Child Care Costs Grow, And So Does Risk For Abbott

The difficulties for parents of raising a family while re-entering the workforce are well known. But if the issue is perennial, two recent events have moved it back to the forefront of the national debate.

The first is a report by the National Centre for Social and Economic Modelling, which establishes just how difficult it can be for parents with young children wishing to re-enter the workforce.

The second is a move by the Abbott government to cut more than $1 billion from child care subsidies.

Child care matters. Without it, parents with young children are often unable to work. While some parents may not want to work and may wish to focus on caring for their children, many parents with young children clearly do want to work.

The situation is particularly acute for families without access to the traditional sources of infant care – grandparents and extended family.

The NATSEM report, by Ben Phillips, looks at the exploding cost of child care in Australia. Over the past five years, child care prices have rocketed 44 per cent – that’s almost nine per cent a year.

Only electricity bills and tobacco have risen faster.

With long day care now costing as much as $170 a day in some inner city child care centres, child care is becoming unaffordable for low- and middle-income families, even with the assistance of government subisidies.

The NATSEM report models the costs of child care for typical families, and establishes just how costly going back to work can be.

For a family with a two-year old in long day care, and a seven-year old in after school care, the extra income from a mother returning to work is almost completely wiped out by the costs of child care, income tax and lost government benefits.

NATSEM estimates that “a mother from a low-income family returning to work part-time (20 hours) after having a child would lose about 69 per cent of her pay to income tax, loss of Government benefits and covering the cost of child care.”

If she went back to work full-time, she would lose even more. The hourly wage of a mum working 40 hours equates to a measly $4.55 an hour.

The figures are even worse for single parents. NATSEM estimates that “a single low-income mother working 20 hours a week, who decided to increase her hours to full-time (40 hours), would lose around 80 per cent of her pay for those extra 20 hours.”

Her hourly rate for those extra 20 hours? $3.44. No wonder many women do the sums, and decide it’s not worth it.

Reports like this simply confirm what many parents already know: the cost of raising a family is increasing.

While Australia’s overall inflation rate remains low, price rises for critical services like child care, education and utilities continue to cause real pain, particularly for low-income families.

This, is turn, damages the economy. Even economic conservatives and the business lobby agree that encouraging more women back into the workforce will improve productivity and ultimately make for a wealthier, happier society.

Governments have long recognized this, which is why the Howard government introduced child care assistance, and the Rudd and Gillard governments expanded it.

Indeed, Tony Abbott trumpets his paid parental leave scheme in overtly economic terms, talking about “participation” whenever he can. 

There’s no getting around it: child care is expensive. Even the name “child care” is a misnomer, because we are talking about something much more important than just minding the kids.

Child care is expensive in part because it requires high-quality workers: better-qualified and skilled child care educators is exactly what we should be aiming for, after all.

High-quality early childhood education has long been known to be amongst the very best things any government can spend money on: the outcomes in terms of a healthier, smarter and more productive population are huge.

Nobel laureate James Heckman has estimated that the return on investment in early childhood is around 17 per cent annually.

Unfortunately, and despite the huge investment it plans to make in its paid parental leave scheme, the Abbott government has been going in the opposite direction on child care.

 

One of the first things the Abbott government did on taking office was to axe Labor’s $300 million fund to improve the quality of child care education. 

It also decided to fight a wage claim by child care sector workers in the Fair Work Commission.

This year’s horror budget contained further cuts. The government plans to save nearly a billion dollars by freezing the thresholds at which child care rebates and benefits are paid. This means that as child care costs rise, government subsidies will stay at 2013 levels.

The freeze on the Child Care Benefit will be particularly regressive, as it will hurt lower-income families the most.

By 2016-17, industry group Early Childhood Australia estimates low- and middle-income families paying for child care will be thousands of dollars a year worse off.

Needless to say, changes like this dwarf the supposed benefit of abolishing the carbon tax, which the Coalition made such a point about in opposition.

As with so many other aspects of the Abbott government’s intentions, there are deep contradictions between its different policies here.

Does Tony Abbott believe in the value of parents returning to work, as he claims in regards to his paid parental leave scheme? If that’s the case, then why slash hundreds of millions from child care support?

Labor’s Kate Ellis points out that “never before has a government sought to cut the targeted and means-tested Child Care Benefit (CCB) program.”

“The Prime Minister’s attacks on the CCB will reduce the payments of families on as little as $42,000 per year,” she wrote today in a media release.

It’s a long way from the heady days of the 2013 election campaign, when Tony Abbott famously pledged “no cuts to education”.

Labor is opposing the cuts in the Senate, voting yesterday to amend the government’s bill that would legislate for the funding cuts. The government has already said it will try again with the new Senate.

That means that the fate of affordable child care will rest with the minor parties of the incoming Senate – along with many other key changes announced in the budget, like Medicare, higher education and welfare changes.

Those of us who didn’t quite realise how powerful Clive Palmer will be in this term of Parliament are starting to wake up.