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Report
Child poverty
Care

Poverty proofing the future of early years childcare

Expansion of funded early years childcare in Scotland must focus on children aged 1 and 2, and be designed to reduce poverty as well as costs. 

Increased family resilience

Parents were more likely to emphasise the benefit of childcare for their child when giving the top benefits of early years childcare, compared to benefits to themselves or more general family life. For example, selecting the top 3 benefits of childcare just 3% said it allowed them to carry out other caring responsibilities, 7% said that it allowed them to look after their home and 9% said it gave them time to rest.

However, nearly 9 in 10 parents (85%) said that more free childcare would benefit their family. This was notably reported more by families with an under 3 (89% reporting this as a benefit) compared to families with a 3 and/or 4 year old (79%).

When we focus on families in poverty, Figure 4, we see slightly different family work patterns in 2017–22. This is not surprising as work, particularly full-time work, protects families from falling into poverty.

A higher proportion of families in poverty with an under 5 have no one in work or have one parent working full-time and one not working than is seen for all families with an under 5. For some of these families, the cost of childcare could be prohibitive to accessing work, particularly for single parents, while for others work may not be feasible due to a disability or other caring responsibilities.

Work and current early years childcare use

Modelling by the Institute for Public Policy Research (IPPR) Scotland (Whyte et al., 2023) shows that the current 1,140 hours offer is likely to be holding around 10,000 people above the poverty line through the work they can do while their child/children are in childcare. However, there are complicated dynamics in balancing hours of work, hours of childcare, income from work and cost of childcare. This means that, when parents access free funded childcare, we would expect parents in lower income families to move into work/more work. For higher income families that are working to cover childcare costs, some parents may work less due to reduced childcare costs.

From our survey of parents, we find that only a slightly higher proportion of parents in low-income families who are not accessing free funded childcare are not in employment than parents in similar families with funded free childcare.3 This suggests that access to funded childcare can help low-income parents into work, yet, with high levels of employment for families without funded care, it is clear that many parents are already using informal or private childcare to access work. 

We also see a slightly higher proportion of parents in low-income families without funded free hours working in the lowest hours bracket (1–20 hours) while a higher proportion of parents in families with funded hours are in the higher hours part-time group (20–35 hours). This suggests that the funded offer is helping low-income families to work more hours and again highlights this complicated balancing act between work, income and childcare costs.

Increasing work hours through greater access to free early years childcare

In our survey of parents with an under 5 we asked 2 questions on how parents might make changes to their work hours if they had access to more free funded early years childcare: one is comparative while the other is more attitudinal. We asked parents how many hours they would work if they had access to more free childcare (comparative question): this allowed us to compare to the number of hours they currently work, and we asked whether parents would increase their hours of work or study (attitudinal question).

Nearly half of responding parents (48%) said they strongly agree that they would work or study more hours per week if there was more free childcare provision and a further 17% said they tended to agree.

This tells us that expanding funded early years childcare has the potential to unlock greater economic activity and increase incomes.

However, there are 2 notes of caution that come with this finding. First, we have not done analysis to show whether there is capacity in the labour market for this level of increased activity.

Secondly, while one aim of funded early years childcare is to reduce poverty via increasing earned income, there is a question of how much this expensive intervention is holding up or perpetuating low-quality employment. This is a fundamental challenge for policy-makers. Would increased childcare be required if more employers embraced fair work principles? What effort is being made by employers to drive down costs of childcare via increases in flexibility? 

As key beneficiaries of a well-designed childcare offer, employers must be involved in these types of discussions. 

Through the comparative question, by comparing the hour bands that parents selected for their current hours of work to the hours they would work if they had additional free childcare, we can see whether parents wish to change their hours enough to move between hours bands. We see that around 1 in 4 responding parents (23%) would increase their hours enough to move to a higher work-hours band. Around half would have the same hours band (52%). Nearly 1 in 4 responding parents (23%) would reduce their hours enough to move between hours bands. For low-income responding parents, 32% would increase their hours and 15% would reduce their hours. As mentioned previously, the balancing act of hours of work, hours of childcare, pay and the cost of childcare may mean that some parents are currently working to cover the cost of their childcare, meaning that some parents might work less if more funded childcare was available.

