The sleep deprivation experienced by parents when a newborn arrives not only frazzles their nerves, but can also seriously harm their bank balance, a new study suggests.

Researchers from the London School of Economics (LSE) found that when parents are frequently worken by babies they are less likely to hold down a job, more likely to work shorter hours and consequently earn less than before the birth.

In fact, just one hour less sleep each night can reduce household income by up to 11 per cent, say the study authors, with the impact accumulating with more time spent awake.

Dr Joan Costa-Font, Associate Professor in Political Economic at the LSE, said new parents should factor in the lower earnings when they have children.

“Lack of sleep is responsible for human fatigue, and can undermine economic performance,” said Dr Costa-Font who presented the research at the Royal Society of Economics annual conference in Bristol on Wednesday.

“Sleep is often overlooked in economics models despite its obvious restorative effects on human health alongside its influence on brain plasticity and feelings of well-being.

“Having children reduces productivity and I think parents and government should factor this in, and hence they need to be compensated for it make it worthwhile.