Women are being discouraged from returning to work after having children, as tax, childcare costs, and lost government benefits leave some earning as little as 20? for every dollar they earn.
New modelling done for the Grattan Institute shows the second earner in a family - generally the woman - is effectively being penalised for working because the more they earn, the more they lose in government payments such as family tax benefits.
"The current system strongly discourages mothers from paid work," says chief executive officer of the Grattan Institute, John Daley.
In only one of the 10 family scenarios that were modelled for the research did it prove financially rewarding for the woman to work full time instead of part time.
Even in that case, a family with one child where one parent earned $40,000 a year and the other $24,000 working part time, the mother increased her take home pay from only 33 per cent to 35 per cent.
The worst situation was for families with two children where both parents earned an equivalent full time wage of $40,000 a year.
In that case, the woman kept only 20 per cent of her take home pay if she worked three days a week but 17 per cent if she worked full time.
Mr Daley said women with lower earning capacity are more strongly discouraged from work.
"They take home a smaller proportion of any money they do earn and a much smaller dollar amount," he said.
If an extra 6 per cent of Australian women worked, the size of the economy would grow by about $25 billion a year, the Grattan Institute modelling found.
In every family type the institute modelled, the woman's pay dropped once there was a second child, largely because of increased childcare costs.
In a family where both parents earned $70,000, if they were working full time the woman kept 39 per cent of her pay if she had one child but only 10 per cent if she had two children.
Families needed to have one partner earning $100,000 a year with the second earning about $60,000 a year and only have one child for the woman to keep more than 60 per cent of her take home pay.
Mr Daley said families faced difficult choices between needing to work and how much work could be done before it was no longer worth their while.
"Mothers face a high opportunity cost in seeing less of their children and in dealing with the stress of juggling work and family responsibilities," he said.
But despite the cost of work, the Federal Sex Discrimination Commissioner, Elizabeth Broderick, stressed the importance of women remaining in work.
The longer women remained out of the workforce the harder it was for them to return, Ms Broderick said, leading to older women facing retirement with little in the way of savings or superannuation.
"My advice to all young women is to remain attached to the labour market," Ms Broderick said. "Your brain isn't delivered with the placenta.
"You can be committed to a family and a job and not have to choose."
Difficulties in finding affordable childcare and flexible work arrangements remain a problem, Ms Broderick said, but she warned women against staying away from work for too long.
"With paid work comes economic power. So many women are entering retirement in poverty because they chose to care," Ms Broderick said.
Although the workforce participation of Australian women is slightly above the OECD average it is substantially lower than comparable countries such as Canada.
Frequently Asked Questions about this Article…
Why are mothers being discouraged from returning to paid work in Australia?
New modelling for the Grattan Institute shows many mothers face a financial penalty when they return to paid work because taxes, higher childcare costs and lost government payments (including family tax benefits) reduce their effective take‑home pay. John Daley of the Grattan Institute says the system often makes the second earner — typically the woman — worse off as they earn more.
How much of their pay do mothers keep when they go back to work?
It varies by family situation, but the modelling found some women keep surprisingly little. For example, in a family with two children where both parents earned about $40,000, the woman kept only 20% of her pay working three days a week and just 17% if she worked full time. In other scenarios the increase in take‑home pay from part‑time to full‑time work was minimal.
How does having a second child affect a mother’s take‑home pay?
In every family type modelled, a second child reduced the woman's pay because childcare costs rise and government supports are phased out. For instance, in families where both parents earned $70,000, a woman kept about 39% of her pay with one child but only 10% with two children.
Who is most strongly discouraged from working by the current system?
Women with lower earning capacity are most strongly discouraged. The modelling found they take home a smaller proportion of any money they earn and a much smaller dollar amount, making paid work less financially attractive compared with higher‑earning households.
What would be the economic benefit if more women entered or re‑entered the workforce?
The Grattan Institute modelling estimates that if an extra 6% of Australian women worked, the size of the economy could grow by about $25 billion a year, highlighting a significant macroeconomic gain from higher female workforce participation.
Why do experts say women should try to remain attached to the labour market?
Federal Sex Discrimination Commissioner Elizabeth Broderick warns that the longer women stay out of paid work, the harder it is to return, which can lead to low savings and little superannuation at retirement. She advises young women to remain connected to the labour market to protect long‑term financial security.
Do childcare affordability and flexible work options matter for mothers returning to work?
Yes. The article notes that expensive childcare and a lack of flexible work arrangements are major barriers that make paid work less worthwhile for many mothers. These practical issues amplify the financial penalties modelled by the Grattan Institute.
How does Australia’s female workforce participation compare internationally?
Australian women’s workforce participation is slightly above the OECD average, but it is substantially lower than in comparable countries such as Canada, according to the article.
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