When we compare these questions we see that around 14% of responding parents answered the opinion question by saying that they would increase their hours yet selected a lower hours band, while 2% said they would increase their hours band but would not work or study more if there was more free childcare. The unclear elements of this work shows 2 things:

  1. It is difficult for respondents to predict the relationship between hours of childcare and number of work hours they would work when thinking about prospective changes.
  2. For a significant number of parents increases in hours worked are likely to be minimal and therefore not captured by a move in the work hours band that is selected.
Table 1: Comparison between attitudinal and comparative questions
Change in hours band"I would work/study more hours per week if there were more free childcare provision"Total proportion of parents
Strongly agreeTend to agreeNeither agree nor disagreeTend to disagreeStrongly disagree
Reduce hours band9%5%4%3%1%23%
Same hours band21%8%10%5%7%52%
Increase hours band18%3%1%1%0%24%
Not in work/study0%0%0%0%0%2%
Total proportion of parents48%17%16%9%9%100%

Who is more likely to increase their work hours with more free early years childcare?

Income group was not a strong predictor of whether people said they would increase the amount of work that they would do, with nearly 2 in 3 low-income and high and middle-income parents (64%) saying that they would work or study more if they had more free funded care. We also saw little variation by the gender of the responding parent, this is surprising when we know that the majority of unpaid childcare is undertaken by women.

When looking at a number of groups, we see that, across the board, the majority of responding parents say that they would work more hours if there was more free funded childcare. However, we do see some variation by the age of the youngest child, parent work intensity (for example, full or part-time or not working) and whether parents are currently using free childcare. It is important to note that these 3 groups are tied together due to the current early years childcare offer and its relationship to work.

Responding parents with younger children were more likely to say that they would work more hours. Nearly three-quarters of parents (72%) whose youngest child is 1 year old said this, compared to just over half of parents whose youngest child is 4 years old (52%). Parents who are not currently accessing free funded childcare are more likely to say that they would work more hours than parents who already have access to free childcare (67% compared to 60%). This is likely linked to child age as the majority of the current offer is to 3 and 4 year olds. Responding parents who are currently working part-time were much more likely to say that they would increase their hours of work (74%) than parents working full-time (58%). For salaried full-time workers, it is unlikely that increasing work hours is possible; however, for hourly paid workers this might be possible.

Focusing on parents who said that they would increase their work or study hours if there was more funded childcare, we can more closely interrogate how changes to their current and desired work hours relate to work intensity. When we look at parents’ current work intensity and compare it to the work intensity of their desired work hours, we see that around 3 in 20 (14%) responding parents who said they would work or study more wanted to move from part-time to full-time work, while nearly 1 in 10 parents (9%) wanted to move from no work to part or full-time work.

The majority of parents in work would keep their current work intensity, even if they said that they would increase their hours of work or study (60%). This could be because they would use this additional time to study, or that the increase in their hours is not sufficient enough to move someone from part-time to full-time work. If more childcare was offered, nearly 1 in 4 working parents (23%) said that they would increase their hours but would continue to work part-time and just less than 2 in 5 (38%) said they would increase their hours but continue to work full-time.

Finding better paid work with more hours of free funded early years childcare

We know that there exists a part-time work pay gap (Close the Gap, 2022), with part-time work being found in predominantly feminised and low-paid sectors. This presents many parents with a challenge to find suitable work that fits with the amount of care they want for their young children. We asked parents whether more childcare provision would allow members of their household to find better paid work. Nearly 2 in 3 parents (63%) said that more childcare would allow someone in their household to find better paid work. In this survey we find that around half of parents in families where everyone works full-time said that more childcare would allow them to find better paid work. This increases to 64% of parents in families where one or more adults work part-time and 71% of parents in families where someone is not working.

We do not see a great amount of variation in this response across different characteristics, with the exception of age of the youngest child. Just over half of parents (56%) where the youngest child is a 4 year old report that more childcare provision would help them to find better paid work, increasing incrementally as children get younger, to 2 in 3 parents with a baby (66%).

Increasing employment security with more hours of free funded early years childcare

Finally, we also asked whether having access to more free childcare would allow parents to find more secure work. Similar to pay, we also know that part-time work can be one characteristic of insecure work (Florisson, 2024). Furthermore, those in part-time work are less likely to be able to progress in their role (Nightingale, 2019). In addition to this, people with lived experience of poverty have told us that a lack of flexibility in childcare makes it a challenge to do irregular, insecure or shift work.

