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DEBORAH BRENNAN outlines a new agenda for parental leave and child care in Australia

This is the text of a lecture delivered on 6 March as part of So, What? (25), a series of public lectures in contemporary humanities and social sciences at the University of New South Wales

THIS appears to be a moment in our political life when many policy “windows” are open. We have a new government in Canberra, the 2020 Summit is in the offing, and there is a widespread feeling in the community that the government in Canberra is interested in new policy ideas, especially ideas based upon research and examples of best practice. A key message from the government is that productivity and investment in human capital are central to its political agenda. Both the issues that I will discuss this evening fit squarely within that agenda, although they are by no means defined by it.

In the lead-up to last year’s federal election we heard a great deal about “working families” and Labor’s plans to improve their situation. (In my view we didn’t hear enough about families who don’t wear the halo of “working,” but that’s a matter for another day.) “Working families” are central to public policy debate around the world. Governments have developed measures to encourage, support and in some instances enforce the participation of adults in paid work. Whether these measures are called “welfare to work,” or “activation” or “support for working families,” they are underpinned by common economic concerns: increasing labour force participation, lifting productivity and reducing dependence upon welfare.

Demographic change, especially population ageing and declining fertility, is another policy driver in many OECD countries, including Australia. And, in addition to these economic and demographic aspects, the “working families” agenda has social dimensions such as achieving a fairer distribution of paid and unpaid work between men and women, getting men involved in the care of their children and strengthening local communities. Less prominent, but at least as significant, is the fact that work and family agenda is not just about adults: policies about family life and work/family balance need to create conditions that give children the best possible start in life.

Parental leave

The absence of a national scheme of paid maternity leave has been a matter of contention in Australian politics for decades. The issue gained momentum in 2000 when the International Labor Organisation adopted a new Maternity Protection Convention, calling on member states (which include Australia) to ensure that women workers received a minium of fourteen weeks’ paid maternity leave. (The ILO had set the standard at twelve weeks in 1952.) Paid maternity leave was vigorously promoted by the then Sex Discrimination Commissioner, Pru Goward, who oversaw the publication of a significant report into the subject, as well as another on the distribution of paid and unpaid work between men and women.

Despite intense community mobilisation, the campaign for a national scheme of paid maternity leave made no headway. In lieu of paid maternity leave, the Howard government delivered the “Baby Bonus” - a lump sum cash payment not linked to workforce participation and worth significantly less than 14 weeks at the minimum wage. The proposal for paid maternity leave put forward by the Human Rights and Equal Opportunity Commission received short shrift. One minister derided it as “middle class welfare” while another commented that maternity leave would be introduced only “over this government’s dead body.” How right he was!

The current situation in Australia is that men and women who have worked for their employer for twelve months are eligible for twelve months’ unpaid parental leave. But a government as attuned to the needs of working families as the Rudd government is would know that unpaid leave is of limited use, especially for those on low incomes. The prospect of being without the wages of one parent severely limits the usefulness of this entitlement.

It is true that, even without a national scheme, a growing proportion of women have access to some paid maternity leave as a result of their industrial award or workplace agreement, or due to company policy. But eligibility for paid leave is skewed towards those employed in the public sector, large workplaces or in unionised occupations. Women employed in Australian universities, for example, often have relatively generous maternity leave arrangements. Women employees of the university where I work can take 26 weeks maternity leave on full pay, or 52 weeks at half pay. But they are part of a lucky minority. Data from the Parental Leave in Australia Survey show that 37 per cent of women employees who worked in the twelve months prior to the birth of their child used some paid maternity leave, usually in combination with other types of leave, paid and unpaid. For these women, only about ten weeks of the leave was paid, on average (and this included paid annual and other forms of leave). Ten weeks pay to settle a new baby into life is not very long! And remember, that’s the average figure for the less than 40 per cent who get some paid leave.

In January of this year, the Rudd government referred maternity and parental leave to the Productivity Commission, asking it to examine ways to improve support for parents with newborn children. The Comission is due to report in February 2009 and its terms of reference include:

• costs and benefits of paid maternity, paternity and parental leave
• extent of employer provision
• models that could be used in Australia
• cost-effectiveness of those models
• their interaction with social security and family assistance
• and their impacts across the full range of employment forms

The reference to the Productivity Commission is an exciting development. It signals a genuine interest on the part of the new government in exploring what can be done to support families with newborn babies. Just as importantly, it opens up a big conversation in the community.

