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The Impact of Publicly Funded Childcare on Parental Well-Being: Evidence from Cut-Off Rules

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Abstract

As more and more countries consider expanding public childcare provision, it is important to have a comprehensive understanding of its implications for families. This article adds to the existing literature by investigating the effect of publicly funded childcare on parental subjective well-being. To establish causality, I exploit cut-off rules introduced following the implementation of a legal claim to childcare in Germany. The results suggest that childcare provision strongly increases the life satisfaction of mothers who were previously constrained by the lack of childcare supply. The effect is more pronounced for mothers with higher labour market attachment. The coefficients for fathers are smaller and not statistically significant. As potential mechanisms, a wide range of time-use and labour market outcomes are explored. This shows that mothers indeed shift time from non-market activities to formal work in response to childcare eligibility, resulting in direct and indirect pecuniary and non-pecuniary returns to maternal life satisfaction. The findings shed light on key issues of work–family reconciliation and stress the importance of considering subjective well-being measures in family policy evaluations.

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Fig. 1

Source: SOEP v31, own calculation

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Notes

  1. Some even argue that subjective well-being measures are the best available proxy to utility—a concept central to economic research (see Frey and Stutzer 2002, for a survey).

  2. Besides being a crucial indicator for how parents think and feel about their lives, parental subjective well-being also constitutes an important mechanism through which child well-being and development is affected (Berger and Spiess 2011; Minkovitz et al. 2005), in particular by influencing the quality and quantity of parental investment within the home environment as well as family formation and stability (Guven et al. 2012; Aassve et al. 2016; Luppi 2016). Thus, when examining the impact of public childcare on child development, it is crucial to take into account parental well-being as a potential pathway.

  3. Note that all well-being effects identified in this paper are short-run effects. There is an ongoing debate in the well-being literature whether policies can change well-being in the long run (e.g. Diener et al. 2009; Kőszegi and Rabin 2008; Dolan and White 2007). However, it is beyond the scope of this paper to address any long-run or general equilibrium effects.

  4. Bauernschuster and Schlotter (2015) and Schlotter (2011) were the first to exploit these cut-off rules as a source of exogenous variation in childcare attendance to study labour supply responses and the impact of childcare on child development.

  5. There is also a small literature on the impact of informal care arrangements on the well-being of the extended family, e.g. Brunello and Rocco (2018) show that informal childcare has detrimental effects on grandmothers’ and grandfathers’ mental well-being in Europe.

  6. One interpretation of the authors for the negative findings is the so-called second-shift effect (Hochshild 1989), which means that mothers are induced to enter the labour market in full-time employment but still bear the brunt of housework and childrearing after formal care ends. The extent to which mothers struggle with this double burden and the extent to which the increased amount of disposable income benefits the well-being of parents depend on their characteristics.

  7. One reason why no private market ever emerged—despite the supply side shortages and severe childcare rationing—is the strict regulatory requirements set by the government of the federal states, including strict hygiene and health standards as well as strict requirements regarding the premises, quantity, and quality of personal (see Bildungsserver 2017).

  8. In Germany, administration, organization and legislation of culture—including education and care—fall within the competences of the federal states. This means that every federal state has to draft and finance its own laws and regulations for early childhood education and care, school education, and the university system.

  9. By 2005, public expenses on childcare amounted to more than 11 billion Euro, most of it spent on operational expenses. This number is more than doubled than that spent in 1991 (Statistisches Bundesamt 2014).

  10. I refer to the father as the current partner of the mother who is living in the same household. It does not necessarily have to be the biological father of the child.

  11. In principal, life satisfaction is a latent variable that cannot be observed directly, which makes it common to ask survey respondents to grade their life satisfaction on an ordinal scale (Schroeder and Yitzhaki 2017). Assuming cardinality of this ordinal variable imposes several assumptions, e.g. all respondents interpret the question in a similar way, the distance between items in terms of the latent underlying variable is equal.

  12. Most children stay in formal childcare once they start attending it, i.e. dropping out of formal childcare or longer absent periods are very rare in Germany (Büchner and Spiess 2007).