Half of responding parents (52%) agreed that more childcare provision would allow members of their household to find more secure work. However, there are some key groups where access to appropriate levels of childcare appears strongly linked to their ability to find more secure work:

  • 57% of parents in low-paid families agreed that it would help a member of their household find more secure work, compared to 45% of middle and high-income families
  • 58% of families with a baby agreed
  • 70% of parents in a family where one or more person is not working agreed, compared to 38% of parents in families where everyone is working full-time.

This highlights the complex interlinking nature of early years childcare, income, work intensity and employment security.

Finally, it is evident from this analysis that there are some families who wish to use 50 hours or more of childcare. However, this covers less than 1% of families with an under 5. Less than 1 in 10 (8%) would like between 40 and 50 hours, particularly families where the youngest child is under the age of 3.

Reflecting back on the 3 questions posed at the beginning of this section, there is evidence to suggest that parents where the youngest child is aged 3 or 4 years old want slightly more hours than the current offer – definitely more than the current offer if spread across the full year.

The vast majority of parents where the youngest child is aged 1 or 2 years old would use some childcare. This analysis suggests this is slightly less than the current offer for 3 and 4 year olds but more than their current offer which is limited to low-income families.

For parents with a baby, the childcare needs are much more mixed and this is likely due to the vast changes in babies between birth and turning one years old. Over 1 in 10 parents of babies (12%) said they wanted no hours of childcare.

It is clear from looking at parent attitudes and the literature on this topic that child social and language development and parents’ ability to work are key requirements of childcare irrelevant of child age.

Household income, area deprivation and childcare costs

Low-income families and families in the most deprived areas of Scotland were less likely to say that high costs were a downside of early years childcare. There could be a number of reasons for this:

  • Some low-income families will have funded free care from the time their child is 2 years old.
  • Low-income families are less likely to have everyone in full-time work and therefore need fewer hours of childcare.
  • Low-income families are less likely to use early years childcare.

All of which mean low-income parents are likely to be using fewer hours of paid childcare.

However, previous work by the Scottish Government (2022) found that parents in more deprived areas were more likely to report difficulties in affording childcare. This makes sense, low-income families may tend to spend less on childcare, but because their incomes are lower, the cost eats up more of their disposable income.

These modelling results highlight the sustained and significant levels of change required in the labour market to substantially reduce levels of child poverty. This is partly because employment rates are already high for families with an under 5, although a number of these parents will be paying for private childcare. There is also a complex interplay between work, social security, housing costs and family type.

Focusing on the Scottish Government’s priority families, the groups most affected by moving parents into more/better work are single parents, parents with 3 or more children (large families) and minority ethnic families, where the family work patterns are more likely to include one parent not working. Moving a parent from no work into work means that they can increase their income more though this intervention. However, for many of these families, the impact on family incomes will not exceed what is seen more generally.

These moves into work do not always lift families out of poverty. This is likely due to other drivers of poverty such as high housing costs, social security taper rates and benefit capping. For example, for single parents in poverty, they will remain in a household with just one income from work, with social security tapers affecting the extent to which they can increase incomes sufficiently. Additionally, for families where someone is disabled, parents may continue to be unable to work, so raising incomes through social security is the only means by which to increase household incomes sufficiently.

In these scenarios, it is only by increasing work hours to full-time (maximum work scenario) that we see a greater impact on reducing poverty for some of the priority families than is seen for all children. In this scenario, for all children, we see the poverty rate fall by 5.3 percentage points compared to the baseline. For large families, the fall in child poverty is 6.4 percentage points and for single parents 9.1 percentage points.

However, it is critical to note that this maximum work offer requires significant amounts of early years childcare for children aged 1 to 4 and may be required to be higher for single parent families where one parent is required to juggle all parental responsibilities. This makes the scenario we have modelled extremely unlikely, and ultimately undesirable, to be a reality for single parents, a tiny proportion of whom are currently in full-time work due to all the other demands on their time.

Many of these parents are also more likely to be disengaged from the labour market and, while childcare is a barrier to accessing work, an unsupportive, family-unfriendly and inflexible employment market needs to be resolved for parents to be able to move into work (JRF and Save the Children, 2022).

It is also critical to note that moving parents (particularly mothers) into good work when their child is still in the early years is also likely to produce other significant labour market shifts which are not captured in this type of model. For example, we know that there is a caring penalty for people who care for children. Taking into account what carers would have earned had they not taken up unpaid care, the pay penalty for unpaid childcare givers comes to an average of £1,264 per month, reaching £1,785, 6 years after starting caring (Thompson et al., 2023). Moving back into good work is likely to have implications, particularly for gender equality, beyond the immediate increase in household income, that are not captured in these scenarios.

