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At a lunchtime meeting on 26 February, Heather Joshi presented the results of recent research on the potential economic benefits of increasing child care provision in the UK. Joshi is a Senior Lecturer at the London School of Hygiene and Tropical Medicine, a Senior Research Fellow at City University, London, and a Research Fellow in CEPR's Human Resources programme. Her remarks were based on her CEPR Discussion Paper No. 600, `Child Care and Mothers' Lifetime Earnings', written jointly with Hugh Davies. Financial support for this research was provided by the Joseph Rowntree Foundation and by the UK Economic and Social Research Council, which also provided funding for the meeting as part of its support for the Centre's dissemination programme. The views expressed by Ms Joshi were her own, however, and not those of the above organizations nor of CEPR, which takes no institutional policy positions.Joshi maintained that 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 work patterns of mothers with young children. In the UK and its immediate neighbours (Germany and the Netherlands), it is customary for mothers to take one long break from paid employment after the birth of the first child and return to work (often on a part-time basis) when their children reach school age. There are two distinct patterns of more-or-less continuous participation by mothers in European labour markets. In Scandinavia, almost all mothers take `long-hours', part-time employment (equivalent to four days per week), for which they are paid full-time hourly rates. In contrast, South European countries (including France) exhibit a marked polarization between women who remain in full-time employment and those who leave the labour force often even before they become mothers and never return. These patterns are clearly associated with differing patterns of child care provision, and a high participation of mothers in employment is always associated with public commitment to daycare. Such an association cannot prove cause and effect, but many mothers in the UK claim that lack of adequate child care provision constrains their participation in paid work. Joshi reported the results of illustrative estimates of lifetime earnings for women with two children, for France, Germany, Sweden and the UK based on country-specific assumptions about the factors that determine women's employment participation and the effects of their previous employment on pay. Most mothers in the UK break their employment record completely for several years until all their children are at school; this gap significantly reduces their earning power when they re-enter the labour market. Joshi's simulations of typical earnings paths indicated that a woman with two children (at ages 25 and 28) will forgo 57% of lifetime earnings after age 25 some £224,000 in the UK, 49% in Germany, 16% in Sweden, and only 1% in France (if she remains on the continuous employment track). These differences reflect, among other things, contrasts in these countries' subsidies to child care. Joshi also reported calculations of the counterfactual earnings of a UK mother of two if child care were available on the same basis as in the comparator countries. Extending care to part-time cover for the two years before the younger child goes to school, as in Germany, increases her lifetime earnings by only £5,000; implementing `Swedish' policies, with better part-time earnings for mothers during both pre-school and school years, adds some £129,000 to her lifetime earnings; while the `French' variant with just two twelve-month breaks from employment before returning to the same full-time job raises her earnings by £191,000. Unlike many estimates of the benefits of child care provision, these figures incorporate not only the immediate gains when child care is provided but also longer-term gains in women's earning power, which may be substantial. Indeed, some 59% of the increase in a UK mother's lifetime earnings as a result of applying `German' child care policies accrues after her children are too old to benefit directly from the policy change, as does 22% of the increase with both `Swedish' and `French' policies. Such gains will remain modest, however, if women can only exercise their skills in part-time jobs of the UK type when their children are older; but better child care provision would support higher levels of female employment and better enable mothers to maintain and augment their skills for the employment market. 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. Joshi also reported the results of recent work by Sally Holtermann on the costs of providing child care of various qualities. A comparison of these results with her own indicated that the resource costs and benefits of applying German-type policies in case of this British mother would be broadly similar; but implementing French or Swedish policies would allow her earnings to increase by at least twice the costs of even the `high-quality' variants of the corresponding child care policies. In conclusion, Joshi stressed that child care provision and education should be viewed as part of an integrated policy to develop the human capital of both children and mothers. Learning does not begin at school, and the need for child care does not begin at school age. In most countries with extensive child care facilities, the original motivation to provide it arose from a recognition of the needs of young children rather than their mothers. Evidence from the rest of Europe clearly indicates that staying at home with young children for an extended period, as is common in the UK, is not the only way for mothers to combine parenthood with employment. The provision of child care both to the under-fives and to children of school age will enhance women's human capital and hence their contribution to economic performance, reduce their dependence on other sources of income and reduce their vulnerability in the event of family breakdown. |