There has been a continued interest in the development of female participation in an Irish context. By European standards, Irish female labour force participation rates are lower than average European country rates . From a policy-making perspective it is important to understand the incentives and barriers to employment which exist for females in Ireland. Increasing female labour force participation is highlighted by the European Commission as important in meeting the Europe 2020 headline target of 75 percent of the working population employed (European Commission, 2018)
Research by Russell et al. (2009) identified four main factors affecting female labour supply at the individual level: expected earnings, the number and age of children, the presence and earnings of a partner and the tax-benefit system. (ESRI, 2016)
This report analyses the impact of childcare costs in relation to female participation rates in an Irish context. Irish policy will be compared and contrasted with Sweden. In pursuance of EU stability during this period of Brexit uncertainty, it is a matter of importance to ensure Irish females are incentivised to participate in the workforce to support the economy. A key concern in Ireland is ensuring all workers are motivated to actively partake in the labour market. Ireland currently has a younger demographic profile in comparison to other countries . (Eurostat,2017) The size and age structure of the population increases the demand for public services such as the provision of childcare. This paper will examine the supply-side constraints to women’s engagement in the labour force and the childcare implications on women’s decision to work. Concluding with recommendations for how the government can incentivise more women to enter the labour force.
The objectives of this paper are to:
? Examine trends in female labour force participation rates;
? Analyse the extent childcare costs is impacting on women’s decision to engage in the labour market;
? Compare Ireland’s childcare policies to other countries;
? Critically assess the effectiveness of Ireland’s policy around childcare as incentives to increase female participation rates.
? “The labour force participation rate is calculated as the labour force divided by the total working-age population”. (OECD,2018)
? In all EU countries, women’s labour participation rates are lower than men. (European Commission,2018) As at Q2 2018, the female participation rate stands at 55.7% while the male rate is 68.4% in Ireland. (CSO,2018).
? In ten years between 2006 and 2016 the gap in the labour force participation rate between men and women narrowed from 20.3 to 14.2 percentage points. (CSO, 2016) The gap between the two rates is continuing to narrow each year over the period 2008 to 2018
? In 2017, Irish female participation rates were lower than the European Union (EU-28), a difference of -1.6% however, the difference was more significant in relation to Swedish participation rates at -14.2% (Table 1).
? The growth of Swedish participation rates has been relatively constant over the period 1990- 2017, remaining one of the highest in EU-28.
Participation rates vary by age cohort;
• Participation rates are highest for Irish women in the age range 25-29 years compared to the EU-28 where the highest is the aged 40-44 years, this could be due to Ireland’s young age demographic. Young Irish females (25-29 years) are more likely to participate in the labour market than other European countries.
• The difference between participation rates is lowest in the age range 30-34 years.
• “More than half of women ascribe their inactivity in the labour market to care-giving and family responsibilities.” (OECD,2016)
• The likelihood of working full time drops notably among women with children compared to women without children. In relation to part time work, in some countries with relatively high female labour force participation rates such as Germany, the Netherlands, and the United Kingdom the effects of children are much smaller. This implies that women in these countries rather shift to part-time work than leave the labour market when they have children. (Eurostat,2018)
• The participation rate of lone parent females was lower than females in couples with children aged 0-5 years was in Q2 2017. An increased responsibility on females to carry out household duties acts as a barrier to participating in the labour force. Male participation rates are higher than female. (Table 3). The unequal division of household duties including child rearing is commonly presented as an indicating factor to explain why female participation rates are lower than those recorded for men.
• Access to affordable childcare is essential in supporting women in the work force, as it directly affects the implicit monetary value of women’s home production. (IMF 2016) The provision of affordable childhood education and childcare provides parents with options to make work-leisure decisions that fit their needs and also helps parents with young children to fully engage in paid work. Childcare supports in the form of childcare subsidies and public provision of childcare increases female labour force participation.
On average across OECD countries childcare costs claim roughly 13% of the disposable family income of a two-child full-time dual earner couple on moderate earnings. In Ireland the amounts charged to a single parent with two children can reach around 45% of disposable income. (OECD,2017) These high costs impact on the financial incentives to work, acting as a barrier to entering the labour force for second earners and single parents, primarily those with low potential earnings. OECD countries with the highest public spending as a share of GDP on child care and education services for children under the age of five have been found to have higher employment rates among mothers with young children. (IMF,2013)
The Department of Children and Youth Affairs (DCYA) total 2019 budgetary allocation showcases an increase of €89m to childcare bringing the total allocation to approximately €574m – an increase of 18% over 2018. (Budget.gov.ie,2018) However, childcare costs in Ireland for parents are among the highest in Europe and directly impact labour market participation. This is largely because in other countries, childcare costs are heavily subsidised. (Ibec, 2018)
For households with children, childcare costs can impose the largest additional cost with taking up employment. It is a barrier for families across a range of salary levels, in several cases the cost of childcare forced them out of the labour market as going back to work would make them financially worse off. These high costs can disincentivise second earners in a dual earning couple to enter the labour force, in the United Kingdom and Ireland where the childcare related costs represent more than 23% of net family income. (European Commision,2018)
2.3 Swedish Comparison
Sweden is among the countries with the highest state expenditure on childcare in the EU-28. (OECD,2017) Childcare in Sweden is aimed at children aged 1-5, almost entirely publicly provided and integrated in the educational curriculum. The lowest income families spend on average 13 % of their monthly income on childcare (taking both public and private care into account), which is almost twice the proportion of their income than their highest incomes (7%).Although childcare use is fairly evenly distributed, the lowest income-earner benefits almost twice as much from government subsidies as the highest because of their lower parental contributions and the absence of a system of tax deductions. (Lancker and Ghysels, 2012) In Sweden because all income groups have access to childcare places, this makes it feasible for all mothers to engage in paid employment.
