Family-friendly policies make for higher fertility rates

It has sometimes been asserted that the old dependent spouse rebate, or its successor, Family Tax Benefit Part B is partial compensation for lack of access to unemployment or sickness benefits. The reality is that a parent in a two-earner family who loses a job could be out of work for 18 months or more and still not benefit, because there are no part-year claims, or risk having to pay the benefit back as is now occurring in frequent numbers.

The traditional family lobby often points to childcare subsidies as though these involved substantial payments to working women with children. The reality is quite different. A Fact Sheet issued by the Minister for Family and Community Services, Amanda Vanstone, acknowledges that a two-earner family on $70,000 per year joint income with one child in formal day care would be $2,000 per year worse off after tax and Child Care Benefit than a single-earner family with the same income, and that ignores all the other additional costs of a second earner such as transport, clothing, etc.

The reality is that only about one third of children in childcare are in the formal sector for which subsidies are available. A majority of working mothers use informal care - neighbours relatives or cash-in-hand operators for which no assistance is available. The average assistance for all children in care is just $850 per child.

The largest inequality, however, between single-earner and two-earner couples with the same joint incomes is in working hours. The latter almost always work much longer hours. Let's assume our single and two-earner couples on $60,000 each have 2 children, one under five. The single breadwinner works 40 hours a week whereas in the two-earner each parent works 35 hours a week. The single-earner couple pays $16,420 in tax and Medicare levy but receives Family Tax Benefit Part A of $2,059 and Part B of $2,752, or a net $11,609 or 19.3 per cent of income. The two-earner couple pays $11,660 in tax and Medicare Levy, and receives Family Tax Benefit Part A of $2,059, or a net $9,601 or 16 per cent of income. The single-earner family works 7.7 hours to pay tax (i.e. for public benefit). The two-earner couple works 11.2 hours. If a "bumper sticker" slogan were needed to highlight the unfairness in the treatment of two earner families, it should be: "How many hours a week does your family work to pay tax?"

With policies such as these which seek to penalise women with children who work, it seems likely that fertility rates will continue to decline and the growth in female employment will stall. This seems retrograde policy when the government's Intergenerational Report forecasts fiscal problems from an increase in aged dependents relative to working age taxpayers over the next 30 years. There is certainly need for reform, but while the Howard government remains captured by the traditional family lobby, it appears unlikely.