Childcare Costs Have Risen 7 Times as fast as Wages
Childcare Costs Have Risen 7 Times as fast as Wages
Not being able to afford to work seems counter-intuitive, but this is the reality for many working parents once the cost of childcare is taken into account. With rising costs outpacing wage growth, parents on lower incomes are no better off going to work, and paying for childcare, than looking after their own children full time. Childcare costs have risen up to seven times as fast as wages in the past nine years, pushing many parents out of work – and often into debt.
Childcare costs and Low Income
A study carried out by the Trades Union Congress (TUC) found that average wages grew by 12% between 2008 and 2016, but childcare costs rose by 48% in the same period. London has been the worst affected by these changes, with childcare costs rising 7.4 times faster than wages, whilst in the East of England the rise was smallest – 2.9 times as fast as wage growth. This means that two parents of a one-year-old, both working full-time, will spend around 11% of their wages for 21 hours of childcare per week. For a single parent working full-time, this rises to over a fifth – 21% of their income.Get Started
The dilemma is most challenging for parents on a low income. According to Ellen Broomé, of the Family and Childcare Trust (FCT), “Low-income families claiming universal credit typically take home just £1.96 per hour after childcare costs have been paid”. With actual wages this low it is easy to see why, for many parents, returning to work is not financially worthwhile. This problem is not new – in 2011 a survey carried out by Daycare Trust and Save the Children found that two thirds of parents on a low income (£12,000 annually or less) said they could not afford to work. A further four in ten parents reported childcare costs were as expensive as their rent or mortgage payments. A further third had turned down work because they could not afford the cost of childcare.
Debt and Childcare
Many parents have resorted to debt to cover childcare costs. According to Daycare Trust and Save the Children, a quarter of parents reported being in debt as a result of paying for childcare. With costs rising so much faster than pay, this is unsurprising, and 47% of parents earning a low income reported cutting back in other areas as a result of expensive childcare bills. 58% admitted to cutting essential spending as a result, including household bills and clothes. Another survey, by Creditfix, found that 7.9% of people struggling with debts cited the costs of raising children as the main factor – the problem clearly persists and is wide-spread. Fortunately, an IVA or Trust Deed can include most types of unsecured debt, and ease the strain when payments get out of hand.
The Roots of the Problem
Childminders believe that the government’s policy of providing 30 hours of free childcare per week to working parents of three and four-year-olds is partly to blame. The National Day Nurseries Association (NDNA) reported that the government pays nurseries, on average, only £4.37 per hour, per child through this scheme. “At these pocket money prices”, the NDNA argue, “nurseries are left with a shortfall which can only be passed on to parents in the form of higher fees for paid-for hours”. The charity is anxious that the government’s free childcare scheme will actually reduce the access that less well-off parents have to childcare if nurseries are not adequately funded. This is even more of an issue for parents of younger children, one-year-old children do not currently receive any free care. Their parents are faced with the brunt of increased prices. Despite these concerns Robert Goodwill, children and families minister, maintains that “Helping families access affordable childcare is at the heart of this government’s agenda”. The TUC are not convinced this help is enough however, arguing that prohibitively expensive childcare especially disadvantages working women. General Secretary, Frances O’Grady, has criticised the “gap in childcare for one-year-olds”, and believes that further government subsidies are required to ensure that “mums don’t continue to have to make that choice between having a family and having a career”.
What can be done?
If the parents of young children are to access affordable childcare, the TUC recommends that universal free childcare be available form the end of maternity leave, increased funding is given to local authorities to pay for this care, and that employers have a greater role in providing care for employees’ children. This could be through onsite crèches, subsidies, or flexible hours. Getting more parents back into work could provide a boost to the UK economy, as well as parents’ quality of life. Access to affordable childcare is also vital to ensuing that women are equally able to work, as the majority of childcare responsibilities continue to fall on mothers rather than fathers. A 2016 study by the Fatherhood institute found that for every hour UK mothers spend on childcare, fathers on average spend only 24 minutes. Fairer policies on childcare provision could go a long way to addressing this.
If you need more information about the options available to you in dealing with your debt, you can always speak confidentially with one of our friendly advisors on 0808 2085 198.Get Started
Get help with any type of unsecured debt
We can help you manage debts with some of the biggest creditors in the UK.