Work to barely pay for returning mothers, inquiry told

The third and final stage of the government's proposed income tax cuts would overwhelmingly benefit men, late evidence presented to the Senate inquiry shows.

The inquiry will report on Monday that calculations prepared by the Parliamentary Budget Office show 1.894 million men would benefit from the final flattening of the tax scales and only 767,000 women.

The third stage lifts the threshold for the top rate from $120,000 to $200,000 and removes the 37 per cent rate, producing a flat marginal rate of 32.5 per cent between $41,001 to $200,000.

The PBO has previously told the inquiry the final stage would deliver $30.35 billion to men over four years and $11.25 billion to women.

It finds that the impact of the first two stages is much more even.

In a second piece of late evidence requested by the committee, Melbourne University tax expert Miranda Stewart reports that the effective marginal tax rate facing women considering returning to work after having children would remain as high as 95 per cent even after all three stages of the tax cuts and the changes to child care benefits due to begin on July 1.

Effective marginal rates include tax, the Medicare levy, lost family benefits and the cost of the childcare needed to return to work after government subsidies.

On July 1 the two existing childcare subsidies will be rolled into one providing a means tested subsidy of up to $11.77 per hour at an extra cost to the budget of $4 billion over four years.

Professor Stewart said at the moment the effective marginal tax rate for a second earner with two young children paying for childcare at that rate was 65 per cent when returning to work one day a week, 85 per cent on the second day, 95 per cent on the third day and 140 per cent and 160 per cent on days four and five, meaning those families lost income when mothers moved from working part time to full time.

"It was extraordinary that second earners went back to work full time at all," she said. "The reality has been that a proportion of women do go back to work, and the family is essentially bearing the net cost, unless they can use grandparents or friends for care or a cheaper option such as family day care.

The combination of the new childcare system and the first wave of the promised tax cuts would bring down the effective marginal rates to 45 per cent for day one, 65 per cent for day two, 90 per cent for day three, 95 per cent for day four and 90 per cent for day five.

"It means the returning mother will still only be able to keep $10 out of every $100 earned on day three, $5 on day four, and $10 out on day five," Professor Stewart said.

"It will certainly be worthwhile for a second earner, usually a mother, returning to work with young children to go back two days a week; however, for her to work three, four or five days a week would produce a negligible financial benefit."

A separate report to be released by the Australia Institute on Monday finds that since the tax changes that accompanied the introduction of the goods and services tax in 2000-01, most taxpayers have had all of so-called bracket creep returned in periodic tax cuts, whether bracket creep is calculated with reference to the consumer price index or the wage price index.

In real terms, high earners on $200,000 were up to $10,000 per year better off, low to middle earners on $40,000 up to $2000 better off, and middle earners on $70,000 only a few hundred dollars a year better off.

In The Age and Sydney Morning Herald

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Stress. The hidden cost of having children

Ever wondered why people who've had children keep hinting that you should too?

It could be because they want you to suffer, like they did... so that you'll understand.

It's long been suspected that an awful lot of suffering is involved, especially for women. Surveys show parents are on average no happier than non-parents, even though most are keen to nominate their children as one of the most important things in their lives.

Many studies find that, all things taken together, couples with children are somewhat less happy than those without. Others find they are only slightly more happy. Most agree during the moments they are actually with their children they are less happy.

It could be that while having children does indeed make them happier people, there's something else going on at the same time that makes them feel terrible.

It would be stress. Mark Wooden and Hielke Buddelmeyer from the Melbourne Institute have quantified it in a new study written with a leading United States economist Daniel Hamermesh called The Stress Cost of Children.

They looked at two types of stress: financial, and being short of time. After examining data from surveys in Germany and Australia they found that financial stress wasn't that important. Time stress was critical.

To measure it in Australia the parents were asked: "How often do you feel rushed or pressed for time?" In Germany they were asked: "Think about the last four weeks. How often during this period did it happen that you felt rushed or under time pressure?"

In Germany, the birth of a child added enormously to the mother's time stress and not at all to the father's.

In Australia, both parents became more stressed, but for the mother the effect was three times as big...

Worse, it never really vanished. Whereas whatever financial stress a child brought disappeared quickly, the time stress for women continued for at least four years – the limit of the survey.

But how much stress?

The researchers used complex econometric techniques to answer the question: what transfer of earnings from the father to the mother would be needed to reduce the mother's financial stress by an amount equal to the increased time stress generated by the birth.

The answer shocked them. (They are all men by the way.)

In Australia the transfer would need to be more than twice as much as the father earned.

"Clearly, there is no reasonable transfer of earnings from husband to wife that can compensate for the increased time stress that she experiences with the new child," they concluded.

"These simulations suggest that the psychological cost of a new child is huge in comparison to the monetary cost. While other simulations would generate different monetary comparisons to the time stress experienced by new mothers, given our estimates it is doubtful that any reasonable simulation would suggest that these costs are small."

The extra stress is all the more shocking because before birth new mothers are likely to be unusually free of stress. It dips before birth and then soars. The report says that might be because parents pick times of unusually low stress in which to have a child. It might also be because women are more fertile when they are less stressed.

At the other end of childhood emptying the nest might be expected to dramatically lower stress in the same way that gaining a child raises it. But their study of a different group of parents whose children left home found what they called an asymmetry. Departures eased stress only gradually. Stress began subsiding four or more years before the child left and then kept falling at roughly the same rate in the years that followed. It's as if the child never really left, or as if the child began withdrawing before they said goodbye.

Wooden and Buddelmeyer found that having children generated "a permanent lifetime increase in perceived stress".

Which doesn't necessarily mean it's a bad thing. There are upsides from having children as downsides: pleasure, a feeling of importance and a feeling of contributing to humanity are among them. But they are likely to be forever offset by a feeling of being tired, or anxious or short of time.

None of these are reasons not to have children. But they are reasons to think about it carefully. Once made the decision can't be undone. And I don't know of many parents who would like to undo it.

It just means that when parents tell you how wonderful it is, they're not giving you the full picture.

In The Age and Sydney Morning Herald


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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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