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Community Affairs Legislation Committee

BAIRD, Professor Marian Pam, Private capacity

HERON, Ms Alexandra, Research Associate, Women, Work and Leadership Group, the University of Sydney Business School

KALB, Professor Guyonne, Private capacity

PAYNE, Professor A Abigail, Private capacity

SCOTT, Professor Andrew, Private capacity

Committee met at 08:40

Evidence from Professor Baird and Ms Heron taken via teleconference—

CHAIR ( Senator Duniam ): I declare open this public hearing of the committee's inquiry into the Fairer Paid Parental Leave Bill 2016, and I welcome everyone here today. I thank everyone who has made a submission to this inquiry. This is a public hearing, and a Hansard transcript of the proceedings is being made. The audio of this public hearing is also being broadcast via the internet. Before the committee starts taking evidence, I remind all present here today that, in giving evidence to the committee, witnesses are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to the committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to the committee. The committee prefers all evidence to be given in public, but under the Senate's resolutions witnesses do have the right to request to be heard in private session. It is important that witnesses give the committee notice if they intend to ask to give evidence in private. If you are a witness here today and you intend to request to give evidence in private, please speak to the secretariat staff as soon as possible.

I welcome representatives of the Women, Work and Leadership Group via teleconference. That is Professor Marian Baird and Ms Alex Heron. I also welcome Professor Andrew Scott, Professor Guyonne Kalb and Professor Abigail Payne. Do you have any comments to make on the capacity in which you appear?

Prof. Baird : I am Professor of Gender and Employment Relations at the University of Sydney and co-author [inaudible]

CHAIR: We are having a bit of difficult hearing you, so we might come back to you and see if we can do anything about the line.

Prof. Scott : I am from Deakin University but I am appearing as an individual with policy knowledge and expertise in this subject.

Prof. Payne : I am a director of the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne and I am appearing as an individual with policy knowledge.

Prof. Kalb : I am also at the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne. This is an area of research for me, so I am appearing as an individual with expertise.

CHAIR: Professor Baird and Ms Heron, I am sorry to do this to you. I think you are going to have to take your phone off speaker and may, as you wish to contribute—

Prof. Baird : Okay. It is just going to make it hard for us both to hear.

CHAIR: Yes, unfortunately. It is almost impossible to pick up the full thrust of what you are saying at this end, sorry. If you could do that, that would be very helpful.

Prof. Baird : Yes. Can you hear me now? I am not on speaker.

CHAIR: Yes. That is much better. I think we did get the last statement from you, so we will move on from there. I just need to ask all of the witnesses that they can confirm that they have received information on parliamentary privilege and the protection of witnesses. That has been provided to you all? Yes. And, on the line, you have received that information?

Prof. Baird : Yes.

CHAIR: Excellent. The committee has your submissions. We will start with short opening statements, and then we will proceed to questions from the committee. Professor Baird and Ms Heron, would you like to make your opening statements?

Prof. Baird : Yes. I just want to clarify that I will speak on behalf of both myself and Ms Alexandra Heron because, unfortunately, given the telephone system, she cannot hear what you are saying.

CHAIR: That is fine. If that is acceptable to both of you, then we will proceed down that path.

Prof. Baird : Is that acceptable to you?

Ms Heron : Yes, that is fine.

Prof. Baird : As you know from our submission, we have been researching in this area for some time and have been involved in the development and evaluation of the paid parental leave policy since its inception. We would like to argue that there is no evidence for a policy change, both in terms of the level of payment and the cessation of the employer paymaster role. The research that has been conducted shows that the policy to date has been very successful in delaying the return to work of mothers who have in the past returned too early for their own and their newborns' wellbeing. The policy has also been successful in encouraging women back to work before the end of the crucial 12 months after which being away from work can be damaging to their careers.

Our modelling also shows that these proposed changes will definitely reduce income for women, many of whom are in low-paid positions. Although they may receive some paid parental leave from their employer, they will be disadvantaged considerably. Returning to work earlier, therefore, is bound to impact on the childcare system, and we do not believe this has been thought through in terms of the costs both to the health and wellbeing of mothers and to the childcare system itself.

We also know that Australia will become once again out of step with international trends if we go backwards in terms of this policy and that around the world there is considerable interest in at least holding the line on parental leave rights and policies, or even extending them. There is potential, as a result of this policy, to reverse the positive impacts of the current scheme on women's and their infants' health incomes, and we note that these suggested changes will impact women more than men and, therefore, the changes are not equitable. We know that over 99 per cent of the current users of the scheme are women and that, as a result, they will be the ones adversely impacted by the scheme.

Finally, the assumption of savings that the government makes rests on employers not removing their own paid parental leave schemes. Yet we suggest this is a huge unknown, and we do not know whether employers will continue to pay these benefits to their employees. Until we know the outcome of those, we cannot be sure that the savings that are projected will in fact be made.

