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  • Writer's pictureKerry Thompson

Why Childcare costs are Squeezing the UK Recruitment Market


As a recruitment consultant, I see the inner workings of the job market every day. But as a mother, I also experience another side of the coin – the ever-present challenge of childcare. These two worlds are colliding in a big way, and the culprit? Soaring childcare costs in the UK.


This issue extends far beyond individual households, significantly influencing the recruitment market in the UK. Understanding the interplay between childcare expenses and employment decisions is crucial for both employers and job seekers.


Here's the reality:

The cost of childcare in the UK is among the highest in the world. According to the Coram Family and Childcare 2023 report, the average cost for a part-time nursery place (25 hours per week) for a child under two is approximately £138 per week, or over £7,000 per year. For full-time care, this figure doubles, placing a significant financial burden on families . This expense can consume a large portion of a family's income, particularly affecting single-parent households and low to middle-income families.


Reduced Workforce Participation: Research by Working Families shows that 51% of working parents on lower incomes (£50,000 or less) have to cut back hours or leave work altogether due to childcare costs. This translates to a significant talent pool being sidelined.

The Gender Gap Widens: Women, particularly those in lower income brackets, are disproportionately affected. A PwC study found that increased childcare subsidies led to a 1.3% rise in employment rates for adults of childbearing age, with women benefiting the most. Without affordable childcare, this progress stalls.

Skilled Talent Shortage: The UK is already facing labor shortages across many industries. When parents, especially those with valuable skills and experience, are forced out due to childcare costs, it exacerbates the problem for businesses struggling to fill vacancies.

 

The Impact on Businesses:

High childcare costs can deter parents, especially mothers, from returning to the workforce or advancing their careers. A study by the Institute for Fiscal Studies (IFS) found that for families with young children, mothers' employment rates are significantly lower compared to those without childcare responsibilities. Nearly one in three mothers consider the cost of childcare a barrier to working more hours .


Limited Talent Pool: Recruiters like myself spend more time searching for a smaller pool of qualified candidates, making the hiring process longer and more expensive.

Diversity and Innovation Stall: With fewer parents, particularly women and minorities, in the workforce, companies miss out on the benefits of a diverse talent pool known to drive innovation and growth.

Employee Retention Issues: Existing employees with childcare needs may struggle to stay on if work-life balance becomes unmanageable.


The UK also stands out in Europe for its high childcare costs. Here's a quick comparison:

UK: According to the OECD, childcare costs in the UK can reach up to 52% of median female earnings. This is a significant financial burden for many families.

Nordic Countries: Countries like Denmark, Norway, and Sweden prioritize affordable childcare. Denmark caps costs at 30% of the actual cost, while Norway applies the principle that no family should pay more than 6% of their total income to childcare and has a monthly maximum of around £200. Sweden offers subsidies that bring the cost down to around £100 per month.

Germany & Austria: These countries see childcare costs below 5% of income. Some cities even offer free public childcare options.

This cost disparity translates into workforce participation. With affordable childcare, Nordic countries and Germany see higher rates of mothers, particularly those with valuable skills, remaining in the workforce. This benefits both families and businesses.


What can we do:

In response to these challenges, many employers have started offering flexible working arrangements and remote work options. These policies can help parents manage childcare responsibilities more effectively, making job opportunities more accessible. According to a survey by Working Families, 90% of parents believe that flexible working is essential for managing childcare, and many are willing to trade salary for flexibility.


Government Action: Increased subsidies and support for childcare providers can make a significant difference. Policies like the Tax-Free Childcare scheme and 3o Free hours, is a step in the right direction, but further initiatives will be needed.

Employer Solutions: Offering flexible work arrangements, onsite childcare facilities, or childcare benefits can make a huge difference in attracting and retaining top talent who are also parents.

Open Communication: Recruitment agencies and businesses can play a role by being upfront about work flexibility and exploring childcare options with potential hires during the interview process.





Conclusion

Overall, the rising cost of childcare in the UK has created a complex situation in the recruitment market influencing both employee decisions and employer strategies. Affordable childcare isn't just a social issue, it's an economic one. Businesses are facing a smaller pool of qualified candidates, while talented individuals, particularly parents, are being pushed out of the workforce. Addressing this issue requires a multifaceted approach, combining government support with employer-led initiatives to create a more inclusive and supportive working environment.

If you are a parent struggling with the recruitment landscape or looking for someone to discuss new opportunities that understands the childcare complexities, please get in touch at Kerry.thompson@redimeer.com or on my LinkedIn.

 

References

  1. Coram Family and Childcare. (2023). Childcare Survey 2023.

  2. Institute for Studies. (2021). Employment Rates Among Mothers.

  3. Working Families. (2022). The Importance of Flexible Working.

  4. UK Government. Childcare and Early Years.

  5. Nordics.info (2024) Childcare Infrastructure in the Nordic Countries

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