Does subsidized care for toddlers increase maternal labor supply? Evidence from a large-scale expansion of early childcare

Abstract

Expanding public or publicly subsidized childcare has been a top social policy priority in many industrialized countries. It is supposed to increase fertility, promote children's development and enhance mothers' labor market attachment. In this paper, we analyze the causal effect of one of the largest expansions of subsidized childcare for children up to three years among industrialized countries on the employment of mothers in Germany. Identification is based on spatial and temporal variation in the expansion of publicly subsidized childcare triggered by two comprehensive childcare policy reforms. The empirical analysis is based on the German Microcensus that is matched to county level data on childcare availability. Based on our preferred specification which includes time and county fixed effects we find that an increase in childcare slots by one percentage point increases mothers' labor market participation rate by 0.2 percentage points. The overall increase in employment is explained by the rise in part-time employment with relatively long hours (20-35 hours per week). We do not find a change in full-time employment or lower part-time employment that is causally related to the childcare expansion. The effect is almost entirely driven by mothers with medium-level qualifications. Mothers with low education levels do not profit from this reform calling for a stronger policy focus on particularly disadvantaged groups in coming years.

Center-Based Care and Parenting Activities

“…Further, there are decreases in housework and sometimes other activities (leisure and sleep) that presumably would have been done during time with the child had it been at home. This is consistent with evidence that mothers use day-care to take up paid work (Müller and Wrohlich, 2020) instead of multi-tasking child care and housework. The lower maternal education group, looking at mothers and fathers together, has a similar reduction in housework but a statistically larger reduction in leisure time during center hours.…”

“…Parenting activities (and housework), therefore, are carried out to a much larger degree by mothers despite a slight narrowing of the gender gap since the 1990s, as illustrated in appendix Figure B2. Consistent with the 'primary-male-breadwinner' model, evidence shows that the roll-out of center-based care, as described above, had an employment effect for mothers but made no difference for fathers (Müller and Wrohlich, 2020). In addition, parenting activities (in minutes per day) exhibit a strong upwards time trend for both mothers and fathers, which is broadly comparable to that found in other countries (Dotti Sani and Treas, 2016).…”

Parental Leave Reform and Long-Run Earnings of Mothers

“…Thus, not only did this group experience cuts in their benefit entitlements, but these mothers did also not benefit in terms of medium-or long-term labor market outcomes. This result is particularly relevant against the background of other recent family policy reforms such as the expansion in subsidized child care that have also been shown to benefit primarily mothers with medium or high socioeconomic characteristics (Müller and Wrohlich, 2020). If family policy wants to target lowincome families, the parental leave benefit scheme should be reformed, for example by increasing the earnings replacement rate and, thereby, the financial benefit for parents with below-median earnings.…”

Parental labour supply responses to the abolition of day care fees

“…Its relevance for maternal labour supply is well-established in the literature (see e.g. for Germany Müller & Wrohlich, 2018). We carefully address two potential threats to our identification in the robustness section: First, the substantial expansion of publicly subsidised day care for children below the age of three (e.g.…”