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Mothers should be free to choose

    International Women’s Day on Saturday was an excellent reminder of some of the horrors still inflicted on women and girls throughout the world. Whilst the situation has improved, globally women are still treated as second-class citizens in issues ranging from child marriage to discrimination in the workplace. Even in our own country, a recent study found that 44% of British women reported being at some point the victim of physical or sexual abuse. IWD has also brought to the fore the issue of mothers in the workplace in the developed world.     

    As CPS Research Fellow Kathy Gyngell points out, the situation for women in the workplace has certainly improved since the days of openly accepted discrimination. However, this progress is insufficient. Whilst open discrimination has clearly fallen significantly, even if the entire gender pay gap is driven by other factors, it is a waste of our country’s talent for highly educated and highly skilled women not to be able to capitalise on their potential if they wish to do so. Only if the entire gender pay gap is due to different preferences amongst men and women would it not be a problem. However, the ONS shows that even if we only look at median hourly pay and even if we exclude overtime (of which men do more on average) then the pay gap is 19.7%. Moreover, PWC’s Women in Work Index shows Britain’s underperformance in female employment relative to the other OECD countries. Given that this pay gap has fallen quite consistently since 1997 when it was at 27.5% and given that it has fallen faster in other comparable countries, it seems odd to suggest that we have suddenly reached the optimal level.

    Many mothers prefer to take time off work to raise their children and as Kathy Gyngell points out, the value of the informal childcare provided by stay at home mothers is simply phenomenal. Indeed, as Ruth Lea argues, “there’s more to women than boosting GDP”. No single characteristic or activity can adequately describe any human being. This is why we must give mothers along with everyone else the maximum possible freedom to make the choice which is best for them and their families whether that means working or looking after children at home or some combination. This is clearly not the case at the moment.

    The supply of childcare is an extremely important factor in giving mothers the freedom to take a job and earn a wage if they wish. The high cost of childcare may significantly reduce the effective financial rewards of employment to such an extent that it is essentially not worth returning to work or finding a new job. Imagine a mother being paid the living wage having to pay the minimum wage to someone to look after a child. After taxes, it is not difficult to see that some mothers (although certainly not all) who would like to work and might be on low and middle incomes are locked out of jobs.

    As a result, some mothers will lose out on the productivity enhancing boost that more time in the workplace would give them. This could come about because of skills depreciation, diminishing networks and not always having access to new workplace developments. Furthermore, the cost to businesses of women being locked out of the labour market is clear. A study by Credit Suisse for example shows that businesses with women on their boards perform better and a study by McKinsey shows that companies with a higher proportion of women perform better with higher return in sales, higher average growth and higher return on equity. As businesses increasingly realise this, many are beginning to act to attract more female employees.

    However, with an inflated cost of childcare there remains a structural impediment in meeting this demand. By some estimates, the cost of childcare rose 19% in the year to December 2013 which is far above average wage growth. Moreover, in some areas in the South East and London, it has been estimated that a part-time nursery place can cost £21,000 a year. The effects of these costs on employment seem to be reflected in a variety of opinion polls. A Mumsnet survey of more than 2000 mothers with children under the age of 10 shows that two-thirds of mothers say the cost of childcare is an obstacle to them working more and more than 40% say that it is the biggest single barrier to greater employment. Interestingly, 43% said they would work even if it did not leave the household any better off which perhaps reflects recognition of the value of sustained employment experience. The Women’s Business Council finds that 2.4 million women are not working who would like to work and more than 1.3 million women want to increase their hours. There is also a lot of interesting polling from America which shows 55% of career orientated stay-at-home mothers would prefer to be working currently. As would be expected, the polling also shows that the cost of childcare is felt most severely by mothers in work on lower incomes.

    One way to reduce these barriers to labour market mobility and to increase the freedom for mothers to choose themselves when they want return to work is to reduce the cost of childcare and thereby increase its provision. Current proposals to cut the tax burden on childcare are very welcome and the Government should declare a clear aim to continue the tax cuts to childcare over time. This would give greater confidence to mothers that the existing reductions in tax will be permanent and that future price rises will be curtailed through reductions in the effective tax burden. The Government should continue with a general deregulation of childcare to promote more informal networks as well as to make it less costly to set up new childcare centres. Recent reports that the Government is looking to cut the cost of childcare are therefore very welcome.

    Whether mothers want to take care of their children at home or work full time or part time, they should have as much freedom as possible to make that choice.

    Adam joined the Centre for Policy Studies as Head of Economic Research in January 2014. 

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