Further evidence the Government overestimate day-care demand

The Government is funnelling significant funding to creche facilities, with the hope that more mothers will enter the workforce. The policy ignores the fact that many parents don’t want to put their children into day-care and it also ignores a new study which shows that subsidising day-care might not have much impact on parental choices.

Career breaks have consequences on future employment and earnings so, what households are likely to be responsive to a change in childcare prices? A new study by Dr Helene Turon, a reader in Economics at the University of Bristol, shows that additional resources in childcare does not lead more women to work outside the house as there are many other motivations, besides cost, behind their choices. One of those motivations will be to stay at home with their children in the early years. In other words, they don’t want to go into paid work so why should cheap day-care induce them to?

The study relies on data coming from the British Households Panel Survey and covers the period 1991-2008.

The study concluded that “the only households who are really likely to be responsive to a change in childcare prices are those for whom the net cost/benefit of supplying labour is close to zero.” This means cases where a parent going out into low-paid work won’t make much difference to household income unless day-care is very affordable.

“All others will value their current choice much more than the alternatives and will not react to a change in the childcare policy”. That is, those who don’t wish to put children into day-care.

Dr Turon presented her research to the Economic and Social Research Institute (ESRI) claiming that other factors, rather than childcare prices, would encourage more mothers to go back to work. Such factors could be less peer pressure from other parents to avoid day-care, or the perception of an improvement of the quality of childcare. “We get a sense that many households are in fact very far from changing their mind and no amount of childcare policy is going to change their decision”, she said.

It this is the case, the government choice to subsidise childcare at the expense of other options is not only unjust but also inefficient, as it will not achieve what it aims at.

Repeated surveys have confirmed that only a minority of parents wish to put their children into daycare. An Amarach poll commissioned by the Iona Institute found that only 17% of parents with children under five pick day-care as their preferred option.

CSO data found much the same thing.

(A submission by The Iona Institute to the Joint Oireachtas Committee on Children concerning day-care can be found here.)