where employees (and the self-employed) pay contributions from their earnings into the fund and/or employers and the state also contribute to this pooled fund. These contributions may also fund other social insurance financed benefits, particularly sickness benefits.

Given the proposed Australian scheme is government funded at minimum wages, two specific areas of concern arise. One is how to ensure that women who do earn more than minimum wages are able to achieve income replacement for the time they are on maternity leave so that they are not financially disadvantaged relative to their male peers by taking maternity leave. The most likely mechanism would be through employer top-ups, but these would have to be negotiated individually or collectively, or left to the discretion of the employer. This is not an entirely satisfactory outcome because it means that certain groups may be disadvantaged or that paid maternity leave will be traded off against other entitlements as has happened in the past (Baird 2003). A second is how the scheme will interact with existing entitlements, whether they are by management discretion or union negotiated. It is important to ensure that employees are not worse off with a government funded scheme or that employers relinquish their responsibility to continue their contributions or current commitments to paid maternity or parental leave in any way. Some mechanism to guarantee continued employer involvement may need to be considered. In the current environment exactly how employers will respond is open to speculation. Already some retail companies such as Myer and Aldi have acted unilaterally and offered paid maternity leave to their employees; whereas other companies appear to be waiting to see what the government’s policy will be before making decisions about extending or altering their current arrangements.

Other considerations

There is no doubt that the introduction of a new parental leave scheme raises many questions and concerns. I have addressed some of the major questions above, but there are many more, not least of which is how the scheme will interact with the taxation and family payments systems. The Commission does touch on these issues in the report and they will undoubtedly be raised again in the review of the Australian taxation system (the Henry review). But there are other matters that do not receive quite the same attention and to which I now turn briefly.

The Parental Leave in Australia Study has shown that employees and managers consider parental leave polices as comprised of three essentially interrelated parts: the actual leave policy, the ‘stay in touch’ policy, and the return to work policy. Most employees and managers are aware of their organisation’s policies. The second two components are less well practiced but are important to working parents. Stay in touch policies allow and encourage employees and employers to maintain contact and stay informed of company changes while the employee is on maternity leave. The return to work policy is crucial to women’s continued workforce attachment and in many cases women prefer to return in some part-time capacity for the period immediately after maternity leave. Another new standard in the NES will be the right to request flexible working arrangement and so the Commission and the government would be wise to consider the way in which any new scheme will interact with the new standard to ensure that both the most is made of the new policy and that women are not discriminated against or unfairly treated in job allocation when they return to work.

Adequate provision of high quality child care is another obvious component of a total policy. Child care was not part of the terms of reference of the Productivity Commission’s inquiry, but with the current child care ‘crisis’ some consideration of how the parental leave policies intersect with child care is urgently needed.

Another factor that requires consideration is how employers and employees are to be informed of, and educated about, any new scheme. The Californian experience of introducing a new parental leave model has demonstrated this is absolutely necessary if those in greatest need are to receive the benefits (Milkman, in press). In the Californian case, all employees pay into a scheme but those on low incomes and in more precarious jobs were most likely to not know of the scheme and thus not to access their entitlement. Our own research in Australia also suggests that knowledge of entitlements and awareness of the difference between company policy and public policy is often less than might be expected.

Finally, monitoring and evaluation of any scheme are required to assess not only the success and uptake but also the implications for gender equity, workforce attachment and interaction with employer initiated schemes over the immediate and longer terms.

CONCLUSION

The Productivity Commission heard and received more than 250 submissions in the first phase of the review, and a further 160 in the second phase of consultations after the release of the draft proposal. The consultation process highlighted paid parental leave and has arguably raised expectations for improvement. In contrast with previous community consultation processes by the Human Rights Commission, the degree of agreement between business, community and union groups and support for a government funded scheme has been considerably greater. For example, in a noteworthy joint press release, three female leaders, Heather Ridout of the Australian Industry Group, Sharan Burrow of the ACTU and Elizabeth Broderick of the Human Rights Commission, all supported a government funded scheme. In addition, various community and women’s groups have supported the call for a nationally paid maternity leave scheme.

Given the recognised time and income pressures on Australian working families, some persisting labour market capacity shortfalls, and the need to provide stimulus to the economy, this is an opportune moment to address the lack of paid maternity, paternity and parental leave across Australia. Notwithstanding the need to consider a total work-family-care policy package, the lack of a universal paid maternity, paternity and parental leave scheme available is a clear and obvious flaw in current public policy and one that should be, and can be, rectified in the immediate future. The Productivity Commission has now finalised its public deliberations and will present a report to the federal Government in early February 2009. It will then be up to the Government to make a decision. There have been fewer dissenting voices this time round and unfortunately it may be that the global financial crisis will be the main impediment to finally introducing a scheme. One hopes, however, that the Productivity Commission’s work will not be totally dismissed because of budgetary pressures and that the baby will not be thrown out with the bath water. If the full scheme cannot be introduced in the first instance, then a staged process is an option that the Government could consider.

REFERENCES

Australian Bureau of Statistics 2008, Employee Earnings, Benefits and Trade Union Membership, Australia, August 2007, Cat. no. 6105.0, Australian Bureau of Statistics, Canberra.

Australian Bureau of Statistics 2005, Pregnancy and Employment Transitions, Cat. no. 4913.0, Australian Bureau of Statistics, Canberra.

Baird, M., Brennan, D & Cutcher, L. 2002, ‘A pregnant pause: Paid maternity leave in Australia’, Labour & Industry, vol. 13, no. 1, pp.1–19.

Baird, M. 2003, ‘Paid maternity leave: The good, the bad, the ugly’, Australian Bulletin of Labour, vol. 29, no. 1, pp. 97–109.

Baird, M., Frino, B. & Williamson, S. ‘Bargaining on paid maternity leave’, Australian Bulletin of Labour, (forthcoming).

Berger, L., & Belsky, J. 2006, ‘Early child care and early child development: Major findings of the NICHD study of early child care’, European Journal of Developmental Psychology, vol. 3, no. 1, pp. 95–110.

Gregg, P. & Waldfogel, J. 2005, ‘Symposium on parental leave, early maternal employment and child outcomes: Introduction’, The Economic Journal, vol. 115 (February), F1–F6.

Milkman, R. (in press), ‘Class disparities, market fundamentalism and work-family policy: Lessons from California’, in Institutions for Gender Egalitarianism: Creating the Conditions for Egalitarian Dual Earner/Dual Caregiver Families, eds E. Olin Wright, J. Gornick & M. Meyers, Verso, New York.

Moss, P., & O’Brien, M. (eds) 2006, International Review of Leave Policies and Related Research 2006, Employment Relations Research Series No 57, Department of Trade and Industry, United Kingdom.

Ruhm, C. 2000, ‘Parental leave and child health’, Journal of Health Economics, vol.19, no. 6, pp. 931–960.

Tanaka, S. 2005, ‘Parental leave and child health across OECD countries’, The Economic Journal, vol. 115 (February), F7–F28.

Marian Baird is Associate Professor in the discipline of Work and Organisational Studies at The University of Sydney. Her research is in the fields of women, work and family and industrial relations. Marian’s specific research focus is maternity leave and she is a lead investigator on The Parental Leave in Australia Study.

View other articles by Marian Baird:

Why the States Matter in Industrial Relations (Digest, 19 Sep 2005)
Paid Maternity Leave in Australia (Digest, 14 Jun 2002)

Policy re-born? The Productivity Commission's paid maternity leave proposal

INTRODUCTION