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High childcare costs hit working parents’ living standards, research reveals

New research from Loughborough University published today (20 July) reveals that childcare costs are leaving working couples £2,600 a year short of a decent living standard.

This year’s analysis of the Minimum Income Standard (MIS) for the UK highlights the impact the prohibitive cost of childcare has on parents’ ability to make ends meet and care for their children, even taking into account the rise in the National Living Wage. 

The research, calculated annually by Loughborough University’s Centre for Research in Social Policy (CRSP), is funded by the Joseph Rowntree Foundation (JRF). The MIS is based on what members of the public think people need to achieve a decent living standard.

The research shows that to meet what the public consider a minimum standard:

  • couple with two children needs to earn at least £18,900 a year each
  • lone parent with one child needs to earn £27,900
  • A single person without children needs to earn £17,100 a year.

The research found that although some necessities like food and fuel have become cheaper in the past two years, one of the most significant barriers to reaching a decent standard of living for working families is the cost of childcare. Parents on low incomes who have to pay for childcare are often unable to find arrangements that leave them financially better off.

The balance between working and caring is shown in the difficulty reaching the MIS if parents do try to increase their earnings. Even with the National Living Wage of £7.20 an hour, working full time does not get you to a minimum standard of living if you have to pay for full time childcare:

  • For a couple with two children aged 4 and 7, full-time work by both parents gives disposable income of £382 a week after paying rent and childcare. This is £50 a week or 12% short of the minimum budget of £432 that they require: a shortfall of £2,600 a year
  • lone parent in the same situation ends up with £299 a week, £55 a week or 18% short of the £354 they require: a shortfall of £2,860 a year
  • If childcare costs were covered in full, the couple family would have £446, £14 more than the minimum required. The lone parent would have £317, still short of what they need, but the deficit would shrink by a third, to £37 a week

Parents emphasise the importance of choice in childcare options, according to the MIS research. They agreed that families with young children should have the choice of nursery provision as an alternative to a childminder. 

Separate research conducted by CRSP for JRF showed the experiences of families on low incomes highlighted the significance of school holiday cover. Those who did not have relations such as grandparents to cover the school holidays found it hard to sustain a job before their children reached secondary school age.

Abigail Davis, Research Fellow at CRSP, who led the research, said: “Our research shows some of the ups and downs that families are currently facing in making ends meet. There have been welcome falls in some costs like food and fuel. In generally tough times, parents are finding new ways of getting good deals to help meet their needs on a tight budget. But they also emphasise new pressures that put some costs up. They increasingly recognise the importance to their children’s future of getting the right kind of childcare before school age, and of taking part in enriching after-school activities later on.”

Julia Unwin, Chief Executive of JRF, said: “The cost and difficulty in balancing work and caring is felt by all families, especially as the summer holidays get underway. But for parents earning low wages, the choice is even starker: struggle to make ends meet and sacrifice family time, or suffer an even lower living standard from working fewer hours.

“Childcare has become the one of the biggest barriers to reaching a decent living standard in modern Britain. Work should always be the best route to a better life, but these figures show that a comprehensive plan to bring down the high cost of childcare, and improve the returns from working more hours, is desperately needed.

“Having promoted greater access to childcare, the Government now faces the challenge of ensuring that it truly becomes affordable and available to help ease the strain on parents’ juggling working and caring. A radical overhaul is needed.”

Read the full report and its findings here.

Notes for editors

Press release reference number: PR 16/106

  1. The Minimum Income Standard (MIS) is the income that people need in order to reach a minimum socially acceptable standard of living in the UK, based on what members of the public think. It is calculated by specifying baskets of goods and services required by different types of household in order to meet these needs and to participate in society. This year’s research has rebased the budgets for pensioners and working age families without children.
  2. MIS is not a measure of poverty, nor represents the poverty line. MIS is about more than survival alone. It covers needs, not wants; necessities, not luxuries: items that the public think people need in order to be part of society. 
  3. The annual earnings requirements given above are what families would need to earn gross, in order to have net incomes sufficient to meet these budgets. The net income is calculated by deducting from gross earnings the amounts paid in income tax, national insurance contributions, rent and childcare costs, and adding on any benefits and tax credits.
  4. Summaries of MIS weekly budgets for four family types:
£ per weekSingle working
age
Pensioner 
couple
Couple + 2 children 
(one aged 2-4, one primary school age)
Lone parent + 1 child
(aged 0-1)
         
Food 44.72 71.99 100.96 56.85
Alcohol 4.89 7.81 9.01 4.31
Tobacco 0.00 0.00 0.00 0.00
Clothing 7.12 12.37 44.05 22.54
Water rates 5.67 6.69 9.87 9.39
Council Tax 15.19 20.25 23.62 17.72
Household insurances 1.21 1.63 1.99 1.66
Fuel 15.96 17.16 17.67 14.73
Other housing costs 1.95 1.95 1.92 1.92
Household goods 12.19 16.09 24.70 20.35
Household services 2.96 7.75 9.57 17.27
Childcare 0.00 0.00 228.41 211.03
Personal goods and services 14.00 32.62 39.09 26.38
Motoring 0.00 0.00 55.45 51.51
Other travel costs 26.89 13.07 21.71 3.78
Social and cultural participation 46.11 58.00 109.36 52.32
Rent 87.68 85.83 91.97 85.83
Total including rent and childcare 286.53 353.21 789.35 597.59

Loughborough University is equipped with a live in-house broadcast unit via the Globelynx network. To arrange an interview with one of our experts please contact the press office on 01509 223491. Bookings can be made online via www.globelynx.com 

Loughborough is one of the country’s leading universities, with an international reputation for research that matters, excellence in teaching, strong links with industry, and unrivalled achievement in sport and its underpinning academic disciplines.

It has been awarded five stars in the independent QS Stars university rating scheme, putting it among the best universities in the world, and was named the best in the country for its student experience in the 2016 THE Student Experience Survey. Loughborough was ranked 4th in theGuardian University League Table 2017 and 7th in The UK Complete University Guide 2017 and was also named University of the Year in the In the What Uni Student Choice Awards 2015.

Loughborough is consistently ranked in the top twenty of UK universities in the Times Higher Education’s ‘table of tables’ and is in the top 10 in England for research intensity. In recognition of its contribution to the sector, Loughborough has been awarded seven Queen's Anniversary Prizes.

In September 2015 the University opened an additional academic campus in London’s new innovation quarter. Loughborough University London, based on the Queen Elizabeth Olympic Park, offers postgraduate and executive-level education, as well as research and enterprise opportunities.

Joseph Rowntree Foundation is an independent research, policy and practice organisation working to inspire social change. 

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