Want to fast-track the economic recovery? Then you need working women and affordable childcare

- August 11, 2020 2 MIN READ

New research by the Grattan Institue makes it clear that if Australia wants a speedy economic recovery post-COVID-19, the key is affordable childcare and working women.

The new report Cheaper childcare: a practical plan to boost female workforce participation estimates that overhauling the childcare subsidy scheme and providing more affordable childcare would add $11 billion dollars to the GDP per year.

The report recommends the federal government invest an extra $5 billion on childcare suggesting the benefits would outway the costs – with an increase in women’s workforce participation.

The report recommends the childcare subsidy for low-income families should be raised from 85 per cent to 95 per cent, gradually tapering for households with income above $68,000. Under this scheme, 60 per cent of families would pay less than $20 per day per child for childcare, and no family would be worse off.

The report’s writers believe a range of policy, cultural, and social factors conspire to prevent many Australian women from working the paid hours they would prefer. A combination of tax, welfare settings, and childcare costs means some second-earners take home little or no extra pay for additional hours of work. This ‘workforce disincentive rate’ can be particularly punishing for the fourth and fifth day of work for the primary carer, still generally a woman.

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell said the report makes a clear economic case for affordable childcare. Carnell is a long time campaigner for more affordable childcare. Indeed the ombudsman believes it is critical to ensuring women can work, including women in small businesses.

“Thirty-eight per cent (38%) of small businesses are owned and operated by women and that number has been growing. Many of these women are mothers who rely on childcare as they work to get their businesses back up-and-running again. For those surviving on JobKeeper, childcare fees are unaffordable. That means one parent – mothers more often than not – need to spend more time at home. It’s bad for business and even worse for the economy,” Carnell said.

The report refers to the ‘workforce disincentive rate’ which leads many mothers to work three or four day weeks, because working an extra day would offer virtually no take-home pay.

“Now is the time for the government to be implementing innovative ways to increase the female participation rate. The report shows that under the current system, a family with two kids in childcare on $60k FTE – the primary carer gets $2 per hour for day four and nothing for day five.

“There’s no doubt that affordable childcare would allow more women to work on growing their businesses, which would deliver productivity gains.”

Carnell said while the Grattan Institute recommends an expanded subsidy scheme, the government could also make childcare more tax-effective.

“After all, getting people back into jobs is key to Australia’s economic recovery,” Carnell said.

The release of the report coincides with a rallying cry from small business owners calling for the government to make childcare free. The “Make it Free‘ movement has already garnered support from businesses around the country who believe Australia’s approach to childcare needs retooling.

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