So, what kind of family leave policy might we in Australia aspire to? A good deal of debate in this country has centred on the attainment of fourteen weeks paid maternity leave - the minimum period of paid leave stipulated by the International Labour Organisation (ILO). There is no doubt that fourteen weeks paid leave for mothers would be a fantastic gain and I would really welcome it. At the same time, I think it would be a great shame if we limited our vision to such a small goal.

It would still leave Australian parents way behind their counterparts in other countries. Six to twelve months leave with a high proportion of one’s previous wages is now the norm in Europe and, with the kind of globalised labour markets emerging in many professions and trades, international social policy norms are likely to be of increasing relevance. Many people know that the Scandinavian countries are way out in front in the generosity of their supports for working parents. Sweden provides approximately fifteen months at 80 per cent of wages, and has a special “father’s quota” of two months leave, available on a “use it or lose it” basis. But it is not only the Scandinavian countries that have implemented generous paid leave.

In the United Kingdom mothers have 39 weeks paid maternity leave: six weeks paid at 90 per cent of previous wages and 33 weeks at a flat rate equivalent to $270 per week. Fathers receive two weeks paternity leave at 90 per cent of wages. The UK government plans to increase the period of paid maternity leave to 52 weeks by the end of the current parliament (May 2010). Interestingly, these are government funded schemes with no employer contributions.

In Canada mothers have fifteen weeks maternity leave at 55 per cent of earnings followed by 37 weeks paid parental leave which either parent can take. In Quebec, which has more generous provisions modelled more on France than on North America, parents can take 55 weeks parental leave at 70 per cent of average weekly income or 40 weeks at 75 per cent of average weekly income. Five weeks are reserved for the father.

And Germany is another fascinating example. In that country, women are entitled to fourteen weeks maternity leave paid at 100 per cent of earnings, with no ceiling. Following maternity leave, either parent can take parental leave until the child is three. Until the baby turns one, that parent is entitled to a benefit equal to 67 per cent of their previous earnings. Both parents are entitled to take paid parental leave but if the father takes at least two months, the period of paid leave is extended to fourteen months.

In all of these countries paid maternity leave is so widely available that it rarely rates a mention. The debate has shifted to new issues: extending the period of paid leave beyond one year, increasing the rate of financial compensation and devising ways to encourage fathers to share in parental leave. We may not be ready to go quite this far in Australia yet, but we need to have a big vision about the possibilities.

Australia should, I believe, move towards a taxpayer-funded scheme of paid leave that would enable parents to care for their infants (up to the age of at least twelve months) without major financial penalty.

European governments do not provide measures such as the ones I have described because they are softer and kinder than Australian governments. Such measures are generally part of very hard-nosed calculations about precisely the kinds of issues that are driving the Rudd government: productivity, human capital and labour force participation.

But they also emerge from a growing consensus about the needs of babies and the best ways to support the parents of newborns. Scientific knowledge about babies in their first months of life should also be driving Australian policy in this critical area but my sense is that it is not, not yet. Babies thrive in the care of loving, responsive adults who understand their needs, who know them as individuals and who have the personal resources to be responsive. These carers do not have to be their parents, but many parents want passionately to be the carers of their infant children. If we as a society are unwilling to support parents to care for their own babies, then we have a responsibility to provide services staffed with skilled and appropriately qualified staff.

Commenting on the poor quality of much centre-based care in the USA, Columbia Professor Jane Waldfogel noted recently that in the state of Mississippi, a centre can legally operate with just one adult looking after five infants under one. What’s more, she pointed out, that adult does not even need to have high school qualifications. Mississippi is one of the southern states of the United States, not known for its progressive social policy. Surely things are better in Australia? Well, no; in many Australian states, including NSW, the child care regulations are similar to those that pertain in Mississippi: only one caregiver is required for up to five babies and that caregiver does not need to have any particular level of education or qualifications. In 2006, a taskforce recommended that NSW regulations be changed to require one carer for every four under two year olds. This was successfully resisted by private, for-profit child care providers.

It’s important, finally, to recognise that, if parental leave is understood as a period of leave from work, some parents will not be eligible for it. Unemployed parents, those outside the labour force, those who do not have sufficient length of service with an employer and recent immigrants, are examples. These parents should not be left behind, especially as many of them will be on very low incomes. Consideration could be given to options that address their circumstance and do leave them behind.

So, what might a new agenda for parental leave include?

• Paid leave with sufficient compensation to enable parents to care for their infants till they are at least one year old
• Specific measures to encourage fathers to take a share of parental leave. (An additional period of leave, available on a “use it or lose it” basis for fathers is worth considering in this context. But it would need to be designed in such a way as to avoid disadvantaging sole parents, same sex couples and families where care by the father may not be in appropriate or impossible)
• Alternative policies for low-income parents not eligible for parental leave

Child care

This is a policy arena where the new government is bursting with new ideas and proposals. Labor has made commitments to address the affordability of care, to establish new services, to improve quality and increase access. The Council of Australian Governments (COAG) has a broad agenda around early childhood education and care. It is not my intention to analyse all these proposals, or even to list them. But I do want to acknowledge that there is a great deal on the table already.

