{"id":18953,"date":"2022-08-23T01:01:00","date_gmt":"2022-08-23T00:01:00","guid":{"rendered":"https:\/\/www.economicsobservatory.com\/?post_type=question&p=18953"},"modified":"2022-10-07T16:30:43","modified_gmt":"2022-10-07T15:30:43","slug":"rising-costs-of-childcare-which-families-are-struggling-most","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/rising-costs-of-childcare-which-families-are-struggling-most","title":{"rendered":"Rising costs of childcare: which families are struggling most?"},"content":{"rendered":"\n

The cost of childcare for some types of families in the UK has been on the rise in recent years. Between 2010<\/a> and 2021<\/a>, the sticker price for a part-time (25 hours per week) nursery place for a child under two rose by 59%. This is around twice as quickly as overall inflation.<\/p>\n\n\n\n

The rise, alongside the general increase in prices across the economy, has prompted government ministers to consider what can be done to help families facing a cost of living crisis.<\/p>\n\n\n\n

In reality, when talking about the cost of childcare, there\u2019s no \u2018one-size-fits-all\u2019. Some families face extraordinarily high bills, which eat up a large share of their income.<\/p>\n\n\n\n

But in England, the majority of families with pre-school aged children don\u2019t have any childcare costs at all, either because they are not using formal childcare or because they are benefitting from government or employer support.<\/p>\n\n\n\n

Teasing out which families are struggling with childcare costs is an essential first step in developing policy options that can help those most affected.<\/em><\/p>\n\n\n\n

Use of childcare<\/h3>\n\n\n\n

Families use many different arrangements to look after their young children. We can group these into formal arrangements \u2013 such as nurseries, childminders or playgroups \u2013 and informal ones, including care from grandparents and other family and friends.<\/p>\n\n\n\n

Across the European U<\/a>nion, just over a third of children aged two and under are in some kind of formal care, and another quarter are in informal care only. Just under half of children are looked after exclusively by their parents. But formal childcare use can be much higher \u2013 for example, two-thirds of young children in Denmark and the Netherlands are in formal care.<\/p>\n\n\n\n

As children get older, their families are more likely to use formal care \u2013 in England, data<\/a> from 2019 suggest that a third of one-year-olds were in formal care, rising to almost 60% of two-year-olds and 85% of three- and four-year-olds. Families also vary quite a bit in how many hours of formal childcare they use.<\/p>\n\n\n\n

Childcare costs<\/h3>\n\n\n\n

These different patterns of use contribute to large differences in costs. Choices about whether to use formal childcare, what type of setting to pick and how many hours to pay for are the principal drivers of families\u2019 weekly childcare bills.<\/p>\n\n\n\n

But childcare spending is also affected by factors that are less directly within families\u2019 control. The existence and extent of government involvement in the early years market \u2013 through providing settings, regulating prices or subsidising families\u2019 childcare directly \u2013 has a huge impact on choices and costs.<\/p>\n\n\n\n

Children\u2019s ages are also an important driver: prices for younger children are usually much higher, partly due to tighter staff-to-child ratios<\/a> in younger age groups.<\/p>\n\n\n\n

This is borne out in data from England. Among all families, the median amount spent by households on childcare, irrespective of the child\u2019s age, is \u00a30 per week. In other words, more than half of all families with children under school age paid nothing out-of-pocket towards the cost of childcare in 2019. This is either because the child did not attend a formal provider or because the family used government or work-based support to pay for the care.<\/p>\n\n\n\n

Among families using formal childcare, the median weekly spend for a one-year-old was \u00a390, falling to \u00a345 per week for those with a two-year-old. This reduces to less than \u00a35 per week for families with a child aged three or four.<\/p>\n\n\n\n

These variations across ages reflect differences in government support as well as in prices and hours. In England, all families with a child aged three to four are eligible for 15 hours of free childcare per week \u2013 and families where all parents are in work get 30 hours free each week.<\/p>\n\n\n\n

As a result, parents of children in this age group tend to pay less for formal care on average. Around two-thirds of these families did not exceed their childcare entitlements and so didn\u2019t have to pay fees out-of-pocket during term-time.<\/p>\n\n\n\n

Families with the highest weekly childcare costs also tend to be those with higher incomes. These families are more likely to have both parents working full-time and therefore use more hours of formal childcare per week.<\/p>\n\n\n\n

They also tend to be more willing to pay higher childcare prices. But among families using formal childcare for their one- to two-year-olds, high childcare costs are common even for those on lower and middle incomes.<\/p>\n\n\n\n

Figure 1: Mean and median weekly cost of formal childcare in England by age group, 2019<\/h4>\n\n\n
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