As countries around the world grapple with childcare challenges for working parents, new research from the University of New Hampshire (UNH) provides crucial insights into potential government interventions to finance these costs.
A study led by Loris Rubini, an associate professor of economics at the Peter. T Paul College of Business and Economics, highlights some unintended consequences of Chile's government-mandated childcare policy.
The Study and Its Findings
In the Journal of Economic Dynamics and Control, Rubini's research focuses on Chile and reveals surprising results: women may be financially better off without a mandated childcare policy. Instead, they benefit more from an income tax spread across the entire workforce. This finding is a reminder that helping with childcare costs is complex and involves tradeoffs.
Rubini emphasizes the need for careful consideration. “Whenever we consider these policies, we need to figure out the costs and who pays for them,” he says. “There could be costs for some groups more than others.”
The Unintended Consequences
Chile’s current policy requires firms with over 19 female employees to cover childcare expenses for the first two years of a child’s life. While this seems beneficial at first glance, it led to some unintended consequences:
- Hiring Discrimination: Firms began to favor hiring men over women.
- Age Discrimination: Younger women, particularly those of childbearing age, found it harder to get hired.
- Lower Wages: Women often received lower wages as firms tried to offset the higher childcare costs.
A New Approach
To better understand these effects, Rubini created a model of Chile’s economy and simulated the impact of removing the mandated childcare policy. The results were striking:
- Wage Increase: Women of childbearing age saw a 3% wage increase.
- Economic Improvement: Women with less than primary education experienced over a 3% wage increase.
Chile is now considering replacing the mandate with a small labor tax of 0.1%, aiming to spread childcare costs more fairly. Rubini's research suggests that a slightly higher labor tax of 0.29% could cover nearly all childcare costs and boost household economic well-being by 13%.
Conclusion
Rubini’s research underscores the complexity of crafting effective childcare policies. It highlights the importance of understanding the economic tradeoffs and potential unintended consequences. As countries look to support working parents, these insights can guide the development of more equitable and effective solutions.
For more details on Rubini's findings and their implications for childcare policy, be sure to check out the full article.
