Pension changes took centre stage in the Spring Budget, but new free childcare legislation will directly and indirectly benefit more people. Working parents of all children over the age of nine months will now be entitled to 30 free hours of childcare per week. This could be a game changer for bridging the gender wealth gap in the UK.
The new initiative will not be fully in place until 2025. It’s frustrating that childcare support has not been better addressed by any government until now, when the UK has an employee shortage issue. However, it should still be celebrated as an important step in tackling the ‘motherhood penalty’. This is the loss in lifetime earnings experienced by women raising children and is at the root of a number of longstanding financial gender gap challenges.
Mind the gender pay gap
The motherhood penalty has become the most significant driver of the gender pay gap according to PWC’s Women in Work Index 2023. At the glacial pace the gender pay gap is currently closing, it will take more than 50 years to reach gender pay parity. This means that an 18 year old woman entering the workforce today will not see pay equality in her working lifetime! Free childcare, along with redesigned parental leave policies, is critical to moving the dial here.
Invest in childcare for success
If we are looking for inspiration, Iceland is seen as one of the best countries in the world for working parents. According to a report from Bloomberg on how nations differ in the quality and affordability of their childcare, Iceland’s high level of investment in affordable childcare means parents only spend about 5% of their earnings on it. This compares to an average of a third of a working couple’s income spent in the UK. It also helps to explain why Iceland has the highest female labour force participation rate.
Dad shaped hole in parenting leave
Of course, women aren’t always the ones to take leave when a baby is born, but the pace of change is equally slow here. The lack of affordable parenting leave for fathers is leaving a ‘dad-shaped hole’ in UK family policy according to The Fatherhood Institute. Only a third of UK fathers taking statutory paternity leave and less than 4% of eligible families using shared parental leave.
Deutsche Bank recently announced that their employees are now entitled to 16 weeks of paid paternity leave, with JP Morgan also offering similar benefits to the non-primary care giver. By leading the way with more balanced parental leave opportunities, hopefully other organisations may follow suit.
Rising to the challenge
Despite these encouraging moves, mothers still tend be the ones taking time out of the workplace and often end up leaving again within a short time. According to That Works For Me’s Careers After Babies report, 85% of women leave full-time employment within three years of having their first child. For those who do stay in work, it takes on average more than a decade for them to return to their pre-maternity salaries and status levels. The statistics are shocking, but what it does show is that 98% of mothers want to work and 53% want to work four days or more per week. Businesses really need to rise to the challenge of supporting them in every way they can.
There are, of course, many factors that impact mothers returning to and staying within the workforce, but affordable childcare is an indisputably significant one. This is why the recent announcement in the Budget is certainly a step in the right direction and an essential one if we want to both retain this vital part of the workforce and achieve better parental equality at work and financially.