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Maternal employment: the impact of triple rationing in childcare

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Abstract

This paper analyses how maternal labor supply relates to the availability of childcare services in Flanders, a region that has a fairly abundant service provision, but does not offer a service guarantee as in several Nordic countries. Variation in price/quantity bundles that stems from the interplay of three types of childcare services are used to identify mothers’ labor supply responses. The estimates indicate that policy measures which increase the availability may exhibit large labor supply effects. Moreover, budgetary simulations suggest the expansion of subsidised care services to be beneficial to the exchequer.

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Notes

  1. See Herbst (2010) for a more recent study on labor supply effects on childcare costs for the US.

  2. Note that the part-time nature of demand for childcare does not warrant a simple equation of the coverage rate with the employment rate of mothers. In effect, a full-time childcare slot may cover for more than one child. As a rule of thumb, the Flemish childcare authority ‘Kind en Gezin’ assumes in its planning exercises that a full-time slot can cover the demand of 1.2 children.

  3. We use the Flemish Families and Care Survey (FFCS) data for these estimations. This dataset is described in detail in Sect. 5. It should be noted that, to obtain maximum reliability, estimation was done on the largest possible dataset (N = 870), representative of all types of households with small children in Flanders, thus including single parents households and households with an unemployed father. The table, however, reflects only the couple households of the target population of this paper.

  4. As a sensitivity analysis, we looked at the percentage of parents experiencing supply to be restricted, when taking other limits than 50 %. If we take 30 %, the percentage of parents living in such a situation drops to 2.5 %. This number raises to 4 % when taking 40 and 11 % when taking 60 and 19 % when taking 70 %.

  5. In contrast to Van Soest (1995), we have chosen not to include alternative specific constants as it is relatively hard to give a meaningful interpretation to these constants in terms of preferences.

  6. In order to keep the extended labour supply model relatively simple, we have assumed that preferences only differ across individuals by observed heterogeneity. As such, we neglect household specific heterogeneity which is unobserved (Hansen and Liu 2011). We assume that all unobserved effects are captured by the stochastic term \(\epsilon _{i,j}\) of total household utility. Haan (2006) showed that relatively simple models of this kind tend to perform well in labor force participation predictions, which is also illustrated by our case (see below).

  7. Note that Eqs. 8 and 9 contain a normalizing factor \((1-p_{i}^{inf})\), which ensures that the sum of the weights for the formal care options to be \((1-p_{i}^{inf})\) and hence to complement the weight of informal care which carries a zero price.

  8. For more information about the FFCS, see Debacker et al. (2006).

  9. 195 households are dropped for reasons of programming in EUROMOD. 112 households are dropped because they either report hours worked or reported income, but not both.

  10. Not working equals the interval [0,10] h/week, part-time is equal to [11,25] h/week, 4/5 to [26,35] h/week and full-time reflects the interval [35,50] h/week.

  11. The empirical data of the FFCS support this assumption. Only 6 % of the parents with a child younger than three actually stated to be able to do without childcare services because they were using flexible working hours to organize care by themselves (Ghysels and Debacker 2007: 57).

  12. More information about Euromod can be found at https://www.iser.essex.ac.uk/euromod.

  13. Taste shifters in the preference for consumption were not significant and were therefore dropped from the estimation.

  14. Only the gross hourly wage of the mother is raised with 10 %, the gross wage of the father remains constant. When changing the monetary cost of childcare, both the cost of formal subsidized and non-subsidized childcare is increased with 10 %.

  15. Note that it is obvious that a 10 % increase in gross hourly wages leads to higher labour supply responses than a 10 % decrease in childcare prices as the change in the budget constraint is considerably higher in the former counterfactual. For full-time working mothers, raising her gross wage with 10 % raises, on average, the monthly disposable household income with 123 Euro. Raising the cost of childcare with 10 % diminishes, on average, the monthly disposable household income with 18 Euro. If we would decrease childcare costs by the same amount as the increase in wages, similar labour supply effects would be observed as both effects have a similar effect on the budgetconstraint of households.

  16. We assume that the supply of childcare is flexible enough to cover this limited increase in demand. However, we can not completely rule out that this reform also necessitates a slight increase in childcare capacity.

  17. As mentioned in chapter 3.4, we assume that parents experience labor inhibiting restrictions when they have a predicted probability of a childcare offer (any type) of less than 50 %. 7 % of the parents in our sample are in this situation. When taking another limit, e.g. 40 %, this amounts drops to 4%. Looking at the impact of our results when taking this new limit, we notice a predicted labor force participation of mothers in the baseline of 83.5 %. Consequently, moving away from the standard tipping point in probability analysis (50 %) comes at a cost of a loss in predictive efficacy, keeping in mind that the observed labor force participation is 80.6 % and the prediction at 50 % is 81.5 %. Therefore, we maintain the 50% threshold in the main analysis. Yet, a sensitivity analysis regarding the use of other thresholds can be found in the online Appendix.

  18. A full day of formal subsidized childcare costs the government 20.65 Euro per month (in 2005 prices). This amount is based on internal information of ’Kind en Gezin’ and does for example not take into account the cost of new buildings. 1.0 million Euro/month might thus be an underestimation of the real governmental cost.

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Acknowledgments

We are grateful to the editor and two referees for their comments and suggestions that have greatly improved the present contribtion. Furthermore we acknowledge support from the participants of the IMPROVE workshop at CHILD in Turin, 1 October 2012, of the Microsimulation research workshop in Bucharest, 11–12 October 2012, of the PE-ETE seminar in Leuven, 15 November 2012 of the CSB seminar, 19 April 2013 and the 2013 EALE conference (September 2013). The usual disclaimer applies. We have benefited from financial support from IWT Flanders in the SBO-project ’FLEMOSI: A tool for ex ante evaluation of socio-economic policies in Flanders’.

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Authors and Affiliations

  1. Centre for Social Policy Herman Deleeck, University of Antwerp, Sint-Jacobstraat 2, 2000, Antwerpen, Belgium

    D. Vandelannoote & G. Verbist

  2. Centre for Economic Studies, KU Leuven, Naamsestraat 69, 3000, Leuven, Belgium

    P. Vanleenhove & A. Decoster

  3. TIER, University of Maastricht, Kapoenstraat 2, N-6200, Maastricht , The Netherlands

    J. Ghysels

Authors
  1. D. Vandelannoote
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  2. P. Vanleenhove
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  3. A. Decoster
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  4. J. Ghysels
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  5. G. Verbist
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Corresponding author

Correspondence to P. Vanleenhove.

Electronic supplementary material

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Supplementary material 1 (pdf 38 KB)

Appendix: Basic descriptives

Appendix: Basic descriptives

See Table 10.

Table 10 Descriptive statistics sub-sample
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Vandelannoote, D., Vanleenhove, P., Decoster, A. et al. Maternal employment: the impact of triple rationing in childcare. Rev Econ Household 13, 685–707 (2015). https://doi.org/10.1007/s11150-014-9277-2

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