Ireland exhibits relatively weak labour force participation for women. As Brexit approaches, it is a concern about securing the stability of the labour market. According to OECD July 2015 Ireland Economic Survey, spending on childcare has increased by 80% since 2015 with a further 7% planned for 2018. (OECD,2018)
The total number of child registrations on targeted programmes is 45,782, an increase of 37% on 2015/2016 levels. (Irish Government Economic & Evaluation Service, 2018)
3.2 Overview of Childcare Programmes
The DCYA existing programmes include the recently introduced universal childcare payment, a universal free pre-school programme (ECCE) targeted towards low incomes and individuals participating in education and training, in addition the introduction in Budget 2017 to provide Affordable Childcare Scheme. Most of the programmes offered by DCYA are targeted at specific cohorts rather than being available universally (Figure 3). One of the objectives of early year programmes is to enhance labour force participation, especially female participation rates. (Programmes” children and youth affairs, 2018)
This universal childcare payment was introduced in August 2017.This provision is to support parents/guardians who do not qualify for the childcare subsidies which are available on a targeted basis. This subsidy is granted to children aged between 6 and 36 months. On average, CCSU reduces childcare costs of up to €20 per week for full time childcare. (Irish Government Economic & Evaluation Service, 2018)
Community Childcare Subvention Plus (CCSP)
This targeted programme was introduced in 2016 which focuses on subsidising part of childcare costs for low income earner parents. It supports these individuals by reducing childcare costs at privately owned childcare services and participating community not for profit childcare services. (Department of children and youth affairs, 2018)
3.3 International Policies
Several EU-28 countries have implemented measures to address shortages in the supply of childcare places. Government policy-makers have introduced legal obligation for local governments to improve the availability of childcare services, by providing all children above a certain age with a place in formal care (Germany, Poland and the Czech Republic). In Germany, all children aged one or older are legally entitled to a place in E. As result of support from a continued programme of public investment, it has seen the number of children under 3 enrolled in public or publicly-subsidised care more than double over the past decade. (OECD, 2016)
There is policy focus on the involvement of both mothers and fathers in childcare, the provisions include childcare for parents who work, in education or for unemployed who are actively seeking work. Research has demonstrated Swedish women may experience more work-family conflict because they are more integrated in the labour market, they tend to work longer hours and hold more demanding positions in comparison with women in the Netherlands and Great Britain. In Sweden (51.0%) of all children aged less than three received formal childcare. (Eurostat,2018) Net Childcare costs is among the lowest in the OECD.
The Nordic idea of universal, institutionalised ECEC services is well established in legislation, which provides 3 hours per day of free pre-school for 1-5-year olds. In Sweden, municipalities must provide at least 15 hours of childcare per week to children over one. This obligation rises to full-time hours in cases where both parents are employed or in education. In Sweden municipalities have an obligation to provide childcare, however there is a cash benefit payable to parents of children under the age of three if they do not use the public childcare services. (Öun,2012) Likewise, Denmark operates a system whereby municipalities are obliged to offer all children older than six months a place in publicly-subsidised childcare. (OECD, 2016)
Section 4 – Conclusions and recommendations in Irish context
There is a variety of childcare programmes in place both universal and target in nature. With most programmes available for targeted groups of parents in contrast to Sweden. Sweden are setting a good example; positive results are evident through high female participation rates. However, policy-makers should consider the implications of universal provisions which can also have adverse effects on labour participation rates. Evidence of Ireland progressing towards Swedish policy is evident in the introduction of the Affordable Childcare Scheme .
In assessing the incentives to increase female labour force participation, the following recommendations to consider include;
Provisions to increase supply and affordability of places in ECEC, especially those aimed at very young children under the age of 3. The reduction of costs charged to parents by increasing subsidies for providers is essential for ensuring that ECEC remains affordable and that work pays for second earners and single parents. (OECD,2017)
Emphasis on reforms which target benefits for those women who work, provision of childcare subsidies for working mothers is necessary to encourage and retain female labour force participation without distorting labour market incentives.