I believe that the policy framework on which the government is building has serious weaknesses, particularly as a result of the unparalleled corporatisation of care that has occurred in Australia. I am using the term “corporatisation” to refer to the trend to reliance upon listed companies that trade on the stock exchange. I’m not talking here about the small, owner-operators who don’t feature so much in public debate and provide a large proportion of Australia’s child care. The private child care sector is made up of a myriad of providers with diverse philosophies, aspirations and motives. Most owner-operators are experienced professionals, deeply committed to the wellbeing of the children in their care. It would be inaccurate to depict private providers, whether owner-operators or corporations, as unscrupulous profit-seekers, and equally inaccurate to suggest that all non-profit care meets some superior standard.

The Rudd government has a great opportunity to reshape early education and care and to undo some of the damage that has resulted from the policies of the previous administration.

Until the early 1990s, both Labor and Liberal governments viewed early childhood services as a public good which benefited the community at large as well as individual children and their families. High quality services were seen as important elements in campaigns against poverty, especially child poverty as well as being a critical element in supporting women’s employment. However, the supply of services fell far short of demand and although governments contributed significant amounts of capital, the gap between supply and demand caused major problems.

In the early 1990s, a decision was made to extend public subsidies to users of private, for-profit care rather than to expand the supply of non-profit care took place in the context of a broader shift towards the “marketisation” of human services including health, education, aged care and employment services. In the political arena, two main arguments were used to argue for an expansion of the private sector: the government’s unwillingness to provide capital funding and the claim that denying fee subsidies to the users of private, for-profit care was discriminatory. The former argument was strongly promoted by Labor’s Finance Minister, Peter Walsh, who argued for “a means-tested voucher system which would remove child care from the public sector and send it back to the private sector.” The Federation of Child Care Associations supported this view and coupled it with the argument that the employment of unionised workers with “unnecessarily high” qualifications was a factor in the high cost of child care.

Private provision expanded rapidly throughout the 1990s and was given a further boost in 2000 when child care subsidies were increased under the Howard government. In 2001, ABC Learning, owned by Brisbane entrepreneur Eddy Groves, listed on the stock exchange, signaling the emergence of a new phase in the Australian child care industry. Several other companies also listed in rapid succession. By floating on the stock exchange companies gained access to significant amounts of capital, enabling them to expand more rapidly and to invest in physical improvements to the services they acquired. ABC adopted an aggressive acquisition strategy, taking over centres run by community-based, non-profit groups as well as those owned by individual owner-operators. Within a few years, in addition to buying up hundreds of individual services, ABC had absorbed most of its corporate rivals.

The proportion of Australian long day care places owned by ABC is not public knowledge. Perhaps only ABC knows, though I hope the government does. The figure of 30 per cent is often used, but a major non-government organisation in Queensland, the Creche and Kindergarten Association, believes that ABC holds close to 50 per cent of the long day care places in that state. A similar figure has also been used about Victoria. In 2006, Eddy Groves was reported as saying he believed he could acquire up to 50 per cent of market share in Australian metropolitan areas before encountering problems with the Australian Competition and Consumer Council.

No other country in the world allows a single corporation to dominate the provision of early childhood education and care to this extent. The market is far more diversified in the United States, the heartland of private enterprise. Until yesterday, when ABC Learning sold 60 per cent of its American business, it was the second largest provider of child care in the US but it held only around 2 per cent of all services. And in the UK, where it is the largest provider, it owns about 2 to 3 per cent.

Why is the level of ABC control in Australia a problem?

The first reason is the incompatibility between the functioning of markets and children’s need for high quality education and care.

The market does not function well in regard to early childhood education and care. Market theory suggests that when parents are “empowered” as consumers, providers will compete on the basis of both quality and cost, since parents, as guardians of their children’s interests, will value quality as well as affordability. But markets can only work under certain conditions: competing products must be availability; customers must be knowledgeable about the products they seek to buy; and customers must genuinely be able to “shop around.”

