The cost of childcare imposes an effective tax rate of about 70 per cent on women who want to take on a fourth or fifth day of employment, but more generous subsidies under a Labor government would lower the barrier to working more.
Angela Jackson, lead economist with Impact Economics and Policy, said governments could boost female workforce participation and improve underemployment of women through cheaper childcare.
“Households make decisions about who works and who cares based on some kind of income optimisation,” Jackson said.
“But that optimisation is directly influenced by government policy… [along with] biological, cultural and individual choices at play as well.”
A woman on the average wage with two children in childcare loses 47 per cent of her earnings, made up of 23 per cent in tax and 24 per cent in extra net childcare fees, according to economists Miranda Stewart, Angela Jackson and Leonora Risse.
For the fourth day, this jumps to 67 per cent, made up of 36 per cent in tax and 31 per cent in extra childcare fees. This rises to 70 per cent for the fifth day, made up of 35 per cent each for tax and additional childcare fees.
“The proportion of women in the workforce has risen to a record high of 60 per cent, but it remains well below comparable countries,” Stewart said.