By Judith Sloan 24 October 2022 The Australian Newspaper
I was reminded of that old joke. A heart transplant patient is given the choice between two donors, one a triathlete, the other a much older Treasury official: “I’ll take the Treasury official. I know that heart would not have been used.”
It takes only three sentences in the recently released Treasury paper entitled Children and the Gender Earnings Gap to use the term “motherhood penalty”. That’s right: Treasury thinks that being a mother is a penalty.
I hate to let them in on a secret – OK, it’s not a secret – but most mothers do not regard having and caring for children as a penalty. Children provide happiness and joy, meaning and purpose. There are challenges, but ask any mother (or father) whether they regret having their children and I know what the answer will be.
The trade-offs that must be made to combine motherhood and workforce participation are not unexpected. Many parents – yes, it’s generally a joint decision – opt for arrangements that serve the best interests of their children while meeting family income needs and career aspirations.
Unsurprisingly, most parents conclude the Soviet model of full-time institutional childcare from an early age is not one that suits their children or them.
Education Minister Jason Clare recently bemoaned the fact most mothers with a child under the age of six works part time. It didn’t occur to him those mothers prefer the flexibility of part-time work in combination with caring for their children.
The fact is that the Australian labour market is one of the best in the world in providing part-time jobs, many permanent ones, which contrasts with some other countries. (In the US, it tends to be full time or not at all.)
So let me go back to that paper by the heartless Treasury officials. Evidently, “women’s earnings are reduced by an average of 55 per cent in the first five years of parenthood”. This is mainly because of lower participation rates and reduced working hours – gosh, that’s a finding – and, to a lesser extent, a reduced hourly wage. We can’t be sure why there is a reduced hourly wage although it can involve a new mother opting for a less responsible job than previously held.
The Treasury officials have an answer for all this. “Addressing Australia’s persistent motherhood penalty and boosting women’s labour force participation after having children could help support improved productivity growth.” At this point, heartlessness is morphing into economic illiteracy.
Higher labour force participation is not the same thing as higher productivity growth. If the women who are encouraged to spend less time with their children and more time at work are those in low-paid jobs, the impact on productivity could be perverse. There may be some argument around skill atrophy and the associated loss of productivity but the impact of this is unclear.
The reality is that highly paid female workers with children, who have undertaken many years of training, are very inclined to remain full time in the workforce at the moment – think here partners of law firms, medical specialists. They are also in a position to fund childcare arrangements that suit them – such as full-time nannies or even a stay-at-home partner.
The broader point is that the federal government is placing a lot of emphasis on improving women’s lot in the labour market – higher childcare subsidies, longer paid parental leave, reducing the gender pay gap – without paying heed to the extensive research that has been conducted on the issues. Bear in mind that interventions that favour women in general, and women with children in particular, are not costless and are paid for by other taxpayers, including those without children.
Consider the gender pay gap. The research is clear that the principal reason for women earning less than men, having taken into account qualifications, occupation and work experience, is the reluctance by women to take jobs with long and unpredictable hours, including those that involve travel. Studies from Scandinavia, which has extremely generous arrangements for female workers, underline this point. A gender wage gap persists in these countries.
Research by Deborah Cobb-Clark of the University of Sydney has demonstrated that Australian women actually do better in terms of wages than men in the lower part of the wage distribution. All the pay gap action is among the higher earners.
When it comes to extending the government paid parental leave scheme to 26 weeks, as recently mentioned by Anthony Albanese, the effects are unlikely to promote greater labour force participation.
Handing over more taxpayer dollars to new parents to stay out of the workforce longer, by definition, reduces workforce participation. As for the impact of government paid parental leave on the gender pay gap, this is quite a mystery, but there is doubtless some political appeal in mentioning the two in the same sentence.It is worth noting that there is no intention by the government to remove the clear double-dipping that occurs in relation to paid parental leave. For lucky public servants and some private sector workers (generally the better paid) whose employers provide paid parental leave, they can simply add the government entitlement to these arrangements. But this has nothing to do with economics – it’s just a lottery. The taxpayer could save several hundred million dollars if this loophole were removed.
And here’s another strange anomaly – the income cut-off point for government-provided paid parental leave is $157,000 for an individual, although there is an expectation this figure will be lifted to $350,000 a couple. However, the new income cut-off point for centre-based childcare fee subsidies to apply from next year will be $530,000 a couple. Go figure.
The bottom line is that it may well be good politics to go after female voters and to use taxpayer funds for that end. But it is always wise to work on the basis of what women and couples prefer given the many factors at play. In particular, encouraging women to work longer and harder because it’s good for the economy is unlikely to hold much appeal.
In any case, women’s participation is at a historic high, having risen strongly during the past several years.
Telling women that motherhood is a penalty will go down like a lead balloon. Treasury officials may be wise to grow a brain as well as a heart.
Judith Sloan
CONTRIBUTING ECONOMICS EDITOR
MELBOURNE
Judith Sloan is an economist and company director. She holds degrees from the University of Melbourne and the London School of Economics. She has held a number of government appointments, including Commissioner of the Productivity Commission; Commissioner of the Australian Fair Pay Commission; and Deputy Chairman of the Australian Broadcasting Corporation.
Original article here
We can ask what value there accrues from children? Any child has the potential to be of much greater value than any currently living person. Who can know what that child may create? The raising of children is of utmost importance to our future as humans. What more valuable endeavour than nurturing our future? Perhaps the corporate folk would want more worker drones, but no compensation is enough to give up our real legacy.