Children are expensive. But cost could increasingly become an issue for UK businesses. As inflation soars and the cost of living crisis begins to take hold, parents are grappling with high costs and difficult decisions that can impact their employers in an already extremely tense.
We have already moved on from the days when child care was seen as just a personal issue for parents. This transition is implicit in both the structure of support schemes, which have tilted in favor of working families, and the government’s choice to keep nurseries open during the UK’s second lockdown, even though schools are closed. remained closed.
But the UK is far from having a cheap and flexible healthcare system. Instead, as Christine Farquharson of the Institute for Fiscal Studies put it last year, it’s “complicated, expensive and constantly changing.”
A full-time daycare place for a child under two in London now costs around £19,000 a year, according to the latest survey from charity Coram Family and Childcare. Coram estimates that costs have increased by 60% in terms of cash between 2010 and 2021, twice as fast as average incomes. This is expected to get worse over the next year. Increases in the minimum wage, food prices and energy bills will push prices up.
For many parents, rising costs are not an issue. An IFS report released last month found that more than half of families pay nothing for childcare, relying on friends and family or doing it themselves.
But there is a significant minority of families who end up paying very high costs. The situation is worse in the capital and among middle-income people, a fifth of whom say it is difficult or very difficult to manage childcare costs.
This makes it potentially worrying that the latest labor force data shows an increase in the number of women counting themselves out of the labor force citing family responsibilities over the past year. It’s not all mothers with young children, but it’s not always the parents who end up caring in the first place. “There are quite a number of older women giving up their jobs to care for their grandparents,” notes Mary-Ann Stephenson of the Women’s Budget Group. This can cause a problem for stretched employers anyway.
The problems are not necessarily the result of a lack of government support (although more would likely help suppliers who are seeing their funding eroded by inflation and their budgets squeezed by spiraling input costs). Public funding for early childhood care services has increased significantly over the past two decades. Nor is it clear that giving more money to parents would radically increase women’s participation in the labor market. Most mothers who work part-time say they do so because they want to, and employment rates for mothers in the UK are already relatively high.
That said, the current patchwork of funding programs risks failing parents, children, and providers.
The Under-Three Subsidy Program is so obscure that most preschool parents didn’t know it existed and so delicately that once they did, 40% of those potentially eligible said they wouldn’t ask for up to £2,000 a year. in support. Low-income parents on Universal Credit cannot access seed funding. For three- and four-year-olds entitled to free hours, nurseries have long complained that state funding does not cover their costs, forcing them to raise prices for younger children. Caught between the constraints of family budgets and rising costs, many will find themselves in an increasingly precarious situation. When providers fail, employees and employers find themselves scrambling to get coverage.
Companies can do several things to try to make the system work better for them. One is to encourage the government to make getting parents back to work the top priority of child care support programs in any overhaul. Trying to do this without undermining the quality of care on offer or limiting opportunities for less well-off families will be tricky, but ultimately the funding tangle requires a complete overhaul. Another is to push for childcare to be treated as a type of social infrastructure in an attempt to spur investment. A third would be to improve their own employee offerings.
Expensive child care has long been a concern for working families. But amid a cost of living crisis and a shortage of workers, a fragmented and privatized market barely kept afloat by public money and parents should also be about business.