Making childcare cheaper would boost the Australian economy by $11 billion a year and improve mothers’ lifetime earnings by $150,000, new research has found.
Increasing the childcare subsidy for low-income families from 85 per cent to 95 per cent and then tapering for households earning above $68,000 could be a key policy measure in recovering from the Covid-19 economic shock, the Grattan Institute’s Cheaper childcare: A practical plan to boost female workforce participation argues.
Under such a scheme, 60 per cent of Australian families would pay less than $20 a day for childcare, with no family worse off.
And while it would cost the Government $5 billion a year, the economic payoff of increased female workforce participation would more than eclipse that, boosting Australian GDP by $11 billion.
“Cheaper childcare is a win-win – it would boost the economy and give Australian women enhanced life choices,” said lead author Danielle Wood.
“It should be central to the Government’s plans for lifting Australia out of recession.”
The report found that a combination of childcare, welfare settings and tax mean that for many families, there’s no incentive for the second-earner to take on additional hours of work. That means that the secondary earner, usually the woman, earns a negligible income for working the fourth or fifth day of a week.
“We can hardly be surprised that many mothers conclude that working an extra day for no or virtually no take-home pay makes no sense,” Wood said.
“And Australia’s high out-of-pocket childcare costs bite even harder now for families that have lost jobs or hours because of the Covid crisis.”
Shifting parental leave arrangements
Grattan Institute also proposed a change to the current parental leave scheme.
As it stands, Australia’s female workforce participation is above the OECD average but Australian women are more likely to work part-time hours and take on the majority of unpaid work at home. This in turn constrains their ability to take on more paid work.
The latest Financy Women’s Index finds that women in relationships carry out 60 per cent more unpaid work than men.
“That [unpaid work] might become another barrier to prevent female workforce participation which affects wages, which flows into everything,” the Financy Women’s Index report author Bianca Hartge-Hazelman said.
“It's like a vicious cycle that we're experiencing at this point in time, and I'm very concerned about the longer term economic impacts of Covid-19.”
And when families have children, women will often look for flexible work arrangements, while men’s work arrangements generally change little. The Grattan Institute’s report noted that in countries with a dedicated parental leave scheme for fathers, men were more likely to do more unpaid work at home.
As such, by extending the parental leave scheme to include six weeks ‘use it or lose it’ leave for each parent at minimum wage, plus another 12 weeks that could be shared between the two, more fathers would be encouraged to spend more time with their children in the first year of their life, the Grattan Institute said.
Under this proposal, single parents would receive the full 24 weeks and would cost $600 million.
The proposals come as Covid-19 changed ways of work across the country, with millions losing work and others taking up remote work.
According to the University of Melbourne, even in families where both earners are working from home, the share of domestic labour carried out by women has increased during Covid-19, raising questions around the future of unpaid labour in Australian households.
Additionally, the Covid-19 crisis has hit women harder than men, with women losing more jobs than men across 14 of the 19 sectors hardest hit by the pandemic.
That’s largely due to work patterns that see women take up more casual and part-time work.