CHAIR: Thank you very much, Professor Baird. Would any of the witnesses at the table like to make an opening statement?

Prof. Scott : Senators, thank you for the opportunity to appear. I want to emphasise that Australia's existing paid parental leave program, firstly, has only been in place for a few years. We are the second-last Western country to introduce a national paid parental leave program; America has yet to do so. It is a very modest program by international standards. I am particularly interested in the fact that overseas evidence shows that workforce participation by women increases with extensive paid parental leave rather than decreases because, if you give people time when they most need it—and obviously, the birth of a child is a key transition in anyone's life, both for mothers and fathers as well as for children—and they have the necessary amount of time, then they can return to the workforce, having had that crucial time for bonding, breastfeeding and other early development. There is also a lot of uncertainty created by this proposed policy change. Uncertainty is not a good thing for parents, who need to predict the complexities of taking on the huge new responsibility. This is also an area, I think, where there is potential for multi-party consensus on policy, of the kind that Senate committees where you have this range of representation can perhaps achieve.

Parents have to manage many disruptions to their working lives in order to avoid dropping out of the paid workforce. The costs of child care in Australia are high. Some people make calculations that it is better not to return to work because it is simply not worth the effort or the expense. If we want women to return to work, we need to give them the time out from the workforce at the time that that matters most. Perhaps, as the only male presenter this morning, I should also say something about paternity leave, which is part of the existing program. The evidence that the inquiries—which both Marion Baird and Guyonne Kalb have participated in—is that paternity leave has increased. The introduction of the Dad and Partner Pay has increased the amount of time, slightly, that fathers spend with their children. It would be very backward for a program which includes some—minimal—paid paternity leave to then be unravelled so early in its life, in a way that will stop that very modest progress in Australia. It is interesting to note that only two per cent of Australian men take paid parental leave. More than 40 per cent of men in some Nordic countries do—and those countries are democratic, robust democracies which fully support women's participation in the workforce and in leadership. Where those paid parental leave programs have been in place for some decades, among the beneficiaries are business, because they do not lose skilled, experienced and valuable employees. Those employees who have been given consideration in their family lives are more likely to return to the workforce after the time with their child at home.

There are a lot of problems with work-life balance in Australia. Gender equality is one of the key issues here. Australia is 20th on the gender equality table; Sweden is first. We do not aspire to be 20th in many international comparisons, the Olympics and so on: could we be higher? We certainly could. First of all, women are much more likely to rise to positions of national leadership, board leadership, and so on if they are able to participate in the paid workforce—if the burden of raising a child does not fall so heavily upon them. Paid parental leave prompts significantly higher rates of return to work in the long run, and higher rates of workforce participation, which is a concern for Australia, which is below the leading countries, and a concern for particular states of Australia with problems of workforce participation—states I know are represented on the committee, including Tasmania—your state, Chair—and South Australia—your state, Senator Kakoschke-Moore. That is all I will say at this point, but I am happy to elaborate.

Prof. Kalb : Thank you very much for the opportunity to appear at this hearing. We wanted to use this opening presentation to highlight our most important concerns from our submission.

Although we were pleased to see the additional flexibility in determining eligibility for paid parental leave, we were concerned to see a number of things. The first of those was the proposed shift away from the employer with regard to the responsibility for payment of PLP. There are two reasons for our concern regarding this. First of all, it weakens the link between the employer and the employee while the employee is on paid leave, and this may have an impact on return to work in the first year. This connection between the employer and the employee seems to be an underappreciated component of paid parental leave. The second reason for concern is that payment being made by the Department of Human Services will make it look more like a welfare payment rather than a work entitlement. That could have an impact on labour force participation, as well. There is some evidence from Germany that shows that there are differences in how people respond to paid leave, depending on what the set-up of the leave is.

Our second concern with the proposed bill is with the proposed reduction in the PLP based on employer-provided paid leave. This is because it takes away the opportunity of the employer to use the PLP as a starting point to build upon. Secondly, the proposed changes make the PLP much more complicated and, as Andrew Scott was explaining, uncertainty about payments can be detrimental. The third reason why this is a concern to us is that it applies income testing in a very unusual way—compared with income testing in a lot of other situations in Australia, it is much less linked to the actual income of people, so it can have adverse effects on relatively low-income people. And they are the ones who probably most need this paid parental leave provided by the government.

Our third concern is that the new scheme further reduces the generosity of paid leave in Australia. Australia, as pointed out by the previous speakers, is already quite low on the ranking—amongst the OECD countries it is the second-last in the rankings. The only country below it is the US, which does not have universal paid parental leave. I think further reducing it really makes us look even worse. One of the thoughts I had about this is whether there is a need for a different source of funding; whether the source of funding is one of the reasons why this is so hotly debated in Australia, even though it was a great success when it was introduced. I think that that is one thing that maybe needs some thought as well. I would like to leave it at that. Thank you.

CHAIR: Professor Payne, did you want to make an opening statement, as well?

