Labor’s highly irregular plan to spend taxpayer dollars topping up private sector wages is not only an unprecedented intervention into Australia’s wages market, it has major implications for the future of many smaller childcare centres.
While Labor’s scheme would not change anything about the way a centre is run, it would impose big new payroll tax obligations onto providers.
In many cases, small providers will be pushed over the payroll tax threshold for the first time (which is based on a company’s total payroll) and would have to find millions of dollars to fund new payroll tax liabilities.
Over the course of Labor’s eight year scheme, based on estimates from the available data, providers will be hit with an extra $591 million in payroll tax liabilities. This includes small providers (those with just one centre) which will be hit with an extra $150 million.
Providers in every state and territory will face higher taxes, including small providers in every state except South Australia and Tasmania – with 71 per cent of all providers liable to pay additional tax being small providers.
Around 5,215 small providers will be pushed over the payroll tax thresholds and forced to pay payroll tax for the first time. 87 per cent of small providers will be hit.
The average payroll tax bill per provider of Labor’s irregular and unconventional wages policy is $81,025, while smaller childcare operators will be hit with $28,731 in payroll tax per provider.
How Labor will manage these increased costs is not yet known, but providers could pass them onto families through higher fees, lay off staff, cut back their hours (particularly if Labor attempts to stop fee increases), or close their doors. This is a risk to the jobs and job security of child care workers.
The additional cost of Labor’s Child Care Jobs Tax is equivalent to 12,687 full-time child care workers employed at the average award wage ($46,600). This is equivalent to 6.5 per cent of the entire early childhood workforce.
This is a tax on wages and jobs. It means small providers will be discouraged from employing more staff and may employ fewer workers or employ them for fewer hours.
It will also dramatically increase operating costs for businesses for simply doing the same thing they were doing before. On average, Labor’s policy will add 5.25 per cent to the tax bill of 87 per cent of small businesses providing child care services.
What this staggering intervention into the labour market boils down to is higher taxes for all Australians. And it demonstrates what we’ve been saying for some time – that every time Bill Shorten promises to give away billions of dollars, it means one thing – higher taxes.
Siphoning off public money to top up the wages of favoured groups or individuals is not only highly irregular economic policy, it is comes with some serious risks.
Mr Shorten has not explained how his unprecedented multi-billion dollar wage market intervention would work, the role United Voice played in striking this deal, and why only 100,000 of Australia’s 195,000 early childhood educators will receive the salary top up.
As is always the case with Labor, Bill Shorten can’t be trusted to manage the economy, and will be coming after you to pay for their policies.