Childcare Availability Allows Mothers to Increase Working Hours and Affects Family Income Distribution
Research
Childcare provision is the most frequently suggested measure to mitigate the “child penalty” for mothers, who often bear financial losses after having a child, usually in the form of declining incomes. The pay gap between men and women begins to widen after the birth of the first child. The differences in pay result in major consequences for lifelong labour earnings and pensions as well as a higher risk of poverty for women. ZEW economist Michaela Slotwinski and a team of researchers examined this relationship more closely. The lack of daycare places is perceived to be the greatest obstacle preventing mothers with small children from working at all or working more hours and is the reason why family incomes often decrease after the birth of the first child.
“We observe that the women’s income decreases by around 70 per cent after the birth of their first child. When municipalities introduce childcare services, the child penalty decreases by approximately 4.5 percentage points,” explains Michaela Slotwinski from the ZEW Research Department “Social Policy and Redistribution.” When they have access to childcare facilities, mothers work more hours and achieve higher earnings. This positive effect is particularly pronounced among households at the bottom of the income distribution, where the drop in earnings due to maternity is 11.2 percentage points less when childcare places are available.
Childcare provision does not eliminate the child penalty
“At the same time, our data also show that childcare provision cannot prevent a decline in income for families with a child. Even if parents have access to childcare facilities, their joint income decreases by around 20 per cent,” explains Michaela Slotwinski. “Childcare provision does, therefore, not eliminate the child penalty.”
When families have access to daycare places, the low contribution of mothers to the family income increases, on average, from ten to 13 per cent. For families whose household income lies below the median, this share also rises to 13 per cent; however, these mothers contribute only seven per cent to the family income if they do not have access to childcare.
Households whose income lies below the median see a more pronounced effect
“Even though mothers tend to contribute only a minor amount to the family income, daycare at least allows them to remain active in the labour market. We observe a particularly pronounced effect for families whose household incomes lie below the median,” explains Slotwinski. “For families without access to daycare, fathers’ contributions to the household income increase significantly immediately after the child is born. This is most likely due to the fact that they increase their working hours or take up a new job. When parents have access to childcare, this effect decreases by 8.4 percentage points.”
The reason for this is that mothers can contribute more to the family income if their children have the opportunity to go to daycare or a childminder.
“If we want to provide mothers with the opportunity to work more hours, childcare offers are indeed a sensible instrument – also with regard to the risk of poverty and old-age provision,” says ZEW economist Slotwinski, commenting on the results of the study. “Our results also show, however, that the availability of childcare offers alone cannot improve the overall financial situation of families.”
The research method
The research team investigated the effects of childcare provision based on data from Switzerland for the period 2001–2015. To examine these effects, the researchers made use of a natural experiment in the canton of Bern. While almost none of the municipalities offered childcare when the experiment started, 59 of 401 municipalities introduced childcare services in the period under consideration. Another 26 municipalities had already offered childcare before the experiment began.