CEY1710

Written evidence submitted by the Social Market Foundation

About the Social Market Foundation

The Social Market Foundation (SMF) is Britain’s leading cross-party think-tank, standing proudly in the centre-ground of politics since 1989. The Foundation’s main activity is to publish original papers on key topics in the economic and social fields, with a view to stimulating public discussion on the performance of markets and the social framework within which they operate. The SMF is a registered charity (1000971) and a company limited by guarantee. It is independent of any political party or group and is funded predominantly through sponsorship of research and public policy debates. The SMF is overseen by a Board of Trustees and Chair.

About this evidence

This evidence includes policy analysis from a Social Market Foundation briefing, Childcare costs and poverty (July 2022). The publication explores the extent of the childcare affordability crisis. In particular, we look at the effect of costs on:

-          household income

-          career outcomes, as people (mainly women) are pushed out of the labour market and their career trajectories are derailed

We are responding to this inquiry to highlight the severe penalties families and primary caregivers, especially those on low incomes, face due to being increasingly priced out of formal childcare.

Submission

Are the current entitlements providing parents/carers with sufficient childcare, and to what extent are childcare costs affecting parents/carers from returning to work full-time?

Childcare provision is insufficient

-          Households in the bottom quintile of income pay nearly three times (16%) as much of their income on childcare as the richest households (6%).

-          A third of childcare users in the bottom income quintile are in what we define as  ‘childcare poverty’, spending 20% or more of their household income on childcare. Even in the top quintile, about 5% are in childcare poverty.

-          Over 1 in 10 childcare-using households in London and the North West are in childcare poverty.

-          Among English households with young children (0-4), it is those earning £45k or more that are the most likely to be using childcare – whether formal, informal, or some combination of the two.

Childcare costs and related issues are preventing people (especially mothers) from increasing working

-          In England, unaffordability of childcare is cited as the leading barrier (54%) to part-time working mothers increasing their working hours.

-          In England, childcare issues is cited as the leading reason (29%) by non-working mothers of young children (0-4) for not working.

-          Across the UK, lower-earning mothers, those in the bottom half of the income distribution, experience a sharper decline in working hours (nearly 10 fewer hours) post-childbirth than their top-earning counterparts (5 fewer hours).

Having children has a persistent, depressing effect on mothers’ wages, and particularly for those on low income

-          Over the decade following childbirth, mothers lose an average £70,000 in earnings, in comparison to a hypothetical scenario in which they did not have children and got to experience the same wage growth as their childless counterparts.

-          In the first three years after having a baby, women on lower incomes saw their earnings fall by around 30%, and women on higher wages saw their earnings drop by around 20%.

-          This relative loss of earnings compared to childfree counterparts persists for at least a decade – with lower earners (bottom 50%) facing a stronger penalty in the early years of parenthood

• This stronger penalty is potentially an effect of lower-earning women’s sharper decline in working hours.

January 2023