Caution Urged in Government Childcare Policies: Insights from UNH Research

Loris Rubini

As countries consider addressing childcare challenges for working parents, new research from the University of New Hampshire (UNH) urges caution regarding potential government interventions to finance the cost. In a study published in the Journal of Economic Dynamics and Control, Loris Rubini, an associate professor of economics, highlights the unintended consequences of Chile's government-mandated childcare policy.

Rubini’s research, focusing on Chile, reveals that women are financially better off without a mandated policy. Instead, they benefit more from an income tax spread across the entire workforce. This finding serves as a reminder that assisting with childcare costs is complex and involves tradeoffs.

“Whenever we consider these policies, we need to figure out the costs and who pays for them,” says Rubini. “There could be costs for some groups more than others.”

Chile's policy mandates firms with over 19 female employees to cover childcare expenses for the first two years of a child’s life. This policy led to unintended consequences, including hiring discrimination and lower wages for women. Firms often shifted employment opportunities away from women to men and from younger women to those beyond childbearing years. Additionally, some firms offered lower wages to women because of disproportionate childcare costs.

Rubini developed a model of Chile’s economy to simulate the impact of removing the childcare policy. The results showed significant improvements in economic well-being for most women, including a 3% wage increase for women of childbearing age and over 3% for women with less than primary education.

Chile is now considering replacing the mandate with a 0.1% labor tax to spread childcare costs more equitably. Rubini's research suggests that a 0.29% labor tax could cover nearly all childcare costs and increase household economic well-being by 13%.

Read the full article to explore Rubini’s research findings and their implications for childcare policy.