Prof. Payne : No.

CHAIR: That is fine. Well covered. Excellent. We will proceed to questions now.

Senator WATT: Thanks to everyone for coming along today. A number of you have raised, both in your submissions and in your evidence today, the potential impact on women's workforce participation if these changes go through. Is any of you aware of any modelling that has been conducted which can put any sort of figures around that, whether it be based on what has happened overseas or in terms of this proposal? If not, would anyone like to elaborate on the potential impacts on workforce participation?

Prof. Kalb : I think there is a lot of overseas research that actually points to this. I think there is some balance between the length of paid parental leave and the generosity of paid parental leave, and it will have a different impact on labour force participation. I think the international evidence points to paid leave of up to one year as being quite good for labour force participation. Longer paid parental leave might have a more negative impact due to women staying out of the labour force for longer periods of time, which makes it more difficult to return and more difficult to return at the same level as they left when they had their child. So there seems to be some balance, but that balance at 18 weeks, I think, is much further down the track. Up to one year, I think most of the studies overseas have shown that women who have access to such types of paid parental leave are more likely to return, usually to their own employer. So that is the other impact: it is not just returning to work but it is actually returning to the employer you were with before you left to have your child. I think that is another important component for long term.

Senator WATT: So if anything even the current scheme, which provides 18 weeks, does not achieve the optimal result in terms of workforce participation and getting women back into work, and any move to reduce the amount of PPL below 18 weeks could very well harm women's workforce participation?

Prof. Kalb : Yes, that is right.

Prof. Baird : Could I speak here? Just to support what the other two speakers have noted, we also know from the evaluation of the scheme—this is our own Australian data, of course—that the scheme did affect the return-to-work patterns of mothers. Fewer mothers returned to work by 18 weeks but it increased the return to work by 12 months. So it has had a positive impact at both ends, if you like. It has enabled mothers to stay at home longer when they have very young infants, enabling them to establish the breastfeeding and bonding—and we also know that that increases the long-term health and welfare outcomes for mothers and babies—but it also did have a slight impact on increasing the return-to-work rates before 12 months.

I should just note here that there is a growing body of literature that does suggest that 12 months is a critical turning point and that longer out of the workforce for women may impact their participation rates. But 12 months is acceptable for employers and it does seem to be manageable for women to return to work, noting that in Australia they do return to work in a part-time capacity, typically.

Senator WATT: Just building on this point around workforce participation, I have certainly seen a lot of research, not just in Australia but overseas, that one of the best things that governments can do to assist with economic growth and building prosperity generally is to increase workforce participation by women. So I imagine it flows that if this proposal goes through and reduces women's workforce participation then not only is that a detrimental outcome for the woman involved, her family and her child but it also would have a negative effect on the economy more broadly. Is that a fair assumption?

Prof. Scott : And therefore in terms of national revenue for spending on other programs, as well as the skills base of the nation, the loss of experience in the paid workforce and so on.

Prof. Kalb : Maybe to provide the statistics from some of the Nordic countries: when you compare labour force participation of women who have a child under the age of five, we are 20 percentage points lower participation for women than Sweden, who are at the top of the rankings. I think that is quite a large gap. When we look at women without children, such a gap does not really exist. So I think there is a real, clear impact from children that is much larger in Australia than in some of these Nordic countries, where they have much more facilitation around having children while working.

Senator WATT: I do not know whether any of you know the statistics around this well enough off the top of your head to quantify this but I imagine, if work has been done to quantify the positive effect on the economy of lifting women's workforce participation, it would be possible to quantify what the adverse effect on the economy would be as a result of these measures. Do any of the witnesses here know those statistics well enough? Or perhaps we could get some more research done around that.

Prof. Scott : The OECD Employment Outlook annual report shows participation by country fairly clearly. It would not be difficult to quantify from that how many dollars are lost, how much economic activity is lost, by the kind of huge gap that Guyonne mentioned between, say, Sweden and Australia of 20 percentage points in participation. It is a huge loss in Australia's potential productivity and, as I mentioned, revenue, so the exact numbers can be computed from that OECD publication.

Prof. Baird : I apologise: it is a bit hard to participate when I cannot see what is going on. The other source of data on that is the Grattan Institute analysis, which does calculate the increase in GDP as a result of each percentage point in women's workforce participation. So I think you can infer from that the cost of not assisting women to participate in the workforce.

Senator WATT: I was actually thinking of that Grattan Institute study when I was asking about that, so I might have another look. One of the allegations made by proponents of the these changes—there has been that suggestion around double dipping and that these changes would parliament impact higher-paid women, and therefore we should not really care about it so much is the sort of implication. Again, a number of you have mentioned that, in actual fact, these changes are likely to have a detrimental impact on lower-paid and middle-income women and families. Would anyone like to elaborate a little more on that?

Prof. Baird : I would like to.

Senator WATT: Go for it.

