Replacing Child Care Subsidy with a low fixed-fee could lift women’s workforce participation by 134,000 FTE workers

Mothers’ workforce participation could be lifted by up to 134,000 full-time-equivalent workers if the Federal Government caps daily early learning and childcare fees at $10 a day, finds a new report from Impact Economics and Policy.

Media release - Monday 25 November 2024

Mothers’ workforce participation could be lifted by up to 134,000 full-time-equivalent workers if the Federal Government caps daily early learning and childcare fees at $10 a day, finds a new report from Impact Economics and Policy. 

The report critiques the Productivity Commission’s modest estimation of female workforce participation under a fixed-fee model – one option currently being considered by the Albanese Government for reforming early childhood education and care. 

CEO of The Parenthood, Georgie Dent, said the cost of childcare had been climbing considerably faster than inflation and wages for years, meaning the cost-of-living-crisis is also a cost-of-working crisis for young families. 

“Early childhood education and care policy will be a key issue at the upcoming federal election because it has such a huge impact in economic terms not only on parents of young children, but on grandparents, employers, communities and the entire economy,” said Ms Dent. 

“The Productivity Commission’s comprehensive report into early childhood education and care was welcome, but grossly underestimated the impact the cost of care has on mothers’ ability to return to work or increase their hours.

“Their model assumed that for every eight extra days of child care taken up, parents would only work one extra day. This doesn’t match current patterns and in the current cost-of-living climate doesn’t add up.”

Ms Dent said the new analysis by Impact Economics and Policy also showed that continuing to tinker around the edges of the Child Care Subsidy system, as the Productivity Commission recommended, will not fix cost pressures.

“The Child Care Subsidy is a broken and confusing system. Every time the government increases the subsidy, as they did last year, inevitably providers increase fees. Parents aren’t experiencing substantive relief.” 

The report also warns that the subsidy model is perpetuating a lack of places and lower quality in low socio-economic areas, which a fixed-fee model could rectify. 

“The daily cost of childcare is a huge financial burden to parents, oftentimes equating to the equivalent of a second mortgage. But that’s just the beginning,” Ms Dent said. 

“We know that 24 million Australians live in areas where there is no access to early learning at all. Without access to suitable early learning and care, going to work becomes impossible, but living off one income is a difficult predicament for the vast majority of families with young children. 

“We are urging all parties to commit to a universal, flat-fee early childhood education and care model ahead of the upcoming federal election,” said Ms Dent. “Every child - regardless of their postcode or parents’ income deserves access to quality inclusive early childhood education and care.”