The cost of childcare alone shouldn’t put you off returning to work

Oct 4, 2021 | News Article

In my 10 years in the childcare industry, I have heard many women say that the cost of childcare makes it “not worth” returning to work after having a child. I’ve only ever heard women say this, never men. And it’s almost never the truth.

Despite the cultural shift towards more flexible workplaces, greater childcare subsidies, and a generational shift in the zeitgeist when it comes to women working after having children, women still believe that returning to work after having a baby is not a sensible choice financially.

The truth is, unless you have three children in long day care at an extraordinarily expensive facility, childcare will almost always be financially worth it.

For starters, childcare will almost never devour one entire wage in a household. The Child Care Subsidy is means-tested, so families on lower incomes are generously supported. Even at the other end, families on very high incomes (just over $350,000 per annum) still qualify for subsidised care.

For the parent considering leaving the workforce (usually the mother in a dual-income household) it’s important to consider the impact not returning to work will have on your retirement. You lose not only your income but also your opportunity to build your superannuation, a vital contribution to your family’s lifestyle in retirement. In addition, you lose the compound interest you would have earned on that superannuation over time. This is particularly important for single parents but also for women in general, who are still retiring with far less superannuation than men.

A woman who does not return to work will also lose out on pay increases – every year a person spends out of employment is a year they don’t receive a wage increase and a subsequent increase in their employer superannuation contribution. In addition, she also loses out on promotion opportunities and career progression, another compounded financial impact. In fact, the more time a woman spends out of work after having a child, the more likely she will be to re-enter the workforce at a lower level than where she left.

You also can’t put a price on the loss of confidence women experience in their ability to be in the workforce. When a caregiver parent is entirely dependent on the primary income earner, many caregivers become less and less likely to feel they can re-enter the workforce.

One of the solutions to this issue is to make sure parents (both men and women) understand the childcare system, and the economics of their decision.

If you’re still thinking through the lens of your hourly wage versus the hourly cost of care, let’s look at it in detail. When your kids get to primary school, the cost of three hours of after school care should be weighed against a full day of income. It’s simple mathematics, and the economics will work out for all families when you look at the whole picture.

With the means-tested Child Care Subsidy, the lower the household income, the more subsidy received. Low-income families will only pay 15 per cent of their childcare cost. A person on minimum wage ($20.33 per hour) will pay only $4.50 for their after school care (if the true price is $30). That’s $1.50 per hour.

The average subsidy across Australia is 60 per cent. For outside-school-hours care, a $30 after school care session of three hours will cost the average person $12, or $4 per hour. Even with three children in outside-school-hours care, it’s still worth working on any income if that care is available. Even without the subsidy, the economics of the whole picture (wage, superannuation, career progression etc) still swings towards parents returning to the workforce.

When you know your subsidy level, this calculation of hourly out-of-pocket expenses can be done regardless of whether your child is in long day care, family day care or outside-school-hours care. Just remember, it’s one part of a much larger picture, not the whole story.

After years listening to women say they can’t afford to return to work, it’s clear we have a major problem. We need women – and men – to understand that the cost of childcare is not a one-dimensional calculation.

Every parent should be able to make the choice to leave the workforce because they wish to be a full-time caregiver to their children. But if you make that decision solely for financial reasons, that is a false economy.

Kim Fenton is Chief Commercial Officer at Extend After School Care. This article was published in the Canberra Times on 21 September 2021.
The cost of childcare alone shouldn’t put you off returning to work