Subsidizing Childcare Is Profitable For Governments

On April 7-8 Kyiv School of Economics organized the conference “Rethinking Gender: Economic and Social Cost of Gender inequality”. VoxUkraine talked to one of the keynote speakers of the conference, Michèle Tertilt, who presented the research paper “This Time It’s Different: The Role of Women’s Employment in a Pandemic Recession” (a brief version of this research was published on VoxEU). This paper is a part of a larger research project that investigates how the 2020 recession caused by the pandemics affected the labour market. When the first lockdowns were introduced in spring 2020, Dr. Tertilt and her co-authors immediately saw that it disproportionately affected women and decided to investigate this impact. 

This recession is quite unique. While previous crises were mancessions – unemployment among men was rising more than among women, the 2020 lockdowns caused a she-cession – unemployment of women rose 2.9 p.p. more than that of men (in US data). Not only employment but also working hours fell for women more than for men. The question which Michèle and her co-authors investigated was – what factors drove these results? They found that the occupations of women play an important role since more women work in service sectors which were hit most by the pandemic restrictions. Another important factor is childcare. Since schools and kindergartens were closed, this workload on women has greatly increased. This factor was more important for families with children of 5-15 years than for families with children under five – likely because many mothers of young children work only part-time. 

However, there is good news too. Dr. Tertilt thinks that this situation might have long-term positive impact on gender equality. In families where fathers can work from home while mothers should work outside, e.g. in healthcare (Dr. Tertilt estimates that there are about 10% of such families in the United States) fathers will learn to value time with their children more. Hence they are likely to be more engaged with their children beyond the pandemic. Such fathers can act as role models for other families and thus cause a change in social norms. Eventually, home responsibilities will be more equally split between men and women. This will not happen overnight (we talk about 10-15 years) and the transition will be uneven both between countries and within countries. The speed of change will also depend on the opportunities for telecommuting which are more abundant in advanced economies. The ability to telecommute gives mothers more opportunities to combine career and child raising and also allows fathers to be more involved into childcare, which in turn benefits working mothers

Which policies should governments implement to help families that suffered disproportionately during the current recession? Dr. Tertilt believes that governments should provide unemployment benefits not only to those who lost their jobs but also to those who voluntarily left their job to take care of children – especially single mothers or fathers. 

What other policies are favourable for gender equality? Dr. Tertilt argues that policies targeted to both parents lead to more gender equality in the labor market. For example, research shows that fathers that took “daddy months” (parental leave after births designated specifically to fathers) are more engaged with their children not only during this time but in all the subsequent years. So it’s advisable for the governments to provide equal opportunities for parental leave.

Another important policy is childcare. Governments need to subsidize it. The impact of this policy on public finance is likely positive since taxes paid by parents who are thus able to work more than offset spending on public kindergartens in most cases. At the same time, hiring a nanny is prohibitively expensive for many parents, especially if it is not tax-deductible as is the case in most countries

As for gender quotas, there are pros and cons. On the one hand, women in high positions can serve as role models for other women and girls. They can change stereotypes in the larger population. On the other hand, quotas can lead to stigmatization (‘we appointed you because you are a woman’). Empirical research shows that the effect of quotas differs by counties and depends on the social environment. For example, quotas for local politicians in India have been shown to lead to more women standing for and winning elections for chief village council. A different study analyzes quotas in candidate lists in Spanish local elections and does not find that the quotas increased the probability that women become mayors or party leaders.

Dr. Tertilt observes that studying gender has become more important in modern economic research. Previously gender research was considered a microeconomic topic and studied mainly empirically. Today other economic fields such as macroeconomics or finance are taking gender and families more seriously because what happens in families has implications for many other issues (for example, gender bias in the financial industry affects the distribution of credit and thus business development).