In the case of child care, none of these assumptions can be taken for granted. Most parents have little knowledge about the quality of services and shortages of supply mean that many families have to simply take what they can get. Research has shown that parental assessments of the quality of care are generally higher than those based on objective measures. Shortages of particular kinds of service (such as care for babies in toddlers) as well as general shortages in some geographical areas (notably inner-city suburbs, remote areas and some country towns) make the notion of “consumer choice” a hollow ideal. Advertising and branding can further cloud parents’ assessments. Indeed, according to Canadian economists Cleveland and Krashinsky, commissioned by the OECD to report on funding mechanisms for early childhood education and care, “for-profit firms have an incentive to provide childcare that seems of high quality but is not. Because parents can be fooled into buying low quality care, low-quality providers will be able to underprice higher-quality producers and drive them out of business.”

Although services are required to participate in the National Childcare Accreditation System, substantial concerns have been expressed about its efficacy. More than 97 per cent of the long day care centres that have completed the process have been accredited.

In an open letter sent to Prime Minister Kevin Rudd last week, the Canadian economist Gordon Cleveland urges the government to approach early learning and child care as a public service, rather than a commodity. Cleveland, who is a management specialist from the University of Toronto and who has been commissioned by the OECD to identify the funding mechanisms used across the OECD, writes:

Competition is not a good mechanism for developing quality in childcare. The kind of quality that optimally promotes child development is very difficult for parents to observe. So parents can’t play their gatekeeper role in the childcare market by punishing low quality producers and rewarding high quality ones.

In this case, the profit motive, normally loved by economists, become pernicious. Corporate child care providers, anxious to serve their shareholders’ interests, do best by claiming to produce high quality services, but failing to hire the expensive trained staff necessary to actually provide them.

The second reason why corporatisation is a problem is that it has reduced choice for thousands of parents. Community based child care, highly valued by many families, has been marginalised in many parts of Australia and barely exists in some communities. By definition, the market cannot deliver this type of service, yet it is precisely what many parents want. I referred a moment ago to the high level of dominance by ABC generally. However, as Frances Press has observed, child care markets are intensely local and it’s what happens in your suburb or small town that really matters. Press notes that Orange with a population of 40,000 has five ABC centres; Wagga Wagga with a population of just under 57,000 has eight; and Albury-Wodonga with a population of 90,0000 has nine. In a number of regions ABC owns more centres than all other providers combined.

The third reason for concern about corporate dominance is that it may make it harder for governments to achieve some of their goals. Labor’s concern about high child care costs is a good example. During the election campaign, Labor made a commitment to increase the Child Care Tax Rebate to 50 per cent of out of pocket expenses and to lift the cap on the rebate from its current level of $4000 to $7500.

To make sense of this for people not steeped in the finer points of child care policy, the Commonwealth provides two kinds of subsidies for users of approved child care services: Child Care Benefit and Child Care Tax Rebate. The former reduces the fees paid by parents on a sliding scale according to their family income, number of children in care and various other factors. It is structured so as to deliver the greatest level of assistance to the poorest families. CCTR, by contrast, is designed to return a proportion of parents’ out of pocket child care expenses, that is, the amount they pay after Child Care Benefit has been factored in. Currently, the CCTR provided a 30 per cent rebate capped at $4354 under the Howard government. Labor has promised to increase the rebate to 50 per cent and to raise the cap to $7500. Since child care expenses rise with family income (i.e. better off families use child care for longer hours and pay more for it) the greatest benefits will inevitably go to those with the highest costs, and the highest incomes. Effectively, it works in the opposite direction to CCB. So one problem with raising the CCTR is its distributional impact. The other problem though, is the likelihood that the additional subsidy will quickly be absorbed into higher prices.

This is a big-ticket item for the government ($1.5 billion over four years) and I think it will require very careful policy design to ensure that it is not simply absorbed into higher prices and/or higher profits. The current proposal, I believe, is a gift to those who seek to make a profit from child care, but may afford only short-term relief to parents burdened by high child care costs.

So, what might a new agenda for early childhood education and care include?

• Ensure that the needs of children and families are at the centre of policy development
• Respect the wishes of parents who seek non-profit community-based care by reinstating capital assistance
• Explore new ways of promoting quality, not only through regulation and compliance, but through professional development and support
• Extend the commitment to high-quality teacher-led pre-school for four-year olds to embrace all children in Commonwealth supported services

Governments want families to “work,” not just in the narrow sense of having adults engaged in paid employment, but in the broader sense of functioning in harmonious and socially productive ways. Families that “work” in this broader sense require well designed, adequately funded supports such as paid parental leave and high quality early learning and care services. I welcome the reinvigorated debate around paid maternity and parental leave and the prospect of revisiting the goals and purposes of early childhood services in ways that place children and families at the centre of policy-making. •

Deborah Brennan is professor of social policy at the Social Policy Research Centre, University of New South Wales

Photo: Tom Horyn/iStockphoto.com

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