Wednesday, July 23, 2014

Productivity Commission. Childcare is worth getting right even without an economic payoff

Ask the minister responsible to explain Australia’s present system of support for childcare and she can’t.

“It's impossible to explain,” she told ABC radio on Tuesday. “The current payments are so complicated.”

Sussan Ley isn’t alone. Curtin University Professor Alan Duncan is an econometrician.

When he ran the National Centre for Social and Economic Modelling he asked his programmers to produce graphs of the circumstances in which childcare support peaked and troughed. At first they couldn’t. He says they eventually produced a three-dimensional graph with contours “something like nose cone on a spacecraft”.

The Productivity Commission wants to simplify the graph. Instead of two overlapping benefits its wants one; means tested and related to the number of hours in care rather than what’s charged. Its preferred option would cost an extra $800 million a year. It would help out families on up to $60,000 with 90 per cent of the deemed cost, families on up to $300,000 with 30 per cent.

What it doesn’t do is to pretend its suggestion will much help the economy...

Despite all the talk about how many more women would work if only they could afford childcare it says the likely outcome is tiny, an extra 47,000 workers. As a point of reference an extra 20,000 Australian women gained jobs in the past two months. The claimed one-off benefit of 47,000 is minute.

Remarkably the Commission says it is worth doing anyway. To pay for it it suggests plundering the Abbott government’s proposed paid parental leave scheme. It too promises tiny economic benefits.

But the suggested tradeoff misses the point. Each scheme is worth doing in its own right. Neither is justified on the basis of economics. Paid parental leave at full salary is intended to become a workplace entitlement along the lines of sick leave and bereavement leave. The extra cost would be funded by a levy on big employers. Affordable childcare is intended to ensure that low and middle income Australians get reasonable returns from work. Some things are worth doing even without an economic payoff. Affordable childcare and paid parental leave are two of them.

In The Age and Sydney Morning Herald

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