Prof. Baird : The first point I think is it is very important to note that the Productivity Commission designed or suggested the design and architecture of the scheme be based on a combination of government contribution and employer contribution in order to enable women and families to reach the recommendation of the World Health Organization of 26 weeks. So that was actually designed into the scheme, and I think any suggestion that women were double dipping is really egregious and erroneous, because that was the design and that was the expectation. That was really to try and move Australia from its incredibly low ranking in terms of a parental leave scheme to something that at least matched some of the other countries around the world. So that is the first part.

The design of the scheme is a unique one for Australia, remembering we have a different sort of a social assurance system to other countries, so that is quite an important factor. That links back to that earlier point about the role of employers in the scheme. I think it is really important to stress that connection between employer pay administrator and providing that link does continue that notion that this is a workforce entitlement and not a welfare entitlement, which, as we know from all the studies, does contribute to women's sense of being a worker and not just a welfare recipient and it increases their orientation to work and connection to work rather than separates them from work. So that is important.

But then, if we look at the design of the scheme and the impact on different groups, if we take women in fairly typical female occupations—retail, nursing, teaching and other allied health services—we can see that they have over the past perhaps five to ten years managed to get some employer-paid parental leave but often that is not a huge amount. We did some modelling around this. For a mother who works in retail for a major company, for example in Tasmania, the employer provision is six weeks of employer paid parental leave. Under this proposed model that six weeks would be deducted from the government amount and that employee would therefore lose a considerable amount of money—they would lose six weeks multiplied by the current minimum wage of $672—so it is not just high income earners who are going to be affected. We are particularly concerned about those women on moderate to low incomes who will actually be really seriously affected by this change.

Prof. Kalb : I have to agree with that. I think it is these particular groups, the main breadwinners and single parents, that will probably suffer to a fairly large extent. They may have relatively low employer paid parental leave. If they then lose part of the government provided paid parental leave, they might feel more pressure to return to work more quickly because the household income is really dependent on them, and those groups are not necessarily highly paid women.

Senator KAKOSCHKE-MOORE: My first question is to you, Professor Kalb. In your submission you propose that the paid parental leave scheme in Australia could move to a social insurance revenue scheme, as opposed to a general tax revenue scheme. I wonder if you could provide a little bit more detail about what you think the social insurance scheme would look like here.

Prof. Kalb : What I had in mind was a very simple scheme. I was thinking of some of the European countries and how they organise their systems. Basically it would involve paying a premium on your employment income, and this could be partly paid by employers and partly paid by employees. It would be paid by all people who are working and basically build up this resource from which maternity and paternity leave can be paid. I think one of the advantages of that would be that there would be less confused discussions.

One of the feelings I have when I listen to the debate in the media and in politics is that people seem to be unsure of whether it is welfare or whether it is a work entitlement. I think making it an insurance based scheme would make it much more clearly a work entitlement and would make it much more sustainable and safer from aims to reduce the amount of paid parental leave, and so that is why I put it in at the end. Yes, I think there have been a few years of this type of debate, and, when I compare Australia to the other countries who have paid parental leave with, most of the other countries have a different way of resourcing the paid parental leave. So one of the thoughts I have is: would that be one reason why we are having this debate, even though paid parental leave, in my view, has been very successful in achieving the goals that were set when it was introduced?

Senator KAKOSCHKE-MOORE: Under the proposed social insurance scheme, would you imagine women would access up to 26 weeks at the minimum wage? What are the parameters you would imagine in that scheme?

Prof. Kalb : Flexibility, of course, depends on how much premium you pay, so, the more generous it is, the more premium you have to pay. There would have to be some actuarial workers who would work out the details of that, but I imagine that it would not be less than this. Ideally it would actually be linked to women's earnings before they had their child because that is one of the things that, in many countries, has shown to reinforce the return to work down the track. It is a bigger reduction in income when the payment actually stops, and that can be a trigger. If the trigger happens at the right time—when women are actually ready to return to work—then that could be a clear incentive to return to work and could have many positive impacts.

Senator KAKOSCHKE-MOORE: Do any of the other witnesses want to make a comment on that?

Prof. Payne : If you think in terms of appearances of a social insurance, what Guyonne has proposed is that it would be a tax or a scheme that all employees would participate in. The message that the Australian government would be sending is that we value a good environment for children within the first few months of their birth as well as the mother's wellbeing. This should be a universal respect that we want to promote and so, as a whole, we are promoting a healthy start for both the child and the mother. It is not just the financial aspects but it is also the appearance aspect of what such a scheme might represent.

Prof. Scott : I think there is merit in discussing such a notion but it would be important that it is discussed in the context of at least maintaining the current level of paid parental leave—of possibly increasing it, not in the context of reducing it. You mention 26 weeks, which is the figure that the World Health Organisation gives as the amount of time necessary for the health and wellbeing of mothers and children—for them to have exclusively one another for their best development. At the moment we are at 18 weeks and there is the possibility of that diminishing. That is not the right context to discuss further major changes. If there is some agreement on at least maintaining the existing paid parental leave program, then funding it in the fairest possible manner is certainly open for discussion. That could involve some changes.

