Amid discussions about tax changes to lower the middle income rate by 30%, a shortage of workers and incomes that take into account the cost of living, a common threat looms.
It is the cost of childcare that, according to the new calculation, imposes an effective tax of up to 70% on the second earner who wants to work the fourth or fifth day of the week.
The example in this chart is for an average male and female wage family with two children under the age of five whose mother is considering working an extra day.
A mother with two children who need childcare will receive 32% of her first day’s pay in family tax benefits and an 11% reduction in childcare fees (net of subsidies), which amounts to an effective marginal tax of 43%. The amount will be
On her second day she would also pay taxes (earnings above the tax-free limit), and on her third day she would lose 47% of her earnings, with a 23% reduction in tax and 24% in additional net childcare charges.
If he worked on the fourth day, it would become 67 percent of that day’s earnings, which is 36 percent in taxes and 31% in additional net childcare fees.
If she worked on the fifth day, that would increase to 70% of that day’s earnings, leading to 35% in taxes and 35% in additional net childcare charges.
The effective marginal tax rates of 67% and 70% are dire, and well beyond what we would typically think is reasonable from a one-day pay packet.
more women can work
The proportion of Australian women working for wages has reached a record high of 60% in the past few months, but this is well below some of the countries we usually compare ourselves to, including New Zealand. Also included, which is 64.2. Percentage of working-age women in paid work.
If the female employment rate in Australia were increased to New Zealand, an additional 460,000 Australian women would be in paid work.
Women employed in Australia are more likely to work part-time than women employed in any other member of the 38-nation OECD, apart from Japan, Switzerland and the Netherlands.
It’s Childcare That Holds Women Back
When asked why they are unable to work longer hours, almost half of the women surveyed by the Australian Bureau of Statistics enroll in “child care”.
Asked to nominate incentives that would help them work more hours, half choose “access to childcare.”
The high cost of childcare drives women away from full-time work towards the role of primary caregiver at home. This in turn limits their career progression, their financial security, their retirement savings and their ability to afford housing.
It is also likely to limit fertility, which has fallen to 1.6, well below replacement levels, and limits tax revenue and Australia’s access to skills.
Employers are crying out for workers
Job vacancies are at a record high with employers crying out for skilled workers.
An analysis designed for chief executive women found that if women’s employment reaches men’s employment, an additional one million full-time equivalent workers will become available, of whom 800,000 will be with diplomas or more.
Separate modeling prepared for the National Foundation for Australian Women suggests that expanding childcare provision (by raising the wages of childcare workers) would increase Australia’s labor supply by 2%.
After ten years it would increase GDP by 1.6%.
In response to continued calls for reform, the government last year increased childcare subsidies for families with two or more children in childcare and removed the annual subsidy cap.
While addressing some of the most impressive effective marginal tax rates, these changes have not reduced the higher costs for workers on average wages.
Labor and the Greens have promised to cut childcare costs. So-called teal independents are also campaigning on the issue.
To work, such policies would need to be supported by investments in the pipeline of childcare workers who would be needed.