New research shows mothers are losing around 60 per cent of their gross income when they return to work, after taking into account childcare costs, loss of government benefits and increases in tax.
The research by the National Centre for Social and Economic Modelling (NATSEM) and AMP says mothers on minimum wage may only keep a fraction of their earnings, with some effectively working for just $3.50 an hour.
The centre’s income and wealth report found the average cost of childcare has jumped 150 per cent in the past decade, with some families paying as much as $170 per day.
NATSEM research fellow Ben Phillips said mothers on minimum wage may only take home a fraction of their wage.
“What we do find is that as the woman returns to work she tends to only keep around 20, 30, 40 cents in the dollar,” he told ABC News 24.
“So if she’s on a minimum wage of $16.40 an hour she may only keep $3.50 to $4.50 per hour.
“She starts paying tax, loses government benefit and the cost of childcare is high and getting higher.
“For middle income mothers on $64,000 per year, she’ll be keeping around $10 to $12 per hour, so again … only keeping about 30 or 40 cents in the dollar as she returns to work.”
The Federal Government has ordered the Productivity Commission to look into into childcare system, with a final report due in October.
Federal Assistant Education Minister Sussan Ley said parts of the system are in crisis and the Productivity Commission report will help fix it.
“We will be in a position early next year to bring new policy ideas before the Australian Parliament and start to give parents the relief from the system that is stressing and breaking at the seams, particularly in terms of cost,” she said.
Financial services firm AMP and the National Centre for Social and Economic Modelling (NATSEM), which compiled the research, said mums from low-income families who return to full-time work may take home less than 30 per cent of their salary.
“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,” AMP’s Paul Sainsbury said.
“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,” he said.
Mothers planning pregnancy around paid parental leave scheme
The report comes as a Galaxy poll shows as many as 570,000 women are looking at planning their next baby around the paid parental leave (PPL) scheme, which comes into effect next July.
The poll, published in the Sunday Telegraph, shows 9 per cent, or around 412,000 women, would delay a pregnancy to claim benefits under the scheme.
Another 4 per cent, or around 162,000 women, would bring their pregnancy forward.
Prime Minister Tony Abbott’s scheme has been under fire from the business community and some of his colleagues, who argue it is too generous given the dire budget situation.
Under the scheme, a woman will be entitled to receive her full wage for six months, including superannuation.
Women earning $100,000 or more will be eligible for a maximum of $50,000 for six months – a figure reduced in April from the scheme’s original $75,000 cap.
City parents, mining communities paying most for childcare
The NATSEM-AMP report also found inner-city Sydney and Melbourne parents, as well as families in remote mining communities, are paying a greater price than most other families for childcare.
Mr Phillips says long daycare can cost up to $170 a day.
“The $170 is certainly the extreme case and we do find the most expensive child care is around Sydney Harbour,” he said.
“So the most expensive areas around the very high-income areas of central business districts of Australia. Also some mining areas as well. You get around the $150, $160, $170 per day.
“A more typical case is around $80 to $90 per day and the cheapest options are actually in Queensland.”
“In terms of the types of childcare people are using, it remains the case that in terms of the total number of hours used in childcare it’s the grandparents, friends and other relatives who actually take up the lion’s share,” Mr Phillips said.
“What we find is that as the woman returns to work she tends to only keep around 20, 30, 40 cents in the dollar. So if she’s on a minimum wage of $16.40 an hour she may only keep $3.50 to $4.50 per hour. She starts paying tax, loses government benefit and the cost of child care is high and getting higher.
“But in terms of formal childcare it’s the long daycare. So that’s where you’ve got a child in care for usually at least 10 hours per day or up to 10 hours per day. That’s the most standard form in Australia.”
The study also revealed women who have children in formal childcare are paying $7 billion in taxes and by remaining in the workforce are saving the Government through lower pensions, allowances and family payments.
Mr Phillips says despite the rising costs of childcare, Government rebates such as the childcare benefit and childcare rebate have helped to reduce the impact on families.
“Over the longer term, say over the last 10 years … we do find that the cost has actually increased by no more than incomes and in fact only a little bit more than Consumer Price Index,” he said.
“So overall it’s been slightly more affordable over the past 10 years. It’s the most recent five years that the report is finding is the area of concern. I guess the challenge for policymakers will be how to deal with that in the coming years as prices continue to rise.”