The rising cost of childcare means that going out to work full-time is now hardly worthwhile for a growing number of "second earners" in middle- and low-income families, a major study will reveal. Where a second earner takes a full-time job at the minimum wage – a couple who use childcare could be left just £4 a week better off with two incomes than with one.
The politically independent Resolution Foundation, also says that childcare costs are eroding incentives to work for those on higher incomes. The study finds that a family with two children in which two earners bring in a total of £44,440 could end up just £4,000 better off than a similar family earning £20,000 less, because of the combined effect of benefits, tax, tax credits and childcare costs. In some cases a family's income can fall when a second earner takes on more hours, because of the complexities of the tax and benefits regime. It cites an example of how a second earner from a middle-income household who is paid £12 an hour will add £4,500 to the family income while working 13 hours a week. However, if they increase their hours above that level, the family income falls as the combination of childcare costs and withdrawn support through the tax credit system bites into earnings.
Vidhya Alakeson, deputy chief executive of the Resolution Foundation and joint author of the report, said: "It's hardly worth a typical second earner going out to work more than a couple of days a week, because the family will be barely better off."
The report says the growth in female employment has been critical in maintaining household living standards over the last 30 years as men's employment income has declined in real terms.
The latest figures from the Organisation for Economic Co-operation and Development, from 2008, put the proportion of income spent on childcare in the UK at 27% for a couple with a joint income of double the average wage, and 21% for a couple on one and half times the average. The Resolution Foundation says that these figures now stand at 30% and 19%.
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The politically independent Resolution Foundation, also says that childcare costs are eroding incentives to work for those on higher incomes. The study finds that a family with two children in which two earners bring in a total of £44,440 could end up just £4,000 better off than a similar family earning £20,000 less, because of the combined effect of benefits, tax, tax credits and childcare costs. In some cases a family's income can fall when a second earner takes on more hours, because of the complexities of the tax and benefits regime. It cites an example of how a second earner from a middle-income household who is paid £12 an hour will add £4,500 to the family income while working 13 hours a week. However, if they increase their hours above that level, the family income falls as the combination of childcare costs and withdrawn support through the tax credit system bites into earnings.
Vidhya Alakeson, deputy chief executive of the Resolution Foundation and joint author of the report, said: "It's hardly worth a typical second earner going out to work more than a couple of days a week, because the family will be barely better off."
The report says the growth in female employment has been critical in maintaining household living standards over the last 30 years as men's employment income has declined in real terms.
The latest figures from the Organisation for Economic Co-operation and Development, from 2008, put the proportion of income spent on childcare in the UK at 27% for a couple with a joint income of double the average wage, and 21% for a couple on one and half times the average. The Resolution Foundation says that these figures now stand at 30% and 19%.
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