John Howard has been tub-thumping this week accusing Labor of having a secret agenda to restrict family tax benefits.
One thing that interests me is that there’s little debate as to the policy choice that underlies his current program. It seems to be self-evident that contributing to the cost of raising children is a good thing. But surely the basic costs of raising kids are relatively constant. And surely those on lower incomes have to devote more of their disposable income to this. I’m not at all sure that a family earning, say, $200000 a year should be subsidised – unless the aim is either to help them raise their children more expensively (private school vs. public school, designer kiddie garb vs. Target) – or to free up more of their disposable income to spend as they choose.
Howard has now asserted that his government doesn’t seek to impose particular choices, but rather follow the direction of choices made by parents. What he’s talking about is the choice not to work on the part of one parent (invariably the mother, the way our society is set up). Yet Family Tax Benefit B has come under attack from the OECD as providing a disincentive for women to enter the workforce.
The latest figures provided by the Department of Family and Community Services to the OECD show that only 56.2 per cent of women with two or more children are in the workforce in Australia, the fifth-lowest among industrialised nations.
There’s been a bit of semantic hair-splitting by Howard and Costello – wrapped up in the tax debate – where they emphasise that Family Benefit B is a tax benefit not a welfare benefit. No doubt this is in part designed to refute claims that the benefit (for some) constitutes “middle class welfare” and also to remove a certain stigma. But the OECD’s take highlights a basic inconsistency. Whether it’s called “tax” or “welfare”, the benefit is still a transfer payment. Yet single women who are on welfare are denied the same luxury of choice by the government. Rather, they’re treated as shirkers, in effect, who have to be prodded into the labour market by reducing benefits and increasing sticks (and it’s at this point that the nasty EMTRs that Costello dismisses cut in). The OECD is being consistent in highlighting workforce participation. But Howard is only interested in this goal when it comes to unpartnered women who choose not to be in the workforce. Whichever way you cut the policy pie, it’s clear that there is massive disparity and that we’re quite unclear on what our social choices should be.
Elsewhere: More on Family Benefit B from Nicholas Gruen at Troppo.
Update: Anna has more comment and analysis.
Hmm. I think this just plain wrong Kim.
The Government gets into partnered people and unpartnered people to the same extent, and it pays FTB B without workforce requirements to the same extent.
Low income partnered people and low income single people with kids get welfare and FTB B. The welfare comes with the obligation to work. The FTB B does not. Millionare sole parents (do they exist?) can get FTB B, just as single income millionare couple parents can.
For couples, FTB B is about saying that a millionare couple with kids and a stay at home partner should not pay the same tax as a single millionaire. It’s a horizontal equity measure that’s being criticised on vertical equity grounds by dunderheads who just don’t get horizontal equity.
That said, FTB B is a crap way of dealing with the issue. The rot set in when Labor introduced it back in 1994 (under the name Home Child Care Allowance). They didn’t seem to mind then that it was available to millionaires; it’s wonderful what political expediency will do for one’s perspective.
Spog, to make it clearer – my point goes to the issue of single parents whose prime source of income is benefits – they’re the ones who are being ratcheted into the labour market through reducing the rate to that of the dole and work tests. The same just doesn’t apply to a partnered woman staying at home to raise her kids regardless of whether or not they’re on welfare.
In the case of a couple where neither partner works, the obligation to work or look for work falls on the recipient of Newstart (ie the male usually).
There’s supposedly concern about labour market participation for women – we hear from the government that it’s a necessity to increase it due to the skills shortage, demographics, etc. And Australia has quite a low participation rate for women compared to other OECD nations with which we would normally compare ourselves (eg, Canada, US, UK etc). But policy is designed to say “that’s not a problem unless you’re a single mum”.
I agree with you Kim, the very strong message that I get from Centrelink is get a man or get a job.
I would like to work, having been out of the workforce for some time, but the financials of any type of work I may get are a nightmare.
I live right on the edge as it is, after calculating what I lose in monetary terms (not health care cards etc) then the cost of actually going to work etc, I simply can’t afford to work and live, and care for my children. It is simply a ridiculous situation!
Ah, no Kim. You are rather out of date on this. Single parents and partnered women are both being required to go into the workforce, in equal measure. True it is that single parents are being moved down to “dole” rates (although for some of them, the “dole” rate will be the same as the pension rate anyway), but partnered women are already on “dole” rates.
