Childcare costs make work 'hardly worthwhile' for some

Childcare costs mean having a full-time job is no longer worthwhile for many second earners in middle and low income families, a think tank has warned.

The Resolution Foundation says in the most extreme cases a couple might be left just £4 a week better off with two incomes than they would be with one.

It calls for major changes in childcare to ensure working is worthwhile.

The government says it has set up a commission to look at the affordability of childcare.

The report says childcare costs are also eroding incentives to work for those higher up the income scale.

Researchers found that a family with two children, in which two earners bring in a total of £44,440, could end up just £4,000 better off than a similar family earning £20,000 less.

The study says the differences in income are eroded by factors such as benefits, tax, tax credits and childcare costs.

The report looks at elements of the system of state support which have the effect of cutting a family income in real terms, as a second earner works more.

A second earner from a middle-income household who is paid £12 an hour will add £4,500 to the family income while working 13 hours a week.

However, if he or she increases the hours above that level, the family income falls off as the combination of childcare costs and withdrawn support through the tax credit system bites into earnings.

The study defines middle income as a salary of between £17,000 and £42,000 for a family with two children in childcare.