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A Time to Value - Proposal for a National Paid Maternity Leave Scheme

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What would paid maternity
leave cost?

HREOC contracted
the National Centre for Social and Economic Modelling (NATSEM) to undertake
research into the cost of a national system of paid maternity leave.
NATSEM has estimated that the net cost of HREOC's proposed paid maternity
leave scheme would be $213 million in 2003-04.

Costs of a PML
scheme in future years

Source:
STINMOD/01b outyears model and NATSEM calculations

Methodology

Comprehensive statistics
are not collected on the number of women in paid work at the time that
they have a child and their individual and family income, the number
of women who are eligible for paid or unpaid maternity leave, the proportion
of women who access their maternity leave entitlement and the duration
of leave they take, and women's pattern of return to work following
the birth of a child. As such, NATSEM estimated a range of inputs to
the costing using a combination of STINMOD (NATSEM's static microsimulation
model of the tax and transfer system) and data from the Australian Bureau
of Statistics. STINMOD was also used to estimate the reductions in government
payments and increases in tax as an input to the net cost.

Number of eligible women

NATSEM assumed:

• 6.53% of partnered
  women in paid work had a baby [Appendix section 6];
• the number of
  single women eligible for the scheme was equal to 10% of the number
  of partnered women who had a child [Appendix section 6]; and
• 81.63% of women
  had been in paid work for 40 weeks of the past 52 weeks [Appendix
  section 6].

Based on these
calculations, NATSEM has determined that close to 85,000 women will
receive paid maternity leave each year. This assumes a 100 per cent
take up rate. Approximately 19,000 women in paid work will not receive
paid maternity leave as they have worked less than 40 weeks in the past
52 weeks.

NATSEM assumed
that, on average, women currently take 28.8 weeks of unpaid maternity
leave and then return to work half time; and that under the proposed
system women would take 14 weeks paid maternity leave plus 28.8 weeks
unpaid maternity leave and then return to work half time [Appendix
section 7]. NATSEM also assumed that no woman would be worse off
under the new scheme.

Gross cost [Appendix
section 11]

The gross cost to the Government is the total amount of paid maternity leave that the
Government will pay out. This is calculated by adding up the total paid
maternity leave paid to each eligible woman in a particular financial
year. In 2003-04 NATSEM estimated this would be $460 million.

Net cost [Appendix section
12]

The net cost of the scheme is the cost to the Government once the effect of decreases
in other government outlays (Maternity Allowance, Family Tax Benefit
Parts A and B, Parenting Payment, Newstart Allowance, and the Baby Bonus)
and increases in taxation revenue are taken into account. This includes
offsets that derive from the family having a higher annual income as
a result of paid maternity leave. In effect, it is the new money that
the Government would need to commit in order to provide paid maternity
leave. This is found by comparing the costs to the Government under
the current and proposed systems.

The net cost to
the Government in 2003-04 is estimated to be $213 million. In other
words, $247 million, or over half of the gross cost, would be saved
by reductions in other government outlays and increased tax.