It is often said that talking about income and money is impolite. Unfortunately I am going to be impolite today because it is hard to illustrate the true cost of childcare without getting a bit specific about the numbers. In recent days the cost of childcare has, once again, been in the news. Today Mission Australia has warned that Australian women will be forced to quit their jobs if subsidies are cut.
Whenever the cost of childcare is reported in the news I am always a little bit surprised. Two figures, in particular, which are reported often, catch my attention. The first is that on average Australian families spend 9% of their disposable income on childcare.
The second is that the median price for 50 hours of care in Australia is $364. I understand those are averages but, even still, I struggle to compute them.
Spending 9% of a household’s disposable income on childcare isn’t cheap but it’s not crippling. In reality many families spend considerably more than that.
Before the last election I interviewed the then-minister for childcare, Kate Ellis. She explained the government assumes childcare costs an average of $72 a day. Last July the Australian Women’s Chamber of Commerce published an issues paper that estimated the average cost of child care is $120 a day. That’s a significant difference, so which is it? I am inclined to believe it’s closer to the later.
But before we delve into the numbers it’s important to remember there is a legitimate shortage of childcare positions. Just last night the host of ABC 7.30 Leigh Sales tweeted that, despite putting her son’s name down at a childcare centre when she was six weeks pregnant, he still doesn’t have a place. He is two. This is not at all uncommon in capital cities.
In light of the fact a family is lucky to even get a position in any centre, it’s disingenuous to suggest that parents have any control over the fees. Families will pay for the position they get. When I came back to work after having my first child, I was lucky to land a spot at all.
We were living overseas when we had her and we weren’t sure where in Australia we would be returning to. Once we had confirmed jobs in Sydney we started the hunt for childcare. I sent 45 emails and got 45 returns emails saying I was dreaming: that perhaps there would be a spot for her in a few years’ time.
About three weeks before we returned we got lucky. A childcare centre in the city had a spot four days a week, so feeling as if we had won the lottery, we grabbed it with both hands. The downside was that it cost $146 a day. At the time we were alarmed but what choice did we have? It was that or a nanny at a cost of $200 a day.
And at least the childcare fees attracted the rebate. I had only ever heard the childcare rebate expressed as a 50% rebate so assumed it would help throughout the year. It was only when I was interviewing someone for an article about the shortage of childcare positions that I was made aware of the fact the rebate was actually capped at $7,500 per child per year. We reached that cap after four months. So from December 2011 we were paying $584 a week, out of net income, for childcare.
If that was 9% of our disposable income that would mean we were earning $6,488 a week. We were not earning anything close to that. It was not sustainable so we began searching for a cheaper alternative. In March of 2012 we got a position at a fantastic childcare centre that my husband’s employer was associated with. It cost $105 a day. This made a difference but until 30 June, when the rebate cap restarted, we were still paying $420 a week for childcare. And we were only paying for four days.
I have written of the struggle we had to find childcare for our second daughter when I started in the role as acting editor of Women’s Agenda. Despite having her name down since she was three months in utero at the centre where her older sister attends we couldn’t get her in there. We were offered a position two days a week for her in a family day-care centre at a cost of $125 a day. At first we accepted but the downside was it required two separate drop-offs, in two different suburbs, and they wanted the youngest collected by 4pm.
Technically, on paper, that might have been possible but in reality it wasn’t. Three weeks of trying, and a few days of illness where we had to get a babysitter anyway, was enough to make me realise I had a choice: if I wanted to take this job and do it properly we would need to get a nanny.
Under the current system there are no subsidies for nannies (with the exception of some situations which attract a rebate for in-home care). Because I work flexibly and only four days a week, we only needed a nanny three and a half days a week. Even still the cost of that, and another three days for my older daughter in day care (so we didn’t lose her coveted spot) just about exhausts my income. We pay substantially more on childcare than we do on rent.
Just last week my youngest commenced at the day-care centre which means our out-of-pocket childcare expenses will be less. But it’s still no where near 9% of disposable income.
That is a financial reality for many working families. In many ways I recognise we are lucky. Neither my husband or I earn the minimum wage so even if it exhausted my income we didn’t have to go backwards to hire a nanny. We were prepared to take the hit for the long-term benefit: I would rather stay in the workforce and maintain my income and employability even if it means there is barely a net financial gain from working at the moment. I realise I am lucky I enjoy my work enough to want to do that.
Many families are in the same boat. Before ‘the cost of childcare’ issues gets dismissed as a middle-class whinge, keep in mind the bigger picture. As Australian taxpayers we spend a significant amount of money educating women but the return on that investment is poor. There are still too many barriers which prevent women from participating in the workforce to the full extent of their education. That costs us in national productivity.
In this regard the cost of childcare is a very real barrier – not just for women on minimum wage. I would hazard a guess that the cost of childcare is a hurdle for every family that earns less than an executive salary. In that light it is not at all difficult to comprehend Mission Australia’s report today; even with the subsidies the cost of childcare is very nearly prohibitive. Imagine what the situation would be without it?