Senator KAKOSCHKE-MOORE: In your opening statement, Professor Kalb, you made the comment that what the government is proposing underappreciates the relationship between an employer and an employee insofar as the payment mechanism is concerned. Can you drill down a little bit more about how this underappreciates that relationship.

Prof. Kalb : Yes, I think moving away the responsibility for payment removes the direct link that the employer and employee had while the employee was on leave—having the payments paid on a fortnightly basis as they would have received their salary. In addition, the payment produced a way to have the employer and employee keep in contact. The original proposal was for the employee and employer to keep in touch over this period and for the employee to come in maybe in the afternoon or morning during that time that she was on leave without losing the paid parental leave. Those arrangements meant that there was more discussion about when she would return to work, how she would return to work and how it could be done. There was more involvement in decisions that were taken while she was away, so she does not come back and find everything has changed.

It is very hard to quantify. I am not saying that we could prove with certainty that this had an impact, but there is definitely evidence from the evaluation that seems to point in the direction that this relationship had some impact on the return to work by mothers after the paid parental leave was introduced.

Prof. Payne : Adding on to that, is it that you just want mothers to return to work or do you want mothers to return to work potentially to the same employer? Is there value in assisting and strengthening the employer-employee relationship? That is part of that point.

Prof. Kalb : Yes. I think that was one of the findings as well—that they actually did return more often to their own employer, which usually has a positive impact on the type of occupation, the level of occupation, that they would return to. So the conditions of work would be similar to what they were before they went on leave, which can have a longer term positive impact on their careers as well.

Senator KAKOSCHKE-MOORE: Professor Scott, in your opening statement you spoke about how Australia's Paid Parental Leave scheme is quite modest by international standards. Can you expand on that just a little?

Prof. Scott : Australia, as I mentioned, was the second-last country to introduce a national paid parental leave program. America is the only one without one in the Western world, to use that term. The degree of difference—I mentioned Sweden a couple of times. Sweden actually has 16 months paid parental leave, which is more than the 12 months indicated as a possible benchmark for disincentive for return to work. Interestingly, of that, two months must be taken by the father; otherwise, the family loses that two-month entitlement. That would be quite a radical, controversial idea to push in Australia, of course, but it does happen and it does work there. There are many benefits proven for both fathers and their children to have more hours spent together, closer time, particularly in those early weeks and months.

In between that you have other Scandinavian countries with somewhat less than Sweden. Denmark, for example, has less. Most of continental Europe has somewhere in between. Britain has it. Most developed nations have more extensive paid parental leave than Australia. In fact, almost all do. And many of those do so with considerable economic success. Obviously, it is not the only factor that affects workforce participation, but it can contribute to it.

I would also add, just on what you were discussing about the relation of employer and employee, that we know from our own experiences of well-functioning workplaces—hopefully there are some in federal parliament as well, tricky though that may be—that there is a lot of interest taken by co-workers and good employers, when someone in a workplace is having a baby, in how the new baby is going and, when they come back to work, the news of the updates of the child's progress and so on. That is all part of the good environment for raising children.

I think returning to the same employer is good. Returning to the same level of position is also very important because there is, unfortunately, still a very strong tendency for women to be punished in career terms, because they are the only ones who can have children, and that is not good for gender equality.

Senator KAKOSCHKE-MOORE: You also mentioned the need for parents and particularly mothers to stay at home for the necessary amount of time. In your view, what would 'necessary' be in weeks or months or years?

Prof. Scott : My personal view is that 26 weeks would be a minimum, but I understand that you do not get to that necessarily in one hit overnight. Even in Sweden it was a gradual, incremental process of building up these entitlements. There was opposition from employers in Sweden to the introduction of paid parental leave—which was brought in in 1974, I should add, which is a long time ago—but there have been no complaints since it has been entrenched and accepted, because of those kinds of benefits I have mentioned about the return to work of experienced, skilled employees.

I think that 18 weeks is what we have at the moment, and it must not be diminished. As to whether it could be expanded in the future, that should be on the basis of the evidence, of course, and deliberation, but I think we need to get some agreement that we do not dismantle so early in its life a program that has, on the basis of the available evidence, proven to have produced positive results.

Senator KAKOSCHKE-MOORE: I have one final question. There has been some suggestion that this proposal—when I say 'this proposal', that is what the government is proposing in this bill—should perhaps be taken back to the Productivity Commission, which undertook a review a number of years ago about the design of what a good PPL scheme looks like. Do you have any views on whether or not the Productivity Commission should be looking at this proposal again—or for the first time, I should say?

Prof. Scott : Marian might.

