Child’s pay: Economists say the opportunity cost of child-rearing is higher for women who have invested more in their education and career
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Shona Stewart, a senior staff nurse at Guy’s and St Thomas’ Hospital in London, is also the single mother of 13-year-old autistic twins.

Ms Stewart, who earns about £33,000, needs childcare each morning before she heads to work and after-school care for her boys in order to remain in the job. However, the high cost means she can barely cover the overdraft on her bank account every month.

“As a parent, I question whether [working] is really worth it,” she says, noting that both the financial and physical strain of child rearing are so great that her nursing career has stalled.

Ms Stewart’s situation will be easily recognisable, particularly to women, in many industrialised countries where the percentage of females at work has grown considerably over the past few decades. However, it still lags behind that of men, and one reason is that parents must weigh up a mother’s potential earnings against the cost of childcare. Access to affordable childcare, economists say, is one of the public policies most likely to help women take up employment.

Encouraging mothers into work is no longer simply a matter of equal opportunities or of helping people to achieve their personal aspirations. It is becoming a matter of urgency both for economies and employers. As working-age populations across the world dwindle while the numbers of elderly grow, nations need to make the most of the workforces they have to keep up the flow of tax revenue and output growth.

In addition, failure to maximise the number of women in the workforce may have undesirable consequences, such as higher labour costs for businesses.

This week, the UK government published plans to improve the supply of affordable childcare. The measures proposed included funding and relaxed regulations so that schools can offer childcare during holidays and beyond the school day – either alone or by working with private and voluntary partners. “The government would like to see primary school sites open for more hours in the day, from 8am to 6pm if possible, and for more weeks in the year,” it said.

An OECD report this year noted that a combination of factors – rising levels of educational attainment, expansion of the services sector and the rise of part-time employment – has encouraged women both to have children and work outside the home.

“The rising provision of formal childcare services to working parents with children not yet three years old is a main policy driver of female labour force participation,” the OECD concluded, noting that other factors including family leave and tax policies were also important.

In addition to the economic benefits of affordable childcare, there is evidence that countries that help women stay at work also have higher fertility rates – at a time when birth rates across much of the developed world are considered too low to keep the population profile stable. “Countries with relatively more open societies allowing a better work/life balance have higher rates of female workforce participation,” says George Magnus, a senior economic adviser to UBS who specialises in demographic trends. “These are also the ones with higher fertility rates.”

For businesses, one consequence of expensive childcare is that many skilled staff are forced to work part-time. In Sweden, for example, where net childcare costs are less than 10 per cent of average wages, about 20 per cent of women work part-time. But in the UK, where net costs are about 35 per cent of average wages, the figure is more than 40 per cent.

For many, the benefits of that flexibility are mixed. “So many couples come to the conclusion that having one parent working part-time while the other works full-time is a good solution,” according to advice posted on Mumsnet, a popular UK website. “The downside is that in many careers this means one of you ending up on the ‘mummy track’, ie not being in line for big promotions, pay rises or other glittering prizes in your particular field.”

For its part, the CBI, Britain’s employers’ body, has added its voice to calls for more affordable childcare, urging reform of the provider market to help cut costs.

“The key to success for these schemes will be ensuring availability of places and access for children from all backgrounds,” says Neil Carberry, the organisation’s director of employment and skills. “We support the targeting of additional funding at childcare settings to improve access and affordability for all.”

For female employees, the dilemma posed by high childcare costs varies according to their investment in their education and career. Economists refer to this as the opportunity cost of child rearing – and it is particularly high for those who delayed having children until their career was under way. “The opportunity cost to you of taking five to seven years off is much greater if you have a law degree than if you are a high-school dropout,” says Gary Burtless, senior fellow at Washington-based Brookings Institution. “If you have a lot of education, you are making a tremendous sacrifice in terms of what you are giving up.”

Likewise, Vidhya Alakeson, deputy chief executive at the Resolution Foundation, which focuses on households on low to middle incomes, notes: “The more senior you are, the bigger the penalty.”

Ms Alakeson says the real issue is what happens to mothers trying to return to work. “We have a downshift for women returning to work. Women who want to work fewer hours will find that their career trajectory has shifted downwards.”

Getting women into work requires much more than making childcare affordable, she adds. “It is more about availability and accessibility,” she says, although the issue is often framed as one of cost.

“The childcare has to be more flexible and the employment has to be more flexible,” she says. “If your only option is to hire a nanny, you have priced most women out of work.”

Willem Adema, senior economist at the OECD, notes that culture also matters. In recent years, Germany has recognised the need to expand its workforce and in 2007 enacted key parental leave reforms.

But culturally, it has been resistant to the idea of mothers in the workplace, and institutions have yet to adjust. School days, for example, are typically 7.30am to 1.30pm, and primary school begins at the age of six or seven.

Germany has only recently begun to invest in childcare facilities and places are limited. Much of the country’s public policy efforts have been via cash benefits rather than investment in childcare.

There is even a pejorative word for working mothers – Rabenmutter – conjuring up the image of an evil raven. “This means you are not a good mother,” Mr Adema says.

The benefits beyond the workplace

Willem Adema, senior economist at the OECD, says family-friendly public policies generally have three goals: gender equality, improving child development and boosting female participation in the workforce. “Public spending on childcare, apart from the issue of child development, is a measure of how good policy is at supporting work and family life,” he says.

Another strong policy argument for access to affordable childcare is that for the most deprived families its availability represents an investment that is likely to create a more productive adult.

Gary Burtless, senior fellow at the Brookings Institution, notes that the genesis of Head Start, the US’s first mass drive towards childcare, had little to do with supporting working mothers and was instead aimed at boosting educational attainment among low-income children.

When middle-class mothers saw the benefits that Head Start brought to poorer children, they began to seek it for their own offspring. “This is one of the rare instances where the middle class followed poorer families,” Mr Burtless says.


Additional reporting by Seb Morton-Clark

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