What happens when the entrenched motherhood penalty meets a cost of living crisis?
We can expect to see more mothers facing financial stress, economic and housing insecurity, and potentially further limitations on their earnings.
The cost of living is impacting people across the globe and is not a unique experience in Australia.
But where Australia is unique is in the size of the motherhood penalty, at least when compared to other OECD nations.
Women experience an average 55 per cent hit to their earnings in the first five years after having a child, according to Treasury figures. Meanwhile, fathers experience a “fatherhood bonus”, which sees a new dad’s wages continue to rise from the year before having a child to five years later.
Currently, a 25-year-old woman who goes on to have one child can expect to earn $2 million less in lifetime savings when compared to the average 25-year-old man who also enters parenthood, based on 2023 work trends and as outlined in last year’s Women’s Economic Equality Taskforce report.
A 25-year-old woman can also expect to take on significantly more unpaid care and domestic work than her male counterpart, spending an average of 30.2 hours a week on unpaid care and housework compared to 21.8 hours for the average man.
Meanwhile, women head up more than eight in ten sole-parent households — where, back in 2020, before the cost of living crisis continued to spiral — a massive 37 per cent of sole-parent households were already found to be living below the poverty line.
So what happens when we throw in a cost of living crisis? Recent research from several different studies released in recent weeks may indicate what’s to come.
Parents with children under five have seen the cost of living soar 27 per cent since 2021, according to 2024 Impact Economics and Policy. A significant contributor is the cost of childcare, finds The Parenthood, with childcare costs named by the Consumer Price Index as the third fastest-growing good or service cost in Australia. Childcare costs have increased by 10.7 per cent in the year to September.
When the cost of childcare comes to be considered as “too expensive” or even as “not worth it”, we know that it’s typically women who’ll step back from a day or so of work a week to take on the care themselves, thereby limiting their earnings potential, their promotions potential (with just seven per cent of managers working part time) and potentially their long-term economic security.
There are also some hints in the dire stats released on homelessness in Australia, which showed how older women, as well as families, making up a disproportionate cohort of those accessing services for the first time in Australia.
The Australian Homelessness Monitory 2024 has found an additional 10,000 people are accessing homelessness surveys every month in Australia. As Homelessness Australia CEO Kate Colvin said on the findings, “Homelessness is no longer confined to the most vulnerable… With the housing crisis forcing working families into homelessness, this should be a wake-up call for action.”
In October this year, Foodbank 2024 reach found that two thirds (69 per cent) of single parent households are facing food insecurity. More than one in four Australian women have experienced food insecurity in the last 12 months.
The lost earnings of motherhood, the gender pay gap, lost superannuation during periods of paid and unpaid parental leave, and reduced super payments during periods of part-time work all compound retirement and superannuation savings later on.
All of these factors contribute to a motherhood penalty that follows mothers well into retirement. Throw in a cost-of-living crisis, and the situation is even more dire for mothers in immediately feeling the effects now, and the cumulative effects later on.
Addressing the motherhood penalty, alongside penalties applied to women who take on both informal and formal care roles, is critical to reducing economic inequality in Australia.
We’re months from an election, and there are opportunities for whoever wants to win government to address the culminating impacts of the widening of the motherhood penalty and how it relates to the cost of living crisis.
One opportunity is in making early childhood education and care radically more affordable, currently being considered by the Albanese Government, with a fixed fee early learning and childcare model capping fees at $10 or $20 a day if re-elected in 2025.
Another opportunity is in affordable housing. The housing bill passed the Senate in the final sitting days of the year. It’s something, but not enough to deal with the fast growing crisis of homelessness in Australia.
Further, while we have seen some commitments to social housing by state and federal governments, it’s not enough to keep up with what’s been described as a “homelessness emergency.”
Kate Colvin is calling for investments in “homelessness prevention” to prevent people from ever entering the cycle of homelessness in the first place. Long term financial security and access to work despite having caring responsibilities is one prevention measure, another is making stronger financial commitments to ending domestic and family violence, which is a significant contributor behind women and children becoming homeless.
Meanwhile, when it comes to mothers increasing their earnings, flexible work with real career progression opportunities is essential, as is every employer addressing gender pay gaps, their policies supporting parents and carers, as well as issues like sexual harassment and discrimination that may be limiting women’s potential.
Both the Albanese Government and the Opposition will talk big on addressing cost of living in the lead-up to the election. Bringing in this context of the motherhood penalty will be essential for considering just how serious they are about creating long-term and meaningful change.