Prof. Baird : I apologise. We dropped out of the conversation for a little while there. I did want to come back to this point, so thank you very much, Senator, for raising it. I refer to an earlier comment about the introduction of a possible levy on employers and employees. Although that is a suggestion, I would like to say that we did canvass all those, and especially that model, in the original Productivity Commission inquiry, and it was understood not to be a way forward for Australia, especially given our policy history, if you like, and the very different policy framework we work in.

As to whether it is a good idea to put the issue back to the Productivity Commission, I am of two minds on that. We have considerable evidence. We have a fabulous evaluation in four very detailed reports that really tell us all we need to know about the current system. We have mounting evidence from other think tanks and around the world about the importance of parental leave and it being a paid system. So my sense is that that really is a way of stalling the debate.

The important thing here is to ensure that we do not go backwards—I think that is very important—and that we do not penalise women. These changes will have a direct impact on women and will penalise them. The other thing we have not done, as Professor Scott has noted, is that we have taken attention away from fathers completely. The refocus on maternity leave is really a policy discussion we do not need to have again. We have been through all of this. We need to think about ways to progress the system, to improve it where it needs improving—and there are areas, superannuation being one, for example—and we need to think of ways to encourage and include men more fully in parenting.

That would have two positive impacts. That would allow women to participate in the workforce more equally. It would have an impact on the occupations they are in and their potential to go to leadership and perhaps reduce the gender pay gap. It would also improve men's opportunities to participate in child raising. We know that those changes are coming through. A very interesting recent study, just out last week, from the UK points out that millennial men, younger men and fathers, are very willing to participate more in family affairs and would rather trade off some of their work time and money to increase their opportunities in parenting.

So I think it is incredibly important that we do not go backwards with the current scheme and we look at ways to improve it. I also want to reiterate that our evaluation of employers—and this is a unique evaluation because very few countries have had the opportunity to do that—found that they adapted very quickly to their role as pay administrator. The costs were minimal, and they have embedded those new systems now, so there is really no reason to remove that or to remove their role altogether.

Interestingly, one of the only other studies on employers was undertaken in California. They had very similar findings, in that, although employers additionally said it would be difficult, the reality is that it is not, and they have found it quite beneficial. It increases their connection with their own workers, and it makes the whole parental leave part of the workforce experience rather than a welfare experience.

Senator KAKOSCHKE-MOORE: Thank you very much.

Prof. Baird : The final thing I would like to say is that we would like to submit our modelling and costings, if the committee will allow that. We did not attach it to our submission, and we should have, really. So, if that is all right, we will send that in for you too.

CHAIR: Yes, Professor Baird, if you want to send that in, we will look to accept that once we have a copy of it. That would be great.

Prof. Baird : Many thanks.

CHAIR: Thank you. I just have a couple of questions, briefly. I am cognisant of time, and I apologise to witnesses that we are running a smidge behind because of our private meeting. It is a good opportunity to discuss the issue of the paymaster, whether it be employer or the Department of Human Services—the government. I do not want to diminish the concern you have expressed over it. In my mind I am struggling to make a link between who puts the money in the bank account, in effect—if you can be so crude about it—and how that has an impact on the relationship between the employee and the employer. My wife runs a business in Hobart, and they bend over backwards to ensure that they are a good employer so that people do not go to their competitor to work on return from maternity leave. That is all around making it a wonderful workplace and treating employees well. I am wondering what impact this element has. Having been in management positions previously, I have done the same. When women go on parental leave they will come in with their children, and you maintain that relationship and you get to know the family; it becomes a better work environment. I am wondering if it can be explained in a different way to help me understand how important this issue of who administers paid parental leave is to ensuring that link remains, given what I have said—that many businesses and other organisations would do their best to ensure employees come back to the same workplace.

Prof. Kalb : I agree with that, and I think a lot of employers would do it regardless of whether they are paying it or not. The reason I brought it up in the submission is that, when we did the evaluation, there did seem to be evidence to point in that direction. One of the things we did after the evaluation was to look at women who were on higher incomes versus women who were on lower incomes and then subdivided along the lines of whether they had employer provided paid leave or not. When we looked at women on higher incomes and at the impact in the first half of the year, where the financial component of the paid parental leave is really important, we could see that the lower income women had a stronger response, because the financial component was relatively larger for them than for the higher income women, which is exactly what you would expect.

Then we looked at the second half of the first year, where we observed the increased rate of return to work for women who had accessed the paid parental leave by the government and then looked at higher income versus lower income women. We saw a difference according to whether or not they had employer provided paid leave. The higher paid women who did not have employer provided leave responded nearly equally as strongly to the government provided paid leave as the women on lower incomes. So, for the first part of the year, there did not seem to be a strong response—not as strong as for the women on lower incomes—because they were on higher incomes and were more likely to have higher household incomes, so they could afford to stay away before the government introduced their scheme. But the aspect of having paid parental leave did seem to make a difference in the second half of the first year. They did have a quicker return to work after the government introduced their paid parental leave. That is suggestive evidence that there is something about the paid parental leave which does not have anything to do with the financial impact that is affecting the return to work of these women. So that was one thing.

