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‘Crippling’ side effect of $120-a-day childcare costs

Angela Priestley, Women's Agenda
·Contributor
·5-min read
(Source: Getty)
(Source: Getty)

I hear this all the time from parents of young kids: “I want to pick up a fourth or fifth day at work, but it doesn’t make economic sense given the added childcare costs.”

And mostly, these parents are women. They’re usually the ‘primary carer’ of a household and they’ve painstakingly crunched the numbers to see that the additional hours or days of work are not worth it, once you factor in the cost of childcare.

My first response is to remind them, if there’s a second parent and earner at home, that childcare should be a household cost. Rethink the idea that it needs to be deducted from the secondary earner’s pay packet and deduct it instead from your combined income.

But that’s simplifying the issue, because the reality is that there is a ‘workforce disincentive rate’, as the Grattan Institute puts it, covering a combination of childcare costs, tax and welfare that conspires to see a household’s secondary earner taking home very little for those extra hours worked.

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It’s this disincentive that the Grattan Institute recommends could be addressed through a $5 billion investment in childcare, that they say would generate an extra $11 billion a year in Australia’s GDP.

That would be great for the country, but what would real childcare reform mean for families?

Childcare reform could help address gender inequality at work

First, there are the raw costs week to week that families could reap through significant reform, such as what Opposition leader Anthony Albanese proposed in Labor’s Budget reply speech last week. He promised to dramatically change the childcare subsidy from July 1 2022 in a way that leaves 97 per cent of families better off.

The Parenthood has released a calculator to help families determine what they could save: for instance, a family with a combined income of $120,000 a year would save $70 a week for every child in child care costing $120 a day.

But for secondary earners, significant childcare reform is not just an opportunity to save money week to week and take home a bigger weekly pay packet due to it finally making economic sense to work those additional days. It’s also an opportunity to access a lifetime of higher earnings and workforce participation options.

It’s an opportunity to help tackle the ‘motherhood penalty’, which sees the gender pay gap widening after a woman takes time out to have a child, with their promotion and earning opportunities diminishing once they return to work.

It’s also an opportunity to give female-led startups and businesses a real competitive edge.

Last year, when Women’s Agenda surveyed thousands of women about their career ambitions and what, if anything, could be holding them back, we found that part time work is a significant barrier to career progression and pay rises.

In many cases, women expressed feeling like they’re doing a full time work load anyway, but just getting paid one or two fifths less because they couldn’t be physically present during traditional work hours. Removing financial penalties for taking up additional childcare days is not the only change needed to support these women, but it’s one factor that could help.

Of course we also need employers, managers and leaders to step up and address this issue, making significant cultural shifts around how they value those working ‘part time’, and to fairly adjust roles and expected outcomes when staff are doing fewer hours.

For female-run businesses, it’s make or break

When it comes to female entrepreneurs and women running their own businesses, the costs of childcare can be crippling and limit options, especially for those starting out.

I was there myself when I started by business four years ago – weighing up and justifying the long-term economic benefits of paying childcare when what I was earning at the time certainly couldn’t justify it.

At one point, I cut back on childcare days as we couldn’t afford it and so I simply worked during the night instead. It was exhausting, unsustainable, and obviously a health risk.

In Covid times, with so many small businesses struggling to stay afloat, childcare costs could make or break many female-run businesses, which is why dozens of such businesses came together recently to urge the Government to make early childhood education and care free.

This make or break moment comes just as the Morrison Government’s own Budget measures are actively claiming to encourage female entrepreneurship.

Families ultimately pay the price of government policies that aim to encourage women’s workforce participation on the one hand, only to then financially disincentivise women through a broken childcare system on the other.

And those costs accumulate over the years to create significant setbacks: it’s the businesses never started by primary carers – or those deemed unsustainable or unable to reach their potential because of childcare costs. It’s the jobs not taken, and the opportunity to take up that additional day – and potentially a pay rise and promotion in the process – that can’t be economically justified. It’s the inability to comfortably look for work.

And of course, it’s the accumulated lost career progression opportunities, lost savings, lost superannuation. For many families, it’s the lost opportunity for their kids to access any kind of early childhood education at all.

We need to transform how we value both paid and unpaid work, and COVID-19 (hopefully) has done something to contribute to that conversation long term.

But in the meantime, with so much already conspiring against working mothers and contributing to a ‘motherhood penalty’ that mothers carry well into retirement, the immediate opportunity is in removing as many costs as possible associated with childcare.

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