Dads taking parental leave may help solve skilled worker crisis
The job summit this week is an enormous opportunity to address Australia’s long-standing growth challenges.
Australia’s trend productivity growth has halved since the late 1990s and early 2000s, and the nation has become too dependent on migration to expand the workforce and meet the skill needs of employers.
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In this drive to lift Australia’s growth potential, doing more with what we have should be a key area of focus.
In particular, there is an opportunity to substantially increase the participation in the workforce of women in the prime ages of their potential working lives.
While Australia is not an underperformer when comparing female participation rates with the average OECD country, it is not at the top of the pile either.
For example, Sweden’s participation rate for women aged 25 to 64 is just over 89 per cent, compared with a bit more than 75 per cent in Australia. Finland, the Netherlands and Switzerland also all do better on this metric.
Meanwhile, the participation rate for women in this age cohort is around 10 percentage points lower than for men. This is despite the fact that women have higher average levels of education.
This gap is also flattered by the fact that women are much more likely than men to be in part-time and casual employment.
Fortunately, the Albanese Government recognises the urgency of addressing this and other aspects of gender equality in Australia.
Finance Minister Katy Gallagher has promised that barriers to women’s workforce participation, closing the gender pay gap, and career advancement will all be embedded in the job summit’s streams.
The Prime Minister, himself, has pledged to make gender central to his Government’s agenda.
What needs to change?
In terms of action, the Government should be guided by the best available evidence.
We recently completed a comprehensive assessment of the policies that have had the largest effect on women’s participation rates across the OECD countries.
In that work, we considered things like the tax treatment of second and single earners, childcare costs and availability, the tightness of employment-protection legislation, as well as maternity, parental and paternity leave policies.
While all of these are relevant, we found that expanding the availability of paid paternity leave had the potential to boost women’s participation rates more than any other policy we investigated.
And, importantly, increasing the availability of paternity leave was not associated with lower male participation.
At first glance, this conclusion seems counterintuitive.
Shouldn’t maternity or parental leave be more tailored towards women’s job and career choices than the leave available to men?
But think about it some more and our results begin to make sense.
If women expect, or are expected, to take career breaks while their partners don’t, this naturally creates less attachment to the labour force.
On top of that, an employer considering two candidates of different genders may have a conscious - or unconscious - bias towards hiring the person perceived to be least likely to leave.
If all parents are equally likely to take leave, these barriers to women entering and staying in the workforce should logically decline.
Legislating for men to take parental leave is a way to ensure that they have a legal right to do so.
Of course, it’s not enough to make additional legislated paid paternity leave available to men – the leave also has to be taken.
In essence, the culture of taking leave also has to change.
The Swedish model
But culture can be slow to change. The experience of other countries shows how policy can be used to drive this behavioural change.
Sweden, for example, has some of the highest rates of paternity leave uptake in the world. But this wasn’t always the case.
In the 1970s, it was the first country to impose a parental leave policy that replaced maternity leave and allowed parents to split the days as they chose – at 90 per cent salary for 180 days.
In the first year, fathers only took 0.5 per cent of this parental leave despite being compensated.
By the early 2010s, Swedish fathers were taking around a quarter of this leave.
Other than the slow burn of the original policy change, studies suggest that the introduction of a “daddy month” in 1995 also made a difference.
If each parent took at least a month of leave, the family would receive an extra month to their leave allowance.
In 2002, this increased so that if mothers and fathers each took two months’ leave, they would receive two additional months. By 2015, a third extra month was introduced.
The upshot is that fathers now take nearly half of available parental leave, well above the EU and OECD average.
Similar policies exist in Iceland and Norway, where rates of parental leave among men are also higher.
To be clear, our findings do not imply that maternity - or broader parental - leave does not matter. It is more that greater progress has been made in expanding the right to paid maternity and parental leave in most countries. And that means that diminishing marginal gains have set in.
A lesson for Australia
Under Australia’s current Paid Parental Leave scheme, the primary caregiver in a household – which is typically a woman – can access 18 weeks of paid leave at the minimum wage. This is already much less generous than in the typical OECD country.
Critically, however, there are only 2 additional weeks of paid leave set aside for dads or partners, with most supplementary employer-based arrangements mimicking this imbalance.
As a result, men are much less likely than women to take extended leave after a child is born, with the large gender pay gap reinforcing the inequity of the burden in early caregiving responsibilities.
The bottom line is that both an expansion in the length of paid leave available to - and set aside for - men, as well as its generosity, has the potential to greatly improve female participation rates over time.
This, in turn, should substantially lift potential output.
And these benefits will be even greater if reinforced by increasing the incentives for men to take the leave that is available to them, as part of a cultural shift towards removing the gender bias that still pervades Australia’s labour market.
Jeremy Lawson is the chief economist and head of the abrdn Research Institute
Abigail Watt is a quantitative economist at abrdn Research Institute
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