This article was created in collaboration with Crayon, an online parenting and financial education database.
The Economics of Returning to Work
We take no sides on “The Mommy Wars”, i.e. the supposed tension between full-time parents and working parents. Both have their trials and tribulations. Both add value to society in different ways. Both can be done by parents of any gender. Both are forms of work - it’s just that one doesn’t come with a paycheck, leave or KiwiSaver. Neither choice is necessarily better for your child. And yes, the research backs this up.
Moreover, it’s often hard to know before your baby arrives how your view of paid work will change, if at all. We’ve seen friends who are self-confessed workaholics and choose to dial back on their careers to spend time with their families, and others who have long been the ‘I love kids’ type crave the stimulation of being back on the tools. And sometimes, your family situation might mean it’s not a choice at all.
There is no universal ‘right’ answer. But if you’re deciding what to do, there are a few helpful prompts that could help you make a good choice for you and your family.
What do I want to be doing?
Number one regret of the dying? “I wish I'd had the courage to live a life true to myself, not the life others expected of me.”
Some parents enjoy intellectual stimulation and career satisfaction from work. Others treasure being present with their children for all the moments, big and small. Be honest with yourself and tune out the social pressure and stereotypes - what is it that you’d rather be doing? We recognise it can be a privilege to be able to do what you want. Our only caution to you is to not make choices based on what you think you should be doing if you have other options.
What are the numbers?
Most returning parents compare their post-tax income to the cost of childcare to determine if it’s worth going back. This is sensible - childcare is eye-wateringly expensive. Kiwi parents earning the average wage with two kids in full-time daycare can expect to spend 38% of their income on childcare costs, making New Zealand the most expensive country in the world (OECD).
What’s more, daycare fees can range from free to over $100 per day, with waitlists of more than a year. If returning to the workforce is an option you want to keep open, then look into centres when you’re pregnant and check out whether you’re eligible for subsidies.
But if your number crunching stops here, then you’re (literally) shortchanging yourself. There are three more financial factors to consider.
KiwiSaver
At the very least, you need to factor in KiwiSaver contributions from you, your employer and the government. For someone earning the average wage of $62,000, that’s worth about $3,600 in total contributions each year. Fast-forward 30 years to retirement, this could be worth $10,000 if invested in a balanced fund. Let’s say you took 5 years out of the paid workforce - roughly speaking, this could cost you $50,000 by retirement. Unpaid caregiving is one of the reasons women’s KiwiSaver balances are, on average, 20% lower than men’s.
Additional paid parental leave
Returning to work may mean you’re able to get paid parental leave for any subsequent children. Government-paid parental leave requires you to have worked for any of the 26 weeks in the 52 weeks before your child’s birth. This means if you’ve been back at work for 6 months or more before your next child, you can qualify again.
On top of that, many employers now offer additional paid parental leave, with some paying up to 6 months of your salary. Again, many of them have a minimum length of service you must complete after returning from one stint of parental leave to be eligible again. You can find out more on The New Zealand Parental Leave Register.
Future earnings
You also need to evaluate your future earnings potential, not just your income today. As your skills and experience increase, you may be eligible for pay rises and promotion opportunities. In many ways, returning to work is often more of an investment in your future finances than your current ones.
On the flip side, returning to work after an extended absence can be challenging. This isn’t just because you’ll likely need to update your skills but because your confidence can take a big hit. The good news is that platforms such as Jobs For Mums are making it easier for parents to find family-friendly roles.
How will this work for our family unit?
The word “unit” is the operative one here. At the end of the day, there often has to be a lead parent. Who will the school call when your child is unwell? Who’s keeping mental tabs and coordinating schedules for your child’s activities? Who’s making sure your child has the right gear for school and presents for their friends’ birthday parties?
This unpaid work needs to be done by someone - but not every job is compatible with this. The reality of raising a family might mean one or both of you need to seriously consider changing the work you do (e.g., taking part-time work or different duties or becoming a full-time parent) or finding other ways to plug the gaps (e.g., moving closer to family help, paying for a nanny).
If you decide to prioritise one person’s career over another, then make sure you enter this arrangement with intentionality. At the end of the day, it’s important both partners feel their needs are being met. Conversation starters include:
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Do we need to change how our finances are set up so the full-time parent can still feel financially independent? How do we value unpaid work? Nigel Latta estimates that the financial equivalent of being a full-time parent is around $142,000 a year.
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Do we need extra protection in place, such as a bigger emergency fund or life insurance, in case something happens to the breadwinner?
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What household chores and parenting duties will the breadwinner take on?
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Does the lead parent want to take on part-time work, volunteer work or further education so they can re-enter the workforce at a later stage?
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When are we going to re-evaluate this arrangement?
Talking about this with your partner might feel awkward - but it’s better than finding yourself in a situation you didn’t want to be in. And while these can feel like big decisions, they don’t need to be set in stone. Keep these conversations going because as the demands of parenting and careers evolve, so will your family’s balance between paid and unpaid work.