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Childcare costs rocket three times faster than wages since 2008

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Published date
03 Sep 2018
Nursery costs have risen by more than 50% over the last decade, while earnings for the average working family grew by a paltry 17%

The government is always telling parents how much better off they will be in paid work.

But ministers are far less likely to acknowledge the growing financial cost of childcare for working parents.

Today, the TUC publishes new research undertaken by Landman Economics with support from Coram Family and Childcare showing just how fast childcare costs are rising, and how far wages are falling behind.

Over the last decade, the cost of childcare has risen three times faster than wages.

So the average family has seen their nominal wage rise by a paltry 17% since 2008, while the cost of nursery places has risen by over 50%.

Single parents face an even tougher financial penalty, with nursery costs for full-time single parents rocketing seven times faster than their pay.

Graph showing percentage growth in parents' nominal wages and nursery costs between 2008 and 2018
The cost of childcare has rocketed over the last decade, while wages have remained stagnant

Insufficient support

Of course, there is some financial support available – and working parents are regularly love bombed by ministers about how generous this is supposed to be.

Tax credits certainly do provide some childcare support, as does Universal Credit. Tax-free childcare gives parents on higher earnings childcare top ups, while up to 30 free nursery hours (for 39 weeks of the year, for those who can find a place) are also available for some 3 and 4-year olds in working families.

Yet our analysis has taken account of this help. And we’ve found that poor wage growth and spiralling nursery costs mean parents are still facing massive financial shortfalls, even when childcare entitlements are factored in.

An example scenario of working parents with a 3-year-old and a 1-year-old shows that:

  • A family on average earnings (with one parent working full-time and another working part- time) has to stump up more than £4,700 a year to cover fees.
  • A low-income working family (with one parent working full-time and another working part- time) needs to find nearly £2,000 a year.
  • A single parent on average earnings (working full-time) pays just over £6,000.
  • A single parent on average earnings (working part-time) has to fork out over £1,900.

More help needed

Families should not have to pay so much simply to go to work, especially when plummeting living standards and the huge costs of bringing up kids are already hitting working parents extremely hard.

That’s why the government needs to act so that:

  • Childcare support is made available from the point at which maternity (or parental) leave ends

At the moment, most parents receive no free nursery hours at all just when they are making decisions about returning to work. This must change.

  • Existing schemes become more generous

Tax credits (and – perhaps – in the future Universal Credit) should cover a greater proportion of costs, and the levels of support provided should taper off far more slowly as earnings rise.

  • Employers are reminded of their role in funding childcare

It’s not in the interest of any business to lose the skills and experience of employees who are also parents. Employers need to recognise their responsibilities to support such staff with their costs.

Of course, there are also significant medium-term challenges caused by the fact that childcare provision across the UK is less flexible, more expensive and hugely patchy compared to many of our European neighbours.

Time to be bold

Ambitious reform could not only pave the way for better provision but also more efficient use of existing government spending.

And let’s not forget that the financial crisis affecting UK families is as much about chronically low wages as it is the cripplingly high cost of childcare.

That’s why some concrete action by ministers to tackle the longest living standards crisis in two centuries is long overdue.

But in the absence of a meaningful government response, working parents will continue to pay the price.

And mums and dads across the country who are already struggling to balance work and care will keep picking up the cost of policy failures.