The other thing that we observed is that for higher and lower income women, the return to the same employer was stronger after the government introduced their paid parental leave. Though I cannot say it is certain that this happened, there seems to be evidence in that direction. These results seem to point to something having changed after the government introduced its paid parental leave that was to be paid by the employer, especially for women, and it could be this particular aspect.

Prof. Payne : If I could add, what I am hearing from you is that there is a bit of a question: does the mechanics—ignoring any clawback or any of the other aspects—

CHAIR: It is this point around the paymaster that is being explored.

Prof. Payne : Right, so it is this point. I think what Guyonne and our submission were trying to say is that there may be a more subtle point for the employee to understand—that part of their pay is coming from the government and part of their parental leave is coming from the employer. It is that employer link. Now, could you have the government pay it, but then there is a notice that says, 'by the way, X per cent—'? That might work. Part of it is thinking more about what information has been given to the employees so that they understand that there is still a strong link to the employer.

CHAIR: I take the point that you made earlier, about whether it is welfare versus a work entitlement.

Prof. Kalb : It is a different type of thinking.

CHAIR: Yes. But the evidence suggests that it could be an element of one's thinking about return to work. Thank you very much for that. The other thing I wanted to briefly touch on, bearing in mind the time, was with regard to the rankings. Professor Scott, I think you mentioned before that we are 20th in the OECD—followed only by the United States, who do not have a scheme. With regard to countries that you have referred to, like Sweden, how long have they had a paid parental leave scheme in force?

Prof. Scott : Since 1974. Paid parental leave started off more modestly and built up over time with the kind of evaluation, discussion and cross-party consideration of evidence and so on as to whether it was appropriate, which is a bit of a tradition in those countries. So it has been a very long time indeed.

CHAIR: What about other OECD countries? In terms of the 19 or so ahead of us, do you know how long their schemes have been in force for?

Prof. Scott : I think most of them have had paid parental leave for a long time. Sweden started the trend. Many of them had it by the end of the 20th century. The Productivity Commission report that led to the 2011 Paid Parental Leave program which we are currently reviewing had a fairly extensive tabulation of some of those countries—the ranges and so on, and when it was first introduced. Some are more recent, but this is an example of a policy which has spread internationally on the basis that it is shown to have produced some benefits. Australia has been slow in picking it up, and now, having picked it up, there is a concern that Australia might go backwards rather than forwards on it.

CHAIR: You may or may not know the answer to this—and it is certainly something I will go and familiarise myself with in the Productivity Commission report—but I am wondering about how the evolutions of the schemes in those other OECD countries occurred; particularly with Sweden, let us say. Professor Kalb, do you know whether they have had the same situation that we are talking about here, where governments look at altering the way the scheme is, going backwards or forwards, and adding or taking away components?

Prof. Kalb : I think Germany is a really good example. Germany has done huge changes since they introduced it. They started from something that was employment-related, to something that was no longer employment-related. Then they went from a reasonably generous payment to a much less generous payment, but gave it for three years, and they made it dependent on the other income that women had in the year before they had their child. And so it became a really different scheme in the mid-1980s until early 2007—that was the most recent change—where they actually went back to make the scheme much more employment-related. There have been a few evaluations on the change from the more welfare-oriented to more work-entitlement-oriented type parental leave. What they found was that more women took up leave in the first year, but then returned more quickly in the second year. What they did was reduce the amount of paid parental leave from three years to one year, but then made many more women entitled to it who were not entitled to it before. Those were actually the women who were on higher incomes, who would be ineligible.

CHAIR: So it broadened the base, did it?

Prof. Kalb : It broadened the base. Basically, they brought it to all women who had been working, made the payments related to the earnings they had before, and stopped it after one year. What they find is that one year is the time when a lot of women start to think about going back to work, and so that had a major impact. Whereas before, they would have two months on full pay, but after two months a lot of these women on higher incomes would lose it totally. Two months is too early, so they did not return to work then, and then you sort of lose that point in time when there is a trigger to return to work. I think that that was shown to have quite a large impact on the return to work by these women.

Ms Heron : In terms of the UK and going forwards or backwards, I would point out that, although the UK has basically been subject to huge cuts in terms of public spending over the past several years, their paid parental leave scheme—it is maternity pay mostly—has been slightly increased over time. I think it is fairly telling that there has been no move to cut it rather than increase it.

Senator WATT: Please do not take my lack of questioning about the health impacts of this proposal on women and children as a lack of interest. It is just that I am conscious of time, and, to me, those impacts are so obvious that they do not need any further exploration beyond what is in your submissions. I think it was Professor Baird, but it might have been other people as well, who raised the point that there has to be a real question mark over the savings that are expected to be generated by these changes.

