Heavy childcare costs could prevent new parents from seeking full-time employment

28^th October 2012

Annalisa Ratti

Annalisa Ratti

28 October 2012

Incredibly high costs for childcare are eating up such a big part of second earners’ salaries in low to middle-income families that in most cases they would be better off working only few hours a week or staying at home.

These are the findings of two reports led respectively by Resolution Foundation and Centre for Social Justice (CSJ). The results showed that extra earnings are largely used for covering childcare costs and other costs covered by tax credits and other benefits in single earner families.

Nurseries and child minders’ prohibitive prices are one of the most important issues that squeezed families have to face, and in some cases it prevents women from returning to work after childbirth.

According to some economists, the reluctance or inability of many new mothers to go back to work is having three important effects: it is slowing down the economic recovery of the country, increasing the Benefits’ bill, and ultimately dragging down living standards.

The Resolution Foundation’s report shows that a second earner from a middle-income household (£17000-£42000) paid an average of £12 per hour will improve the family income of £4500 if working 13 hours a week. However, the increase of worked hours would reduce the family income overall as the combination of increased childcare needs and reduction of support in terms of tax credits and other benefits.

The deputy chief executive of Resolution Foundation said: “ We need major change in our childcare system to ensure that work is always worthwhile – and that working more hours or a pay rise results in higher take-home pay.”

The Centre for Social Justice reported that 455,000 UK households reach state support for their childcare costs with an average of £232 a month for a typical family with two children.

Despite the fact that UK has the second highest level of childcare support in the OECD, British families still struggle to find affordable childcare.

The figures from CJS’s report clearly show that a single mother with three children requiring after-school care would be 17p an hour worse off if they took a job. Another incredible result shows that a single parent with two children would only be 2p an hour better off if employed.

The CJS study predicts that for some large households it would be more convenient for the Government paying parents the minimum wage to stay at home and look after their children instead of paying childcare subsidies.

The Managing Director of the CSJ, Christian Guy, said, “Finding suitable and affordable childcare in the UK is difficult and often hinders some of the poorest parents from working. We need to give people the tools to escape poverty reforming childcare must be a political priority.”

A Government’s spokesman explained the actions that have been taken to solve the issue: “For too many families, the high costs of childcare mean it is not worth going back to work. We are looking at best practice in France, Germany, Denmark and the Netherlands, where high-quality affordable childcare is available for parents, and will be setting out proposals in due course.”

Annalisa Ratti