And in the case of a couple where neither works, the obligation falls on both members (since 1995) except where there’s a child under 16. From 1 July the obligation will arise once the kid turns 6 (if you’re a member of a couple) or 8 if you are a sole parent.
I don’t see that this is worse for sole parents on welfare compared to partnered women on welfare. In fact, the difference in approach between single and partnered parents still favours the former.
The female participation figure for women with children that has been kicked around of late is wrong. Australian rates are a little lower than some comparable countries, but not as low as the figure suggests. Maybe the OECD figure will be corrected eventually, but the wheels turn slowly.
I think we’re at cross purposes, spog.
You write:
In other words, the current situation is that if you have a partner and a child under 16, you’re not required to look for work. Which is as I thought it was.
I wasn’t aware that the same provisions applying to the sole parents would now be applied to partnered women from July 1. I suppose that’s equitable at any rate.
But it seems to me that the basic problem I’m highlighting remains.
That is, if you are a woman whose partner works and earns enough not to qualify for Newstart, you’re supported to raise a kid, and no one cares about whether you participate in the labour market.
If you are a woman whose partner doesn’t work or who is unpartnered, you’re required to enter the labour market.
Kim – but in both cases isn’t the woman eligible to get FTB B?
The difference in the obligation to look for work is that in the latter she is also getting Newstart, and in the former she isn’t. Or am I misunderstanding how it works?
The work requirements are linked to parenting payment, rather than FTB (B). They’re two different things.
I hadn’t considered the incentive-to-work side of things – but certainly I think this is one bit of government policy that needs reforming.
Here’s the eligibility criteria.
Here are the rates.
The short answer to your question is yes.
My point though is that in the case of a couple where one partner earns – let’s say 60k – an extra $100 a week is going to be very helpful in raising a kid. If the partner’s earnings are – let’s say 150k – it’s small change.
But if you’re on Newstart, you have an income of $11549.20 a year if you’re single with a child, or $9633 if you’re partnered (for each partner). The extra hundred bucks or 80 bucks a week if the kid’s older isn’t going to make a huge difference as you’re absolutely scraping to meet your basic living costs anyway.
So I just don’t know about the equity argument – it rewards all parents because all kids cost money to raise – because it ignores in effect their other circumstances because it’s not means tested and paid at a flat rate.
It’s very complex and confusing, but I think the policy principles are clear. We’ll help women whose partners earn a decent income to stay home. We will give a token to those who aren’t partnered or whose partner has a low income, but we primarily care about getting them into paid work. It’s then that all the issues about childcare and EMTRs arise.
Update: Anna has more comment and analysis.
FT-B is the devil incarnate. It engineers a society where women stay at home because the EMTR becomes to great for hubby to stomach her to go to work.
It is a piece of shit. Income splitting is a piece of shit.
However, I’m not averse to the idea of a non means tested child support benefit coming into effect.
The ALP needs to seriously think about things. But then, just as every major party has, it has its head up its mysoginistic arse regarding women.
Kim
FTB B really has little to do with the costs of kids. That is the job of FTB A. FTB B is about the adult, not the kids. Couples without kids get the dependent spouse tax offset, if the lower income partner’s income is low enough. Couples with kids can’t get that offset, they get FTB B instead. The reason the rate varies with the age of the youngest child has to do with a notion that once the kid is at or near school age, there is less need to be a stay at home parent, so there’s a smaller payment.
Your suggestion that the policy intention is clear is surprising. The policy intentions have become very muddled over the years, starting from when the tax deduction for a dependent spouse was changed to a tax rebate. In any event, your description of the policy intention is just one of many. How about this version instead. FTB B is compensation for cost shifting on the part of the Government. A person who has no income can get the dole or other payments depending on their situation. A partnered person cannot get those payments if their partner has a high income. The Government makes the earner pay for both partners, shifting the responsibility from society generally, to just one person in particular. In recognition that this means the earner is paying tax for one, but looking after two, the Commonwealth provides some meagre compensation – about 1/3 to 1/4 of what is would otherwise have to pay.
Well, spog, you seem to have convinced me that the policy is muddled, and thus that the policy intent is unclear!
What I’d really like to see is a debate on priorities, then the technicalities. I don’t know that we’ve had the first, as I said in the post.