READER REPORT:

There is no incentive to work

RACHEL COBURN
Last updated 06:00 24/02/2014
childcare
DOESN'T PAY TO WORK: New Zealand currently ranks a low 22nd in the OECD for workplace participation by women in their prime childbearing years.

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I believe that you should be rewarded for hard work; if you work for an hour you should be better off than someone that hasn't, even if it is by a small margin. 

But did you know that tens of thousands of New Zealand families are currently affected by a Government policy that not only doesn't make them better off by working but actually penalises them by hundreds of dollars?

As a result many families are doing the sums and working out that a week's work will leave them in the red. That doesn't sound right, but it is.

The policy I'm referring to is the childcare subsidy, which, when looked at in combination with taxes and working for families subsidies, means that it is difficult for a couple with more than one young child to get ahead - if they both want to work.

A family with two adults and two children under 3 on a single average wage of $840 a week will get up to $1038 a week in the hand.

But if they have two full-time incomes and earn a little over the subsidy abatement threshold of $1600 a week, they can expect to net about $1031 a week - less than a family working half the hours and a whopping $321 less than a family earning $1379, who would qualify for the full subsidy rate of $3.93 per hour and would net up to $1352 a week.

These differences have arisen chiefly from the rate at which the childcare subsidies abate; but they are made worse by the concurrent abatement of working for families, in-work tax credit and the accommodation supplement. 

What I haven't factored into these numbers are the extra charges paid to childcare providers which in general range from $100-$300 for two children in full-time care. 

These charges effectively mean a family would be better off on a benefit than working two full-time jobs. To me this disincentive to work seems unfair.

To change the current system to fund childcare for a wider bracket would benefit everyone. 

New Zealand currently ranks a low 22nd in the OECD for workplace participation by women in their prime childbearing years; with about 80,000 women in this group choosing not to participate in the workforce. 

Giving these women the option of continuing their careers through their children's early years would increase New Zealand's GDP, give more children access to high quality early childhood education and make sure that women aren't disadvantaged because of a long break from the workforce.

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When thinking about how this can be fixed it pays to remember that for every hour that is funded by the Government they receive back tax and working for families entitlements from not only the parent but from the person employed to care for them. 

Increasing the availability of the childcare subsidy is effectively a money-back guarantee with the education of our young being the icing on top. 

When I brought this issue up with my local MP he sent this information to Hekia Parata, who I hope is working out a solution; but the people affected by these policies need to raise their voices. 

Given that the median household income for a two adult, two dependents family is  $1587 per week from all sources except government assistance, I estimate that about 140,000 families must be directly affected. 

If you are one of those families, or you know one of those families, then raise your voice. Speak to your local MP and let them know that this isn't right.

Note: My figures allow for lunch-breaks and travel time when calculating the childcare subsidy. I have included the maximum possible rate for accommodation supplement in the calculations.

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