Female Participation
Child care provision

Public provision of daycare facilities for children has both an immediate impact on mothers' ability to take paid work and a long-term effect on their earning power; so policies to subsidize child care may have significant effects on the economy as a whole. Europe displays a wide range of such policies, which are associated with striking variations in the rates at which mothers of young children take paid work. A high commitment of a nation's mothers to employment has so far always been associated with public commitment to daycare.
In Discussion Paper No. 600, Research Fellow Heather Joshi and Hugh Davies construct illustrative estimates of women's lifetime earnings, with and without children, for France, Western Germany, Sweden and the UK, using country-specific evidence on the factors that determine women's employment participation and the effects of previous employment on wages. Their simulations of typical female earnings paths in these countries indicate that a woman with two children will forgo 57% of her gross earnings after age 25 in the UK, 49% in Germany, 16% in Sweden, and 1% in France (if she remains on the continuous employment track). These differences reflect contrasts in these countries' subsidies to child care. In the standard UK case, forgone lifetime earnings amount to £224,000 for a woman earning £9,000 at age 24. They also calculate the counterfactual earnings of a UK mother of two if child care facilities are provided according to `French', `German' and `Swedish' models. Extending care to part-time cover for the two years before the younger child goes to school, as in Germany, increases lifetime earnings by only £5,000; implementing `Swedish' policies lasting 17 years adds some £129,000 to her lifetime earnings; while the French variant with just a two-year break from employment raises her earnings by £191,000.
Joshi and Davies conclude that mothers' earnings in the UK will not benefit substantially from increased child care provision unless this includes support while children are of school age as well as earlier. Long-term gains in women's earning power would further augment the immediate gains when child care is provided, and these effects have been ignored by evaluations of child care policy to date. Such gains would be modest if the woman were only able to exercise her skills in part-time jobs of the UK variety when her children are older; but better child care provision would support higher levels of female employment and better preserve mothers' skills for the employment market. This would enhance women's contribution to economic performance, help to reduce their dependence on other sources of income and lessen their vulnerability in event of family breakdown.

Child Care and Mothers' Lifetime Earnings: Some European Contrasts
Heather Joshi and Hugh Davies

Discussion Paper No. 600, January 1992 (HR)