Wednesday, February 25, 2015

Raising mothers' job participation only half the story

I'm not sure how many barbecues it's stopping these days, but the issue you and I call childcare and the politically cool call ECEC - early childhood education and care - is still one of great concern to experts ranging from hard-headed economists to soft-hearted social workers, not to mention the odd parent.
From a narrowly economic perspective, childcare matters because any problems with it limit women's participation in the paid workforce and economists have decided increasing the "participation rate" of women and older workers is a key to reducing the budgetary cost of an ageing population and to maintaining our rate of economic growth.
With girls now more highly educated than boys - and with the taxpayer having contributed significantly to funding  that education - it's been obvious for a few decades that it makes little sense to allow the conventions of a labour market designed for men to prevent women from participating fully in the workforce.
Taxpayers want a return on their investment, economists want faster growth, and the women want to take advantage of their education by earning money and enjoying the greater mental stimulation that goes with a job.
Under pressure from families across the country, governments have been struggling to make the appropriate renovations since the days of Bob Hawke and Paul Keating. Their cumulative alterations and additions have been a bit patchwork.
One early move was to reduce the cost of childcare by introducing a means-tested childcare benefit. Then the Howard government added an unmeans-tested 30 per cent rebate of parents' net childcare costs. The Rudd government raised the rebate to 50 per cent.
Next came Labor's relatively frugal paid parental leave scheme, which Tony Abbott promised to top with a scheme much more generous to higher income-earners. Most of these measures came as election promises.
But under immense pressure from his colleagues, Abbott has now abandoned this promise, accepting the argument that, if there's any extra taxpayers' money to be spent, improving the cost and availability of childcare would be more effective in raising women's participation.
The government will now consider the recommendations of a report from the Productivity Commission in preparing a "families package", to be announced in the next few months.
The commission's main proposal is for the means-tested benefit and the unmeans-tested rebate to be rolled together into a means-tested "early care and learning subsidy". At little extra cost to government, and little change in the present overall average subsidy of about 65 per cent of cost, the new arrangement would increase the subsidy going to low to middle-income families and reduce it for high-income families.
For families with two kids in care, we're talking about gains of up to about $20 a week or losses of up to about $10 a week.
But the commission is quick to warn that such a change is likely to produce only a small increase in mothers' participation in the workforce. It estimates an extra 25,000 people working part time, equivalent to about 16,400 working full time.
Of course, the government could induce more participation if it was willing to spend more on the subsidy. It had planned to cover the cost of its more generous paid parental leave scheme by imposing a levy on big business. Will it make big business help bear the cost of higher participation?
But the cost of childcare is just one of the financial factors affecting mothers' decisions about whether to take a job and how many hours to work. The commission notes sadly that "the interaction of tax and welfare policies provide powerful disincentives for many second income earners to work more than part time".
It's trying to say that when their husbands have reasonably paid jobs, mothers who earn more don't just pay tax on their earnings, they have their family tax benefit cut back, leaving them without much to show for their efforts.
It's one of the great drawbacks of Australia's unusually heavy reliance on means-testing and probably does a lot to explain why our rates of female participation are lower than in other English-speaking countries.
But none of this explains why childcare has become "early childhood education and care". It's in response to the growing scientific evidence that children's experiences in the earliest years of their lives greatly affect the development of their brains, with implications for their wellbeing - and misadventures requiring government intervention and expense - throughout the rest of their lives.
Far too slowly, these insights are affecting government policy. They've had a big effect on childcare, leading to better paid and qualified carers and more emphasis on nurturing infants' mental development.
As part of this, there is federal and state agreement to increase the proportion of children either attending a dedicated preschool or participating in a preschool program in a long-day care centre.
"The benefits of quality early learning for children in the year prior to starting school are largely undisputed, with evidence of immediate socialisation benefits for children, increased likelihood of a successful transition into formal schooling and improved performance in standardised test results in the early years of primary school as a result of participation in preschool programs," the commission says.
The greater emphasis on early childhood development is one area where our economic aspirations and social aspirations fit together well.