Have childcare costs risen up to seven times faster than wages?

Published: 8th Nov 2017

In brief

Claim

Childcare costs in England have risen up to seven times faster than wages.

Conclusion

This is roughly the case for parents of children under two in London from 2008 to 2016, according to research by the TUC. The exact changes are unclear. In England overall it is three to four times faster.

“Childcare costs in England rise up to seven times faster than wages”

The Guardian, 20 October 2017

In England overall, nursery costs for under-twos rose three to four times faster than the wages of parents of one-year-old children between 2008 and 2016. It’s difficult to be exact, because the available data doesn’t allow us to pinpoint childcare costs over a specific period of time.

The picture varies across regions, and for children of different ages. Under-two nursery costs in London rose around seven times faster than the average wages of parents of one year-olds. The overall picture is one of costs rising significantly faster than wages across the country.

Throughout this piece, discussions of nursery costs refer to children under two, whilst the wages figures refer to parents of one-year-olds. For simplicity’s sake we’ll use the term “one-year-olds” throughout.

The regional picture

The average cost of a nursery place for a one-year-old in London rose by 59% between 2008 and 2016, the Trades Union Congress (TUC) reports. In that same period, the average wages of those with a one-year-old in London rose by 8%. This means that nursery costs increased over seven times faster than wages for those parents.

This picture varies across the country, but all regions saw costs rise faster than wages. Taking England as a whole, nursery costs rose by 49% between 2008 and 2016—four times faster than parental wages, which increased by 12%.

Outside London the fastest rate of increase was in the East Midlands (seven times faster than wages), and the slowest rate was in the East of England (three times faster).

It’s difficult to estimate childcare costs for a specific year

The TUC calculated the average hourly earnings of parents of one-year-olds in each region by using an average of quarterly figures from the Labour Force Survey. The hourly cost of nursery in each region was then worked out, using figures from the Family and Childcare Trust’s (FCT) 2016 Childcare Survey. The TUC then compared the change between the two sets of figures between 2008 and 2016. We’ve not seen the exact calculations behind this.

It’s not clear that the FCT’s 2016 report actually reflects childcare costs in 2016. The FCT told us that they asked local authorities to report their childcare costs in November 2015. They expect that respondents’ figures will actually reflect a range of different time periods.

This means the TUC’s calculations aren’t necessarily exact but provide an indication of how much childcare costs have risen in comparison to wages over the time period in question.

Depending on which FCT surveys most accurately reflect costs between 2008 and 2016, nursery costs for one-year-olds in England overall could have risen three or four times faster than wages.

How much is this costing parents?

The TUC’s findings mean that on average parents of one-year-olds today spend a larger portion of their income on childcare than in 2008. The impact of this varies depending on the exact conditions of their work, with single parents most affected.

The TUC found that single parents working full-time, with a one-year-old in nursery for 21 hours a week spent an average of 21% of their wages on childcare in 2016. That’s an increase of 4 percentage points since 2008.

A couple working full-time, with the same childcare needs, spend an average of 11% of their wages on childcare in 2016. That’s up 3 percentage points since 2008.

Why focus on one-year-olds?

The TUC report focuses specifically on the wages of parents with one-year-old children. It says this is because, “While there is government support for childcare for children aged two and older, most working parents with one-year-olds do not get any state help with childcare costs”.

There are around 950,000 working parents with a one-year-old child in the UK, according to the TUC’s calculations (based on the Labour Force Survey). It is correct that these parents receive less government support for childcare costs than those of children aged two to four.

The government currently provides 15 hours of free childcare a week (for up to 38 weeks a year) to all parents of three- and four-year olds. These parents get another 15 hours on top of this if they work at least sixteen hours and earn £115 a week, and earn less than £100,000 a year.

Parents of two year-olds also receive 15 hours a week of free childcare if they are in receipt of certain benefits.

What support can parents of one-year-olds get?

Parents of under-twos can get some government help with childcare costs. If they are in work, they may be eligible for “tax-free childcare”. This means the government pays 20p for every 80p spent by a parent on childcare, up to a value of £2,000 a year.

Parents on tax credits or Universal Credit are not eligible for tax-free childcare. These benefits have their own separate elements to help with childcare costs.

People aged over 25, or over 16 and with a disability, earning below a certain threshold may be entitled to Working Tax Credit. If they are parents they may then be able to claim back 70% of their childcare costs up to a certain level.

Parents on Universal Credit can claim back up to 85% of their childcare costs, up to a certain value.


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