For many men and women, trying to arrange childcare for a child is the first time they will personally encounter any structural barrier to parents working. Up until the point when a childcare position is required it is easy to assume that in 2014, in a country like Australia, we have the basic infrastructure to support working families. Needing a childcare spot and not being able to secure one – or being able to secure one but only at substantial cost — is a rude awakening.
The availability, affordability and accessibility of childcare remains a genuine impediment to parents, and most often mothers, returning to work. Because of that it remains a genuine, and costly handbrake on our productivity. Dismissing childcare as a women’s issue is to dismiss the additional $25 billion in national GDP that the Grattan Institute estimates would be generated by increasing female workforce participation.
Whichever way you consider it, it is difficult to argue that childcare isn’t a major economic problem. Which is why in November last year the government directed the Productivity Commission to undertake an inquiry into childcare.
What emerges from the inquiry will be of critical importance. It is an opportunity to bring Australia’s childcare system into line with the economy. As a nation we educate women better than any other country in the world but we don’t have adequate infrastructure to support mothers — many of whom are highly educated and eminently qualified — returning to work.
In the Financial Review today, Louise McBride, a barrister, wrote an opinion piece arguing that the cost of nannies must be tax deductible. The cost of a secretary is legitimately tax deductible because it is a cost incurred in the earning of income and McBride argues that reasoning can – and should – apply to nannies. It is a point that I agree with but I would argue there is more to consider.
I will preface this by saying I am not an accountant but my understanding is that there is no financial advantage of making childcare tax deductible until an individual’s salary is in excess of $150,000. At that income level the cost of childcare, even paying a nanny without any subsidies, isn’t prohibitive.
That doesn’t mean making the cost more affordable shouldn’t be important. But because no government has unlimited resources the pertinent question when allocating public funds has to be – where can this money be targeted to garner the best results?
Any policy designed to increase workforce participation must be judged as such. Improving the cost and availability of childcare has to be done in a manner that will lever productivity. That means it has to make it easier – possible even — for parents to work more than they can under the existing arrangements. The cost of childcare is less of a pain point for men and women earning more than $150,000 than it is for those below that level. The fact is there are many parents, educated and qualified, who cannot afford a nanny even if they wanted to. Families in that income bracket bear the brunt of unaffordable childcare and that needs to be a policy priority.
Making nannies more affordable through tax deductions, or even childcare rebates, makes sense for many reasons. As McBride explains in-home care provides vital flexibility that childcare centres can’t.
The other reason I support childcare being tax deductible is for the same reason that Eva Cox argues the coalition’s proposed parental leave scheme is beneficial. It helps create and reinforce the idea that caring responsibilities are a legitimate and normal aspect of our working lives. It builds another important bridge between working and family.
As ever, however, there are limits on what we can have. It’s important to keep the big picture in mind when we start building childcare bridges.