A Time to Value - Media Pack

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

Media Pack

• Back to Contents

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.