The Abbott government's paid parental leave (PPL) scheme is unfair and expensive, and should be overhauled in favour of a loans scheme similar to the Higher Education Contributions Scheme (HECS), according to a new report from The Centre for Independent Studies.
'At a time when the Coalition government is talking about ending the "age of entitlement" and budget savings, it is extraordinary that they are proposing a scheme that would deliver large amounts of cash to the highest income families,' says CIS Research Fellow Matthew Taylor, author of Fairer Paid Parental Leave.
In 2012-13, the federal government spent $1.4 billion on statutory PPL, providing more than 130,000 parents with the equivalent of the full-time minimum wage. If the Coalition's PPL scheme is implemented, the annual cost of PPL will increase to more than $5 billion by 2016-17.
'Despite the Abbott government's claims that the scheme is a productivity measure, the additional $3 billion of expenditure will do nothing to increase women's labour force participation,' says Mr Taylor.
'Not only is the Coalition's PPL scheme excessively costly, it is also poorly targeted as many parents - especially those on high incomes - already have access to PPL from their employers.'
'The Coalition's PPL scheme is also unfair, giving $50,000 to women with incomes over $100,000, but only $16,172 to women earning the minimum wage - this takes money from low-income families and gives it to those who can afford to self-finance their parental leave.'
Mr Taylor argues that a Parental Leave Contribution Scheme (PLCS) would be a fairer and more sustainable approach than the current scheme and the Coalition government's alternative.
'Under a PLCS, money would be given to working families as a loan, which would begin to be repaid only once parents were earning above a minimum repayment threshold,' says Mr Taylor.
CIS modelling shows that under the proposed PLCS, a typical family with two children would pay off their loan within five to eight years, and would not pay more than 6% of their annual income towards the loan.
'Importantly, both parents would be responsible for the loan, with the higher-income earner paying the lion's share of repayments,' says Mr Taylor.
'A PLCS recognises the unpaid work of parents - usually mothers - who stay at home with a newborn during the parental leave period, and ensures that the primary income earning parent - usually the father - contributes to the cost.'
Matthew Taylor is a research fellow at The Centre for Independent Studies.He is available for comment.