As far as I have been able to tell, the government's rationale behind these changes has largely been about delivering budget savings. You have talked about the likelihood that these changes might see women needing to return to the workforce sooner, which might then require them to find child care, which might then require some sort of government rebate for child care. So the impact on child care rebates would be one potential impact on those savings that the government expects to generate. Would anyone like to talk a little bit further about how these changes might have unintended consequences in terms of government savings.

Prof. Baird : We are in regular contact with employers. In fact, just yesterday, we were invited to discuss this very issue, parental leave, with an employer in Australia who employs about 80 people. A third of their employees in sales are women and a third in operations and other areas are women, so they have a high proportion of females—two-thirds altogether—of child-bearing age, so they were very interested in this whole debate and the value of introducing parental leave. Interestingly, what they are now considering is not introducing or expanding their own paid parental leave scheme but rather thinking of alternative ways.

I think this is really unknown area, but we can expect that employers will not pick up the cost, and, as their enterprise agreements terminate, they may reconsider whether they include the paid parental leave entitlement. What the government is doing is shifting the cost of that to the employer, and they could look at other ways of making themselves an employer of choice. So I think this is a really huge unknown area. We cannot cost it yet. That is the employer side—

Senator WATT: Can I just pick you up on that. I might be missing something here, but am I right in saying that the women you are talking about would currently be receiving the 18-week government payment and, in addition to that, an employer payment?

Prof. Baird : Yes.

Senator WATT: If the employer decided to do away with the employer PPL and simply rely on their female employee getting the government payment, would that create any additional cost to government, if they are already paying that, or am I missing something?

Prof. Baird : Under the proposal the government would pay fewer weeks of parental leave. But if the employer removes their contribution then the government has to continue paying 18 weeks, so the saving would not be recouped.

Senator WATT: I understand. Thanks.

Prof. Baird : I think the other point is that, because we have seen a shift in women increasing the time that they stay out of work, especially in the first 18 weeks, we might expect that, as their income is reduced, there would be more pressure on the household for those women to return to work, and, as you have said, that would increase the cost to government of child care. I just want to stress: not only is it that; it puts pressure on the system to look after infants, who are more costly. So it could have a very negative effect on child care. And I note that child care is going to be one of the government's main focuses this year.

Prof. Scott : I would just add, you can quantify it in a narrow frame, and you can take the methodology wider. As well as the loss of skills, experience and productivity that you gain with more women returning to the workforce under a proper paid parental leave arrangement, you could take it as far as looking at fertility rates, for example. Are less women going to plan to have children because it is not worth their while? Or, looking at the uncertainty and lack of predictability of the current situation: what effect will that have on the fertility rate? Will it mean less children are born and therefore there will be less offset for the ageing population, and to cope with the rising dependency ratio? They are the big fiscal questions for government, and this is part of that discussion.

Prof. Baird : Yes; we have not even touched on fertility. I think that is a good point. I am sorry to interrupt here, but we have meetings to go to. Is it all right if we leave the committee at this point?

CHAIR: That is absolutely fine. Thank you very much for persevering on the phone, and thank you for your evidence.

Prof. Baird : Thank you all.

Senator WATT: Professors Kalb and Payne, you have raised the savings point in your submission. Is there anything that you want to add to that or to what has been said on that point?

Prof. Kalb : I would add that the additional administration costs—due to there being more complexity of the payment—could be quite substantial, because now you have to make more checks about exactly how much they are getting from the employer, and the additional complexity will mean additional outlays there as well.

Senator WATT: Professor Scott, this is probably a question for you. I think you talked about the importance of the DAPP scheme—I have forgotten what the acronym stands for.

Prof. Scott : Dad and Partner Pay.

Senator WATT: That is paternity pay, in a colloquial sense. What exactly is the proposed change here that would impact on that payment?

Prof. Scott : I do not think that there is an explicit proposal to change the DAPP in the current bill, but the effect of weakening maternity leave and reducing it, which the bill does propose, would be to set back the very small but necessary and positive gains that have been made in the short time since the combination of maternity leave and DAPP has been in place, and therefore is going to set back the cause of fathers being more involved in their children's parenting, and greater gender equality, and to move Australia out of the two per cent of Australian men taking paid parental leave—which is very low compared to the 40 per cent in some other countries.

Senator WATT: Professors Payne and Kalb, do you agree that that these changes might have, again, some sort of unintended consequences on the numbers of fathers taking time off after the birth of their child?

Prof. Kalb : I think it will have some impact, in that if there is less total parental leave to be had, then I think more of it will go to the woman because she will need it straight after birth. When that is reduced further, I think the small proportion of men that actually did access the parental leave—so I guess that is a possibility as well, that some of the 18 weeks would be taken by fathers—will be reduced even further, because there is maybe not enough time for the mother to really fully recover from childbirth, so there is no time left for the father to play a little bit of a bigger role than they are currently doing. So in that sense, I do agree.

Senator WATT: Thank you.

CHAIR: Thank you all very much for your contributions today.