Mixed signals

To spend heavily to incentivise one cohort of mothers to work while spending heavily to disincentivise another cohort to do so defies logic. BY Amanda Stoker.

First published in the Australian Financial Review.

The government’s approaches to welfare and childcare subsidies are operating at cross-purposes, and the mismatch of incentives perpetuates difficulty for single mothers.

Single motherhood is a tough gig by any measure. But we do single mothers little good by paying them what Indigenous advocate Noel Pearson calls “sit-down money” for as much as the first eight years of their child’s life. That period can become much longer if a parent has multiple children, because the eight-year clock restarts each time another child is born.

After eight or more years out of the workforce, these women face a skills and confidence crunch that can make for low employment prospects for the rest of their careers, and low wages if they can get into work. That snowballs into limited retirement savings compared to women who, with or without a partner, worked for most of their parenthood.

Now it has been revealed that Labor intends to extend that period from eight years to somewhere between 12 and 14. The government’s Economic Equality Taskforce wants it extended to 16 years.

There is an incongruity in having a welfare payment that disincentivises single parents to work in a market that is begging for staff, while providing about $15.1 billion in subsidies to get women with children under five to go to work.

And the data cited by the taskforce to say that the eight-year limit is to blame for child poverty ignores the role of a parent’s decision not to work, even when there are care options available for them to do so with substantial government support.

From July 10, the childcare subsidy will be raised from a maximum of 85 per cent of the cost of approved child care – usually in the form of childcare centre attendance – to 95 per cent. The percentage of the cost of care that will be taxpayer subsidised slides down 1 per cent for every $5000 of income earned by the family over $80,000. It doesn’t cut off until family earnings of $530,000 are reached.

To spend heavily to incentivise one cohort of mothers to work while spending heavily to disincentivise another cohort to do so defies logic. That is particularly so when the former category includes women in families earning more than half a million dollars.

In doing so, it entrenches disadvantage for women in our community who find themselves raising children alone. Indeed, that disadvantage often (but as with all generalisations, not always) becomes intergenerational.

There has never been a better time to get a job in this country. This is a fact, not a political slogan. With a skills shortage biting, more employers than ever are willing to give an out-of-the-box candidate a chance. There are more than 430,000 job vacancies now, meaning there are more jobs than JobSeeker payment recipients. Such high demand is a boon to those who belong to cohorts that have experienced discrimination or difficulty in the past, such as older workers, single parents and people with a disability.

Yet, instead of our public dialogue being about how to ensure consistency in the message sent by national policy surrounding care for children, the debate is about the quantum by which payments should be increased, and extending the period of time for which single women should be exempt from work.

I don’t dismiss for a moment the hardship that inflation is causing households, whether partnered or single. Yet, it would be a mistake to respond by dramatically increasing the rate at which the taxpayer funds welfare payments. To do so would inflict a double-whammy of higher inflation and a higher tax burden on those who are by their effort helping our nation find its way out of this economic mess.

It is hard to make ends meet on welfare right now. But we should direct some of our compassion to working families struggling with the cost of living, rather than slugging them with more inflation and higher taxes in sympathy for those who do not work despite a climate where everyone who is willing to work can get a go.

There is a fine balance to be struck between providing enough assistance to get a person through a period of unemployment without providing so much that it disincentivises a genuine work search and timely return to employment.

It is in everyone’s interests – single women, their children, all taxpayers, employers and the government – to ensure welfare policy supports and encourages single parents to spend only the time necessary out of the workforce. It would be even better if it were sufficiently flexible to reflect the range of working hours and environments people face, rather than shoehorning families into the centre-based 8am-to-6pm model.

But it is madness to continue to pour subsidies into approved childcare centres to facilitate the work of some parents while paying single parents with a child under the age of 16 to stay at home.

Amanda Stoker is a former LNP senator for Queensland and a distinguished fellow of the Menzies Research Centre.