[ The Sydney Morning Herald ]

Second incomes not a good earner

Date: November 25 2012

Stephanie Peatling

WOMEN are being discouraged from returning to work after having children because tax, childcare costs and lost government benefits leave some clearing as little as 20¢ from every dollar they earn.

Modelling 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,'' the chief executive officer of the Grattan Institute, John Daley, said.

In only one of the 10 family scenarios 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 with one parent earning $40,000 a year and the other $24,000 working part-time - the mother increased the amount of money she took home after taxes and childcare from only 33 per cent to 35 per cent.

The worst situation was for families with two children with both parents earning 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 for working three days a week but 17 per cent if full-time.

Mr Daley said women with lower earning capacity were 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 modelled, the woman's pay dropped once there was a second child, largely because of childcare costs.

In a family in which 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 and the second earning about $60,000 a year, and have only one child for the second earner to keep more than 60 per cent of the 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 the Federal Sex Discrimination Commissioner, Elizabeth Broderick, stressed the importance of women remaining in work. The longer they were out of the workforce the harder it was for them to return, she said, leading to older women facing retirement with little in savings or superannuation.

Finding affordable childcare and flexible work arrangements remained a problem, she 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.