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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.

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