Women would be as much as $118,000 better off in retirement if subsidies were increased to make childcare more affordable, according to new research by Industry Super Australia (ISA).
ISA said the move would help close the gap between men and women, who retire with an average of a third less super than men because of time spent out of the workforce with children, and boost Australia’s total superannuation savings by $35bn by 2050.
Until recently, the government subsidised up to 85% of childcare costs for lower income households, but the payment declines at the steep rate of one percentage point for every $3,000 a family earns over $70,000 a year.
According to research by the Grattan Institute, this dramatic fall in the subsidy discourages women with small children from working more than three days a week.
For ISA’s new report, accounting firm Deloitte modelled the effect of boosting the childcare subsidy from 85% to 95% for low-income households and flattening the taper rate at which it is reduced as income rises.
Deloitte’s modelling found that a woman earning the median wage would have $118,000 more in super by retirement if the changes allowed her to work five days a week rather than two.
A woman in the same situation who was part of a low-income couple would be $69,000 better off.
The change would also reduce dependence on pensions and increase the income tax take by $2.1bn a year by 2050, according to the report.
“Making childcare more affordable will boost retirement savings, slash the gender super gap and drive down future pension costs,” said ISA’s director of advocacy, Georgia Brumby.
“More affordable childcare combined with paying super on parental leave will make sure mums are not left behind when they have children,” she said.
The report is the second in a series by ISA tackling the retirement income gap. Last year it recommended paying super on parental leave.
ISA said there was still much work to be done, with many other factors contributing to women leaving the workforce with less in super than men.
These include lower participation in the workforce by women than men, lower pay in female-dominated industries, the gender pay gap, employers that won’t give flexibility to accommodate caring responsibility, discrimination in hiring and pay rise decisions and women being expected to do unpaid caring work.
Additional drivers will be examined in future reports, ISA said.