  13. Note that time-invariant characteristics, such as migration background, education, gender of the child or potential disorders, are automatically controlled for by including individual fixed effects.

  14. One concern with the variable is that the question is not clearly stated. There is some bunching at 12 and 24 h, indicating that some parents consider 24 h as the maximum, while others consider 12 h of childcare per day the maximum. This has to be kept in mind when interpreting the results. However, I conduct several sensitivity estimations, all yielding qualitatively and quantitatively similar results.

  15. Note that the estimated coefficients are remarkably similar to those obtained by Bauernschuster and Schlotter (2015) and Schlotter (2011), even though a different model and sample is used.

  16. The administrative data on childcare attendance rates were collected in 4-year intervals, i.e. in 1994, 1998 and 2002. I imputed the missing data by assuming a linear growth in childcare attendance rates. Slightly changing the imputation method does not change the estimated coefficients. The years after 2002 are dropped from the analysis since the categories collected in the administrative data were changed and, thus, are not comparable to previous years.

  17. The adaptation theory says that that individuals habituate to life circumstances very quickly (“hedonic treadmill”) or adjust their well-being aspiration to the utility that they experience (“aspiration treadmill”). Thus, people adjust to major life events (almost), fully returning to the initial baseline level of well-being.

  18. These additional results can be obtained from the author upon request.

  19. Another potentially important mechanism is child development. Under the assumption that parents have an altruistic utility function, i.e. they derive utility from the development of their children, childcare attendance could have either detrimental or beneficial effects on the well-being of parents, depending on how children are affected by being cared for in formal childcare. Indeed, information from the Families in Germany (FiD) data set shows that, during 2010–2013, child development is the most important reason (stated by 64% of parents with 3-year-old children in formal childcare) for parents to send their child to formal childcare, followed by employment related reasons (stated by 15%) and leisure time arguments (stated by 8%). In addition, it might be important how parents feel about sending their child to formal childcare; i.e. the pure perception of whether they think that childcare will harm or benefit their child might have an additional effect on their subjective well-being. One important factor in that respect is childcare quality. The same logic applies to social norms or pressure; i.e. in Germany maternal care during childhood was long thought as ideal, deviating from it might induce maternal guilt, thus decreasing their well-being. However, due to data restrictions it is not possible to take into account child development or norms as a potential pathway.

  20. This might be particularly important in Germany since women have high educational attainment despite their low labour force participation and, thus, might wish to achieve their full labour market potential.

  21. Occupational change is another potential mechanism. However, in Germany, in general, and in this study’s specific sample, changing occupation is rare (less than 10% of mothers report an occupational change).

  22. Unfortunately, information on different free-time activities (e.g. civic engagement, exercising, meeting with friends) is only available for a few years in the SOEP data. Thus, I can only consider the amount of free-time, rather than provide a more differentiated analysis by taking into account the specific type of free-time activity.

  23. For completeness, I conducted a standard mediation analysis. As expected, including time use, income, and employment as explanatory variables in the regression decreases the coefficient on childcare attendance and makes it insignificant.

  24. However, the results are not sensitive to alternative specifications, e.g. assuming that the maximum amount of childcare is 24 h, suggesting that the individual fixed effects already control for most of the systematic measurement error. Standardizing time use for each individual by taking the fraction of time spent on the respective activity relative to the maximum amount of time stated also does not change the conclusion.

  25. These additional robustness checks can be obtained from the author upon request.

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Acknowledgements

Thanks to participants of the ESPE conference 2017, the VfS Annual Conference 2017 and EALE conference 2017. I am also grateful to C. Katharina Spieß, Vaishali Zambre, Aline Zucco and Adam Lederer for helpful comments and suggestions. All errors are my own.

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Schmitz, S. The Impact of Publicly Funded Childcare on Parental Well-Being: Evidence from Cut-Off Rules. Eur J Population 36, 171–196 (2020). https://doi.org/10.1007/s10680-019-09526-z

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