Paul Sainsbury
Family budgets are under pressure with the primary carer, typically the mother, losing about 60 per cent of her gross income when returning to work full-time after having children – when factoring in the cost of child care, loss of Government benefits and increase in tax – according to the latest AMP.NATSEM report.
Middle income mothers who work part-time fare a little better, losing about 45 per cent of their pay; but mums already working part-time who decide to increase their hours to full-time, will lose a massive 75 per cent of their pay for these extra hours of work.
Even though it’s more expensive than ever, child care use has jumped by almost 80 per cent since 1996, with almost a quarter of all children in some sort of formal1 child care, compared to only 13 per cent in 1996.
These are some of the key findings in the AMP.NATSEM Income and Wealth Report: Child care affordability in Australia.
The report finds Long Day Care is the most common form of formal child care, with 630,000 Australian families using this type of care, but it’s also the most expensive, costing up to $170 a day per child, which is more than a full-time wage for many low income women.
But parents are still more likely to use the services of grandparents, friends and other family members when it comes to caring for their child with 60 per cent opting for this type of informal care.
The average cost of child care has increased by 150 per cent in the last decade, jumping from $30 to $75 a day for Long Day Care.
AMP Chief Customer Officer Paul Sainsbury said affordability and accessibility of child care is critical to supporting a sustainable society, particularly from a workplace participation perspective as our population ages.
“While Government subsidies have meant out-of-pocket child care expenses haven’t increased by much more than the CPI, the big concern is recent growth in the price charged by child care centres, which has increased by more than 44 per cent in the past five years,” Mr Sainsbury said.
“The AMP.NATSEM report shows child care prices increased more than all but two of the household expenditure categories monitored by the Australian Bureau of Statistics, rising more than education, petrol and health costs. Only electricity and tobacco were higher.
“When the time comes for parents to decide whether to return to paid work, it’s not only an emotional consideration, but also an important financial one. For some, the decision to return to the workforce may not be a choice, so it’s crucial that Australian families understand the costs involved and the potential impacts of a return to work,” Mr Sainsbury said.
Other key report findings
Low income and single parents fair the worst
- Mothers from low income families returning to work full-time, may only keep as little as $4.55 an hour, or 28 per cent of their salary, when factoring in the cost of child care, loss of Government benefits and income tax.
- Mothers from low income families going back to work part-time, will lose a little less of their salary, but still a big chunk at about 69 per cent, and can expect to keep about $5.10 of her $16.37 hourly wage.
- Low income single parents working full-time can expect to lose about 62 per cent of their pay, keeping just $6.25 of their $16.37 minimum wage. They will lose about 45 per cent of their pay if they work part-time, keeping just $9.09 an hour.
Child care today
- Child care is mostly used by children under five years and peaks for three year olds, where almost 60 per cent of children are in approved child care.
- Only around eight per cent of children younger than one year use approved child care, this increases dramatically to 34 per cent by the age of one.
- Overall 887,000 families use formal child care, with nearly 1.3 million children attending around 13,000 approved child care centres.
- Around 630,000 Australian families use Long Day Care and 109,000 families use Family Day Care (home-based care by registered carers).
Lack of child care vacancies in inner cities
- 11 per cent of child care centres don’t have vacancies.
- Finding child care for school-aged children can be tough, with no vacancies at 13 per cent of before and after care school providers and no free spots in over 30 per cent of vacation care.
Typical child care cost after subsidies
- Government covers about 54 per cent of the cost of child care with the average annual gross cost of child care for an Australian family at $9,315.
- So families are on average $4,352 out of pocket from the cost of child care.
Where a person lives has a big impact on their child care costs
- Capital cities tend to offer less affordable child care than regional areas.
- Outside Western Australian mining centres, Sydney’s affluent Mosman has the least affordable child care, with child care making up 9.3 per cent of disposable income, compared to the 6.5 per cent national average for a family with one child in Long Day Care and one in Outside School Hours Care.
- Queensland has the most affordable child care in Australia, making up about seven per cent of disposable income in inner Brisbane and 3.7 per cent in Far North Queensland.
Informal care still most popular
- Even though a lot more children now use formal child care, informal care remains the most popular option with almost 60 per cent of children being looked after by grandparents, relatives or friends.
- Grandparents are playing an increasingly vital role in caring for our kids – covering almost a quarter of all child care hours.
Most mothers work part-time
- Around 42 per cent of mothers with kids in child care work part-time and 29 per cent work full-time.
More females in the workforce, only moderate by international standards
- Female workforce participation has increased from around 44 per cent to 59 per cent over the past 35 years, but Australia is still well behind the United Kingdom, Canada and Sweden when it comes to the number of women working compared to men.
- Australia also sits in the middle of international rankings for the number of families using child care, with Denmark and the Netherlands well ahead of the pack.
Women who return to work after children are hit with a triple financial whammy
- When women go back to work after having children, they’re not only faced with covering the cost of child care, but as they increase their working hours, they lose child care benefits and pay more income tax.
Mothers can take home next to nothing after paying for child care
- The short-term financial gain of returning to work after having kids can be negligible with a mother from a middle income family only taking home $12.32 of her $30.70 hourly wage when returning to work full-time.
- Middle income mothers will keep slightly more of their pay if they go back to work part-time – about $16.80 an hour.
NATSEM Principal Research Fellow, and author of the report, Ben Phillips said the report shows Government subsidies such as the Child Care Benefit and Child Care Rebate have helped keep a lid on families’ out-of-pockets child care costs.
“Without Government assistance, the gross cost of child care would have doubled compared to incomes and would be 182 per cent above current levels,” Mr Phillips said.
“But it’s likely that – along with higher standards, lack of supply, and Australia’s strong economy – child care subsidies have also helped drive up prices, which means people need more assistance, and so the cycle continues.”
Since 2002, AMP and NATSEM have produced a series of reports that open windows on Australian society, the way we live and work and our financial aspirations. AMP publishes these reports to help the community make informed financial and lifestyle decisions and to contribute to important social and economic policy debate.
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1 Formal child care is regulated child care that takes place away from the child’s home