These countries have the highest childcare costs in the world

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: David Alexandru Timis, Global Communications Manager, Generation, Teresa Pallarés-Ramos, Fellow, European Leadership Programme

• High childcare costs can be drag on the economy, including by discouraging participation in the workforce for parents.
• New Zealand, Czechia and the US have some of the highest net childcare costs as a share of the average salary of a couple, OECD figures show.
• Countries such as the UK, Portugal, Canada and China are putting in place policies to cut childcare costs and boost their economies.

No one ever said having children was cheap, but when childcare costs start to exceed monthly mortgage or rental payments for large parts of the population, it looks like there might be a problem.

This is the case for around two-thirds of families in the UK, according to a recent survey, and it has led to 43% of mothers considering leaving their job.

The UK has some of the highest childcare costs in the world, but it’s not top of the list. Policymakers there and in other countries need to realize that having more affordable childcare offerings is not only good for women and families, but good for economies too, says World Economic Forum Managing Director, Saadia Zahidi.

Many mothers consider leaving their jobs because of high childcare costs. Image: World Economic Forum Global Gender Gap Report 2023

Some governments are increasingly recognizing the importance of expanding access to affordable childcare, but their current efforts are just a first step and need to be scaled up significantly, according to the Forum’s Global Gender Gap Report 2023.

“Care infrastructure investment is actually a job creator … and therefore better for creating multiplier effects for economies,” says Zahidi. “In the same way that governments are thinking about focusing on physical infrastructure, making it greener, making those investments because that’s going to be better for economies in the future … they need to think about care infrastructure and ensuring that that investment is happening now so that our economies can grow in the future.”

Cutting childcare costs

Inflation and the cost-of-living crisis appear to be bringing the childcare problem into focus for some countries.

The UK plans to extend a programme offering working parents 30 hours per week of free childcare for children aged three to four. It will begin offering 15 hours free for children aged two or over from April 2024, extend this to cover children aged nine months or older from September 2024, and then offer 30 hours free for any child under five from September 2025.

The government expects this to encourage an extra 60,000 parents to seek employment after having children.

Portugal has begun a scheme allowing children aged up to one to enrol free at day care centres, and it plans to extend this to cover all children up to three, regardless of family income.

Canada began investing in a nation-wide system offering affordable childcare in 2021, and says this has cut fees for parents by an average of 50%.

Meanwhile, falling birth rates have prompted China to look at ways to improve its childcare services. The country is launching pilot projects in more than 20 cities that it hopes will create a better environment for raising children by offering tax incentives, housing subsidies, and free or subsidized education for having a third child.

The International Labour Organization says that 2 billion potential parents live in countries without quality childcare services, adequate maternity protection, or paternity and parental leave. Improving childcare policies could create millions of jobs and boost equality and women’s employment, it adds.

Highest childcare costs by country

For a UK couple on an average salary, net childcare costs account for a quarter of average household income, according to OECD figures.

The US has the highest childcare costs as a percentage of a couple’s wages, according to the OECD. Image: OECD

In Czechia, net childcare costs account for 28% of the income of an average couple, in Cyprus the share is 29%, while in New Zealand it’s 30% and in the US the share is 32%.

Lowest childcare costs by country

The lowest childcare costs are found in countries including Germany and Estonia, where they account for 1% and 0% of a couple’s salary, respectively, according to OECD data.

In Germany, the average annual cost of childcare is $1,425, or just under $118 per month. That’s around an eighth of the cost of renting a one-bedroom apartment in a city centre.

For the past decade, the country’s Kitas scheme has offered heavily subsidized care to children older than 12 months.

In Estonia, full-time childcare can cost as little as $19 per week. Children do not start formal schooling until the age of seven, but they are entitled to a highly-subsidized kindergarten place from the age of 18 months.

Estonia only spends 0.8% of its GDP on early years care – just above the UK’s 0.6%, and half of Sweden’s 1.6%, where childcare costs average 5% of a couple’s salary. So how is it able to afford the subsidies that keep childcare costs so low?

The answer is a 30% social tax that employers have to pay for every worker, which covers parental leave and healthcare, UK newspaper The Times reports.

Bloomberg says that the quality and cost of early-years childcare can have critical impacts on everything from student performance at school and university to the size of a nation’s economy.

The evidence coming out of Estonia seems to back that up. It is the top European country and fifth in the world in the Pisa programme of student assessments, which measures 15-year-olds’ ability in reading, mathematics and science.