Childcare costs causing major problem for low-income households

A new study shows that multiples of the national minimum wage are required if many households with children are to afford the full cost of formal childcare and simultaneously provide a Minimum Essential Standard of Living,.

The study, by the Vincentian Partnership for Social Justice, quantifies the additional earning requirement imposed on households by the high cost of formal childcare in Ireland.  The full study may be accessed on the VPSJ website.

This study, entitled Minimum Income Standard and the Cost of Childcare, quantifies the income needed to meet the high costs of formal childcare for urban based, one child households.

The study examines the gross salary required to afford the full cost of a Minimum Essential Standard of Living (MESL), including the cost of formal full-time childcare; this is the Minimum Income Standard (MIS). The analysis then sets out to identify how much of the MIS is attributable to the cost of childcare.

The MIS rate required to afford formal childcare and all the essential elements of a socially acceptable minimum standard of living, is up to 150% of the National Minimum Wage for two-parent household compositions, and up to 260% of the National Minimum Wage for One Parent household compositions.

The effects of two alternative approaches to childcare subsidisation are analysed, examining the impact on the MIS earnings need of each approach:

• An adjustment to the Family Income Supplement (FIS) which would take account of a household’s childcare costs in the FIS means test
• A Scandinavian model of childcare charges; capping childcare costs to the household at 30% of the actual cost

The findings in this study demonstrate the burden of formal childcare costs. Full-Time employment at the National Minimum Wage rate does not enable a Minimum Essential Standard of Living for any of the six household compositions examined. The amount of income inadequacy faced by households in this situation varies by the composition, but amounts to thousands of euro per year in all cases.

Households in such a scenario have to choose to do without essential items and live below a socially acceptable minimum level, in order to meet the costs of formal childcare and pay for housing.

Multiples of the national minimum wage are required to afford the full cost of formal childcare and a Minimum Essential Standard of Living, particularly for One-Parent households. Given this, and the evidence found elsewhere, it seems only logical that the high cost of formal childcare must make low paid work and full-time employment an un-economic choice, in some cases.

Details available at www.budgeting.ie