Economic environment unfavourable for mothers returning to work: KPMG study

A recent report by KPMG has suggested that there is significant cost to women returning to work and increasing their days of work after having children.

A recent report by KPMG entitled The cost of coming back has analysed the financial cost of women increasing their involvement in the workforce after having children. The report found that the combination of the new childcare subsidy (CCS), tax brackets, and family tax credits form a disincentive to women of all socio-economic situations to increase their work hours.

Creating an indicator called the Workforce Disincentive Rate (WDR), KPMG looked at various hypothetical situations of couple families and the impact increased work hours had on take home pay. The WDR measured the percentage of any additional income lost by the family for increased work hours, after considering the additional income tax paid and cost of childcare, and the reduction of CCS and family tax credits. The report found that many families would experience WDRs of between 75 per cent and 120 per cent for an increase in work hours. This means that at the lower end, a mother would take home 25 per cent of her additional pay as 75 per cent is lost in additional tax and childcare. At the high end of the spectrum, in some situations, the family would be effectively be paying 20 per cent of their additional income to work extra hours.

The report highlights that this disincentive is seen at all income levels of mothers. For example, consider a couple who both earn minimum wage and have two children in care. If the mother decides to increase her work from three days to four days a week, the additional income gained would only equate to $2.50 an hour due to the increased costs of childcare and income tax. For an additional example, consider a couple family where both parents earn the equivalent of $100,000 per year for full-time work. If the mother were to increase her hours from four days per week to five days per week, the additional costs of childcare and tax, and the reduction in benefits would result in the increased work hours costing the family $85 for the additional day.

The findings of the report support research conducted in the Australian Longitudinal Study on Women’s Health. This study includes a survey on the paid and unpaid care provided by women to people of all ages and situations. One section includes informal unpaid and paid care of children, and specifically those who care for children and their involvement in paid work. It was reported by many in the survey that the cost of childcare is not worth the income obtained from working, or working extra hours. Others also reported that the inability to find flexible professional workplaces that allowed part-time or opportunities to work from home prohibited them from obtaining satisfying work.

Despite these disincentives, the latest employment data from the Australian Bureau of Statistics (ABS) suggests women are increasingly prevalent in the workforce. We continue to see an average decrease of women not in the labour Force (NILF), and increases in part time and full time employment for the past four years when compared to the rate of growth of working aged women.