Paid parental leave change ‘a backward step’ that will leave women behind, say economists

Economists overwhelmingly believe the government’s proposed parental leave changes will not encourage more take up by fathers – and worse, they call it a backwards step for gender equality.

The government used Tuesday’s budget to announce plans to roll the existing 18 weeks of paid parental leave and two weeks of dad-and-partner pay into a single scheme, with families able to decide how to split the 20 weeks. Single parents could take the entire 20 weeks, adding a fortnight to their existing entitlement.

Ariane and Frederick Stark are still deciding how best to use the government’s paid parental leave offerings, but would like the scheme to be longer.Credit: Wolter Peeters

There’s also a change to the means testing, adding an option of a $350,000 household threshold to the existing limit of the mother earning $151,350, and fathers would be allowed to take the government leave as well as employer-funded entitlements.

Treasury has estimated 65,000 fathers and partners taking parental leave would benefit under the new scheme, expected to start in March next year.

But economists say it’s more likely that mothers will end up taking the entire 20 weeks since there’s no specific incentive for their partner to use the leave.

“This is a backward step. It’s not what’s recommended by the experts; it’s not what’s backed up by the international evidence,” Impact Economics’ lead economist Angela Jackson said.

New mother Ariane Stark is still working through how she and her husband Frederick will juggle leave when their baby arrives in the next few days.

They are considering whether to use flexibility arrangements introduced in mid-2020 to allow Ariane to transfer some of her leave entitlement to Frederick so she can return to work. But if they do that, the minimum wage on offer is only about a third of what he usually earns as a software developer, so they wouldn’t be able to afford it for long.

Ms Stark wants to see Australia’s parental leave extended beyond 20 weeks and better promote gender equality.

“We should aim for more of a Scandinavian model where a portion is assigned for the partner – except for single parents – to encourage a more equal use of the leave between parents,” she said.

Grattan Institute chief executive Danielle Wood said the new policy moved in the opposite direction from most countries around the world.

“My concern is that, under the guise of flexibility, we will actually go backwards in terms of the progress in trying to share care a bit more evenly between men and women,” she said.

International experiences show use-it-or-lose-it schemes, where a substantial portion of leave on offer is quarantined for fathers, are the best way to significantly boost take-up.

Women’s Economic Security Minister Jane Hume said the proposed changes would reflect the individual differences in every family situation.

“Giving families greater choice and flexibility about managing work and care will boost women’s workforce participation, and enhance their economic security,” she said.

Dr Jackson said choice sounded good, but “if you don’t design policy understanding how those choices are made, you risk inadvertently – or potentially intentionally – locking women into their role as society’s unpaid care workforce”.

Julie McKay, PwC’s chief diversity, inclusion and wellbeing officer, who is herself on parental leave currently, said while it was better for women if they ended up with two weeks extra leave under the changes, “it doesn’t shift that societal piece around how we actually get the role of men to change”.

The standout example for encouraging fathers to take paternity leave is Quebec, Canada, where the proportion of new dads taking leave rose to 80 per cent after it introduced five weeks specifically for them. Conversely, in Denmark when the fathers-only portion of the parental leave scheme was removed, the amount of time mothers spent on leave increased while uptake by partners stagnated.

But the government points to evidence in Australia that when private firms offer paid leave to both parents, fathers do use it.

The latest data from the Workplace Gender Equality Agency shows 60 per cent of large businesses offer paid parental leave. Men account for 12 per cent of those taking primary carer leave.

In 2020-21 there were 168,167 women who received taxpayer-funded parental leave pay. In the same year, 89,784 people used the Dad and Partner Pay Leave Scheme – just over half the number of mothers on leave.

RMIT economics lecturer Leonora Risse said it was important leave was offered, but unless the right incentives in place, there was no guarantee it would be taken up.

“Many men struggle with the decision to take parental leave, even if it is on offer, because they’re concerned about how they might be professionally perceived,” she said.

Ms Stark says she and her husband were both incredibly lucky to have workplaces that accepted their need to take leave.

“If [Frederick] was in a situation that a lot of my female friends and their partners are in, which is it’s not socially acceptable within the culture of the office to take the leave, then they wouldn’t. You hear that a lot in law firms or finance,” she said.

Labor is yet to announce its paid parental leave policy, although shadow treasurer Jim Chalmers said on Wednesday the party was up for a conversation about improving it.

The opposition’s social services spokeswoman Linda Burney labelled the government’s changes “just tinkering around the edges of a scheme they’ve tried five times to slash”.

Jacqueline Maley cuts through the noise of the federal election campaign with news, views and expert analysis. Sign up to our Australia Votes 2022 newsletter here.