With no salary increases and government cuts, childcare costs and other expenses are wiping out earnings
When you have a job, you expect to be better off than if you were unemployed, but for parents that’s often not the case.
Although they are working, sometimes in professional jobs, some are effectively doing it for nothing.
Soaring childcare costs, stagnant salaries and government cuts to tax credits and benefits, have led to an increasing number of people being thrown into so-called “pay-neutral” work. This means that their expenses – primarily childcare and travel costs – wipe out their entire net earnings in what work-related charities and social enterprises are describing as a toxic situation.
The problem is particularly acute for those on low incomes, figures from debt charity the CCCS revealed last week. Almost 40,000 parents sought help from CCCS last year, and two-thirds of the 1,745 who said pregnancy was the reason for their debt problem earn less than £20,000 a year.
The people the CCCS saw last year in the under-£10k income bracket had a monthly budget deficit of £54. Those earning between £10k and £20k had an average £16 left over each month after paying living expenses.
But rather than drop out of the workforce, many of these “pay-neutral” workers – the majority of whom are women – choose to take the hit in the hope that by continuing to work they will safeguard their future earnings. They also point out that giving up a job feels too risky – of the 2.67 million who are currently unemployed, 1.12 million are women, the highest for 25 years.
Ceri Goddard, chief executive of the equal pay campaign, the Fawcett Society, says that the current economic climate means that, for many parents, working no longer makes financial sense.
She says: “Finding affordable, quality childcare is a nightmare. Costs are some of the highest in Europe and families’ ability to pay has decreased as changes to things like working tax credit mean there’s less in household budgets.
“We’re really concerned at the number of women forced to give up their jobs because it no longer makes financial sense to bring money in, only to see it all go out again for childcare.
“But we also worry about those women feeling pressure to return to work earlier because they feel their future career and earnings will be jeopardised if they don’t.”
Helen Noble, 41, is facing a “pay-neutral” situation as a civil engineer. She has two children aged three and a half and 10 months and she lives with her husband in West Yorkshire. She’s currently on the three-months unpaid part of her maternity leave.
Once she returns to work, three days of childcare a week will cost £800 a month and that, coupled with travel costs, will swallow up her salary, which means her family won’t benefit. “But I need to keep my job,” she says. “It would be difficult for me to go back in at a senior level if I stayed at home full time for a few years, particularly with such high unemployment in my industry. Of course, I’m frustrated that we won’t actually have any more money, but I hope that going back to work means that I’ll be in a better position to earn more in the future.”
The Resolution Foundation is conducting a major study into childcare costs versus earnings. Its report is due to be published this month, but initial findings show that for a couple with two children, aged two and four, on a combined gross income of just over £40,000, having the mother go from not working to full-time work, will increase the family’s final net income by just £3,000 after childcare. This doesn’t take into account any other work-related costs, such as travel.
Balancing the books can be particularly difficult for women in the south-east, where the cost of childcare is highest. According to one charity, the Daycare Trust, an average part-time nursery place in London is £126 per child each week (this compares to £86 in the West Midlands).
Of course, in London salaries are also higher but travel can easily erode the difference – as is the case for Nancy Carter. She’s 36, married and lives in Reading, with a one-year-old son, and has recently decided to give up her job as a telecommunications manager.
Nancy says: “Childcare is nearly £5,000 a year for one child and it’s £9,000 to travel to my job in central London. Anything left over may well have been used up in fines from the nursery if I was ever late for pick-up – which is easily done when you rely on trains. I loved my job but it’s not worth the stress if you’re not really earning anything.”
When it comes to single parents, the situation is even worse. Many professional women find themselves in this “pay-neutral” position, as they’re often forced to take lower-paid part-time jobs to fit around their children.
Single mum Louise Belchamber-Ellis, 38, is an example of someone who is financially disadvantaged by working. She has two daughters, aged two and a half, and eight months, and she lives in Surrey. As a part-time accounts manager her net income is £920 a month, her childcare costs are £1,400, of which she can claim 70% for her first daughter and 80% for her second in tax credits.
“I’d be better off if I claimed benefits, as I’d get my housing costs paid,” says Louise. “But I won’t do that. Even though I hardly earn anything, my work gives our lives a structure, and my children benefit from the social interaction of nursery. We get by, but if the fridge breaks down I have no money to pay for a new one.”
Businesswoman Fiona Bartosch also refused to give up work after she had her daughter, who’s now eight, but she says it stood her in good stead for the future.
“When my daughter was born, I was working in a badly-paid position as a government press officer,” she says. “It didn’t really cover the childcare and the cost of nappies, but I loved it. I dropped my hours for a few years and I was married back then, which made a difference.
“Pay-neutral work can be a real struggle but I’d make the same choices all over again. It’s paid off because I can now run my own business and have the flexibility that I need.”
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