An effective early years childcare policy aimed at increasing incomes via paid employment could work in concert with employability policy. Employability policy is currently failing to deliver for parents. This is despite some good intentions with ideas like the Parental Employment Support Fund which, as outlined in Best Start Bright Futures in 2022, aimed to move 12,000 parents in to work. However, funding has been cut and mainstream services are failing to deliver. Parents make up less than a fifth of those receiving support via No One Left Behind.

It would make a great deal of sense for a government with such stretching child poverty targets to invest in the employability services needed to connect parents who are seeking more hours and better work with the labour market opportunities that an early years childcare offer could enable. There might also be opportunity to attach employability offers and outreach to childcare.

How can more funded early years childcare help low-income families to make ends meet?

Although increasing incomes for parents with an under 5 through work has modest impacts on poverty rates, it is possible for a larger funded offer to significantly reduce families’ outgoing costs. While reducing childcare costs will help families to make ends meet, as explained earlier, this will not affect relative poverty levels.

This is critical as a report from the Centre for Research in Social Policy at Loughborough University (Hirsch and Stone, 2022) found an increasing gap between real-time family income in Scotland and the cost of raising a child. By reducing the cost of early years childcare, it would be possible to further decrease this cost of raising a child.

We have looked at what is left in household budgets for 4 families after they pay for early years childcare, both currently and if parents received the example offer that we outlined earlier. For each family we vary the family work intensity (both parents full-time or one full-time and one part-time) and rate of pay (National Living Wage, real Living Wage or higher pay of £20 per hour).

For the purposes of making simpler comparisons, we have only looked at families with 1 to 4 year olds and not older or younger children who would not be affected by the example early years offer.

While single parents would clearly benefit from the example offer, we have also not looked at disposable incomes for single parent families for a few reasons:

  • Greater interactions between work, social security and childcare. This means that any analysis is likely to reflect inadequacies and complexities of the social security system over the relationship between childcare, work and disposable income.
  • Single earner: as incomes from work will naturally be lower for families with a single earner, while childcare costs remain the same, weighing up the benefits, and practicalities, of hours of work, childcare, pay, benefits and childcare costs is much more complex. This makes some work and childcare combinations unlikely for low-income single parents: for example, a single parent with two 1 to 2 year olds is unlikely to be able to be working full-time on the NLW. This means that these example families would need to be presented very differently.

Looking at the current offer, we see that families with a 1 or 2 year old have significant portions of their income eaten up by childcare costs (Figure 10). Even higher paid families use over half (53%) of their disposable income on childcare if they have two 1 or 2 year olds and are both working full-time. This increases to 85% of disposable income when both parents work full-time on the NLW. Even a family with one 1 or 2 year old sees around half (49%) of their disposable income going to childcare if both parents work full-time on the NLW.

In Figure 11 it is possible to switch between the four families, comparing the amount of disposable income that would be left after paying housing costs and childcare. 

Families with a 3 or 4 year old are left with the largest disposable income with the current offer, with families where one parent is working part-time having all of their childcare covered by the current offer. For parents with a 3 or 4 year old, working on the NLW, we see a clear example of where it does not make financial sense with the current offer for both parents to be in full-time work. Parents’ disposable income after housing and childcare costs is £9 lower per week than if one parent worked part-time. If this family were given the example childcare offer, their disposable income would increase to £576, higher than both their disposable income on the current offer (£56 more) and on the example offer if one parent was working part-time (£47 more).

Families with two 1 or 2 year olds are left with the lowest amount in their pocket after paying for housing and childcare. When both parents are working full-time on the NLW families are left with just £101 in their pocket after paying for housing and childcare. This is not enough to cover the essentials. Increasing their early years childcare offer to the example offer, their disposable income would be more than four times the amount they would have with the current offer. However, with the example offer, one adult working full-time and one working part-time makes most financial sense for couples paid the NLW, increasing their income to £611, 40% more than what they would have in their pocket if both parents work full-time. 

While the example offer leaves parents in a better financial situation than the current offer, the financial gains made by having both parents working full-time is greatest the higher the wage. Not all families see an income rise from moving both parents into full-time work in the example offer. For the example offer, for the highest earning parents, where both are working full-time, we find that they are only worse off having both parents in full-time work, compared with one full-time and one part-time, when they have two 1 or 2 year olds. 

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