The Impacts of Child Care Subsidies in Australia

During the Covid-19 pandemic, women faced a well-documented exodus from the workforce. From a New York Times series about the breakdowns and burnout of motherhood during the pandemic to a Rand analysis of the changing female labor force participation rates, it is clear that the pandemic has wreaked havoc on the progress that women made in the workforce since the 1970s. In September of 2020, about four times as many American women as men dropped out of the labor force, with the estimated numbers coming to 865,000 women compared with 216,000 men.

The pandemic did not create the problems that women now face but, rather, exacerbated issues that have already existed and have seen very few tangible solutions. In the United States, a married woman is twice as likely to do household chores and child care activities as a married man, though a majority of married women enter the workforce. Though mothers today are more likely to work, they are also more likely to spend time on child care today than mothers in the 1960s. Moreover, parenthood implies something different for men and women. A study found that children offered fathers an increase in their salaries, while mothers saw a decrease in earnings with each child that they had.

During a pandemic, when the lines between home and work blur, parents have to take on a plethora of additional responsibilities, ranging from extra child care to even supplementing online schooling. Though both parents certainly face these challenges, it was women who primarily took on these roles at the expense of their place in the workforce. Even during a non-pandemic year, women face a similar, stark choice between remaining in the labor force and providing care for their child, primarily due to the high cost of child care. In the state of Massachusetts, the average annual cost of infant care is $20,913, a sum $8,134 more than in-state tuition for a four-year public college. While parents have a child’s whole life to save for a college education, they may have to pay just that much per year to find adequate child care for their baby or toddler. Its prohibitive cost turns away many parents, forcing a great deal of women to leave the workforce to care for the child themselves.

A portion of the American Jobs Plan, promulgated by the Biden Administration, emphasizes the need for upgraded child care facilities that are safe, accessible, energy efficient, and high quality learning environments as a means for increasing female participation in the labor force. However, as the plan faces pushback in its ascent through Congress, it may be time to look at similar policies in other countries.

The Australian government announced that they intend to increase childcare subsidies through the investment of A$1.7 billion to increase female participation in the workforce. On May 1, the Liberal-National Coalition of Australia, known as the Coalition, announced that they would use the country’s budget to focus on “jobs and economic recovery.” Part of boosting job growth and surging economic recovery includes a child care package that prioritizes low and middle income families with more than one child, especially those who want to work an extra few days during the week.

Under these changes, the child care subsidy will increase to up to 95%, from a current 85% of the total cost of child care, for families with two or more children under the age of five. This may see an average household saving of $2,260 per year for the 250,000 families with more than one child in Australia. This package will also eliminate a $10,560 cap on the child care subsidy, which benefits higher income earners who pay more once they reach the maximum rebate amount.

The Labor Party, in opposition to the Coalition, have criticized this plan as nothing more than a well-timed incentive for women to vote for the Coalition in the upcoming election. This policy is born of a government embroiled in sexual abuse scandals. A former political staffer described an alleged rape inside the Parliament House, followed by three more women accusing the same man of harrassment or assault. Since the Coalition first came to power in 2013, Australia’s global gender equality ranking from the World Economic Forum has fallen from twenty-fourth place to fiftieth place.

Regardless of their initial intention, these types of programs benefit the country’s economy and the economic outcomes of women, both of which need stimulating after the effects of the Covid-19 pandemic. Between 2022-23, government predictions indicate that about 75% of the total $10.6 billion in the government child care subsidy will go to families earning under $150,000 annually, while less than 4% will go to families earning over $250,000.

Specifically, a family earning $110,000 a year would see their subsidy for their second child increase from 72% to 95%, indicating that they would be $95 richer per week if they opted for four days of care. A family earning $80,000 with three children would see their subsidy rise from 82% to 95% for their second and third child, meaning they would be $108 richer per week for four days of child care. Because the government intends to eliminate the subsidy cap, a family with one child earning $200,000 would save $2,400 if they opt for five days of care.

The policy in place reflects the values of a conservative government in the midst of gender-related scandals looking down the barrel of an election. However, these policies do affect the daily lives of families and have the potential to turn around a national and global economy devastated by a public health crisis. These policies also foreshadow the necessity for child care oriented policies in all major economies. To fully recover and even exceed prior economic growth, women play, perhaps, the most essential role.