The rising cost of childcare

As countries continue to emerge from the Covid-19 pandemic, parents around the world are returning to office working. At the height of the pandemic many nurseries were closed and parents were juggling remote working with childcare at home. Despite the rise of hybrid working patterns, parents increasingly need to budget for the cost of nurseries for children below school age. With the cost-of-living crisis affecting all parts of life, the cost of childcare is no different and ECA’s latest Childcare survey showed that average nursery costs are now 5% more expensive globally than in 2021.

What is causing increases in nursery fees?

Nursery costs are being affected by many of the same market forces prompting price increases for most goods and services around the world. Staff shortages after the pandemic led to wage increases to try to attract new nursery workers, with inflationary pressures on workers’ incomes leading to further pay rises. Spikes in energy prices following Russia’s invasion of Ukraine have added to the overheads faced by nurseries. Many nurseries include items such as nappies and baby food in their fees, which have also seen significant price increases over the past year. With central banks in many countries turning to increases in interest rates to try to tackle high inflation, some landlords have had to raise rents and many nurseries’ premises costs are rising. 

Because of the global nature of the pressures on nursery fees, our latest Childcare survey saw that price rises were not restricted to any particular region. Some of the highest fee increases were seen in Saudi Arabia, a country where female economic participation is growing and adding to demand for childcare. Significant increases were also seen in Austria, where it is common for meals to be included in nursery fees. With food inflation at such a high level, this has had a disproportionate impact on the all-inclusive fees charged by Austrian nurseries. In South America, a shortage of places and long waiting lists have contributed to high fee increases in Brazilian nurseries.

Childcare costs span a wide range

The average annual cost of full-time childcare is USD 12 771 globally. However, childcare fees can vary considerably from country to country. In some, it is common for both adults in two-parent households to work full time and so demand is high for nursery facilities that are open year-round for over nine hours a day, with annual fees higher than for nurseries with shorter opening times. The ratio of childminders to children can also vary between countries. In some countries there will be four children per childminder at most, whereas the ratio may be higher in other countries, having a significant impact on a nursery’s wage bill. Sometimes nursery fees will include the cost of meals, nappies and snacks, whereas other nurseries will expect parents to provide these supplies themselves. 

The United States tops our latest childcare rankings where average annual costs are a staggering USD 39 817, 6% higher than the previous year. At the other end of the scale, the cheapest childcare can be found in Sweden, where nursery fees are typically less than USD 1 900 per year. This disparity highlights the main driver of differences in costs: government subsidies. Whereas childcare facilities in the States receive almost no government assistance, heavy subsidies are common in many European countries where nursery fees are capped. These caps may be based on the parents’ income or a maximum percentage of the actual costs incurred by the nurseries themselves.

Childcare support for international assignments

ECA’s latest Benefits for International Assignments Survey showed that 22% of companies provide some form of assistance with childcare for children below mandatory school age in the host country, compared to 77% of companies providing support for international school fees. However, childcare provision is becoming more common, with more dual income households and a growing trend for single-parent families going on assignment, and assisting with childcare costs can make a real impact on the success of an international posting .

Organisations may wish to support assignees by contributing to the cost of nannies and individual childminders. In countries where fewer suitable nurseries are available, in-home childcare is often a more affordable alternative.

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