As the focus on a minority of troubled families intensifies, the economic pressures bearing down on the majority of families are in danger of being forgotten. This will not last because as cuts to Tax Credits start to be felt and the cost of paying someone to care for your children continues to increase, childcare will rise up the agenda as the hottest parenting issue. Indeed, Save the Children and the Daycare Trust published a new survey recently suggesting that working parents in Britain are spending nearly one-third of their income on childcare.
The costs of childcare are also a key feature of the Minimum Income Standard for the UK that the Joseph Rowntree Foundation (JRF) publishes each year. This standard is based on what ordinary members of the public, gathered together in a series of focus groups, say we all need for a minimum acceptable standard of living. The standard covers food, clothing, household and personal goods and services, bills, rent and so on. A large component of the budget is childcare for working lone parents or for couples who both have jobs.
The minimum budgets are developed for all the major family types, ranging from a single, childless adult to families with up to four children and also for single and couple pensioners. Each of the budgets is determined by people with those same demographic characteristics; so, for example, the items and activities for families are set and checked by parents. The budgets are also validated by experts so that they meet minimum standards for nutrition from food and warmth in the home, for example.
Childcare costs in the minimum income standard are based on the assumption that parents are in full-time employment. The rationale for this decision among the focus groups was that it allowed parents the resources to make the choice whether to use formal childcare or not. The amount of childcare needed varied by the age of the children. For infants and pre-school aged children, groups agreed 50 hours per week (including time needed for commuting, picking up and dropping off), excluding annual leave. For younger school-aged children, the standard provides for after-school plus full-time childcare in the school holidays. For older secondary school children, there is only provision for structured activities during summer holidays.
On the back of these assumptions, the latest data from the Minimum Income Standard research confirms how much of a squeeze there is on low income working families:
·From April 2011, families need to typically earn over 20% more than they did just one year ago to achieve the same minimum standard of living. This is not just a result of cutting Childcare Tax Credits from 80 to 70% of the cost of childcare. The combined effect of other cuts or freezes to family benefits and continuing high rates of inflation have all contributed.
·A family of four with two earners and using childcare needs £36,800 a year to reach the minimum standard.
·A lone parent needs £18,200 a year to reach the minimum standard of living.
·Last year, figures for families and lone parents were £29,700 and £12,500, respectively – lone parents are hit particularly badly because they lose housing benefit as their earnings requirements rise as well as tax credits.
The hourly wages that these figures imply are much higher than current levels of the minimum wage or even many low wage jobs. So, in order for working poverty in general, as well as child poverty, to reduce in the future, we need a much stronger focus on job quality in addition to job creation. This entails a parallel concentration on retention and progression in work as well as on welfare to work policy. This would involve stimulating better quality part-time jobs and work that is more contractually secure and better paid.
Policies and incentives are needed that allow businesses to develop their staff, create progression routes and use the skills that their staff gain. The benefits system needs to support employers in these goals for working parents. At the time of writing, we are still waiting for the final design of help with childcare costs in Universal Credit, due to begin from October 2013. The way this is implemented could make or break the Government's welfare reforms for families and their goals on child poverty and social mobility. The lesson is that what seem like small changes to the benefits system can have a massive impact on the living standards and decisions of families in combination.
