This paper examines the horizontal equity of Australia’s system of family payment for newborns. Using microsimulation modelling this research illustrates the higher levels of disposable household income that can be achieved by mothers eligible for Parental Leave Pay (PLP) compared to almost identical ineligible mothers.
Under 2017-18 policy settings eligible mothers with private incomes between zero and $90,000 in the year following birth are able to achieve disposable incomes more than $5,000 greater, on average, relative to otherwise similar ineligible mothers. This income disparity amounts to 10-19% of the private income of ineligible mothers with private incomes under $47,000.
The simulations demonstrate how recent reforms to family payments for newborns that reduced the generosity of maternity payments have made the extent of the horizontal inequity associated with PLP far more pronounced than it was at the time of its introduction in January 2011. The paper concludes with a discussion of whether the horizontal inequity that is inherent in a payment with eligibility determined by pre-birth employment, funded by taxpayers rather than the contributions of recipients, can be justified given PLP’s policy objectives.
Matt is a Senior Research Specialist at the Australian National University’s (ANU) Centre for Social Research and Methods (CSRM) and a PhD candidate at the ANU Crawford School of Public Policy. He has over a decade of experience in the use of econometric methods and policy simulation techniques in the analysis of public policy. His research has informed policy making at both a State and Federal level across a range of policy areas including Vocational Education and Training, early childhood education, housing, child support policy and labour market programmes. In addition to policy evaluation and quantitative data analysis Matt has expertise in the development of micro-simulation models to assess the fiscal and distributional impacts of alternative taxation and income support policies. Before joining CSRM Matt worked for the Classical Liberal think-tank the Centre for Independent Studies and a number of government agencies and universities including the National Centre for Social and Economic Modelling at the University of Canberra and the Australian Institute of Family Studies.