As part of the American Families Plan, the Biden administration has proposed investing in childcare and capping childcare spending as a share of family income. But the price tag is big—an estimated $226 billion. That raises the question: How important is childcare to the economy?
Decades of research has documented the labor supply boon that comes from additional childcare availability: the introduction of kindergarten in the United States; the expansion to a five-day school week in France; the increase to a full day for kindergarten in Chile (PDF); the increased subsidy for childcare in Germany; and many others. These studies have found that the more affordable and accessible care is, the more mothers work or earn. The United States currently has limited childcare investment in the form of subsidies to very low-income families, but even those have large impacts on work hours for the recipient mothers.
In short, policymakers have long had evidence that childcare enables mothers to work. What the COVID-19 pandemic taught everyone is how the lack of childcare can be a disastrous constraint.
At the peak of quarantine efforts, nearly 90 percent of K–12 schools in the United States closed for in-person instruction. At the end of the '20–'21 school year, 25 percent were still closed. Estimates vary on how many day cares and preschools shuttered, but the number of workers in childcare cratered 36 percent initially and is still down 9 percent.
The more affordable and accessible childcare is, the more mothers work or earn.
Share on TwitterThe effects of those closures have been felt even after businesses began to reopen. Figure 1 shows the change in labor force participation for four groups: men and women 18–55 years old with and without children in their household. All four groups experienced deep labor force declines in April 2020 and recovered some last summer. They've all been stuck at various lower levels of participation ever since.
Figure 1: Labor Force Participation Rates (age 18–55) With and Without Children in Their Household
| Date | Men with children | Women with children | Men without children | Women without children |
|---|---|---|---|---|
| Jan-20 | 0.00 | 0.00 | 0.00 | 0.00 |
| Feb-20 | -0.23 | -0.31 | 0.24 | 0.33 |
| Mar-20 | -0.81 | -1.27 | -0.20 | -0.75 |
| Apr-20 | -4.30 | -4.33 | -3.63 | -4.38 |
| May-20 | -2.59 | -3.42 | -3.00 | -3.22 |
| Jun-20 | -1.20 | -1.70 | -1.80 | -1.74 |
| Jul-20 | -1.14 | -1.20 | -1.08 | -1.56 |
| Aug-20 | -1.59 | -2.33 | -0.50 | -2.08 |
| Sep-20 | -1.79 | -3.18 | -1.12 | -1.72 |
| Oct-20 | -1.37 | -1.91 | -0.66 | -1.02 |
| Nov-20 | -1.63 | -2.35 | -1.39 | -1.20 |
| Dec-20 | -1.56 | -2.16 | -1.80 | -0.64 |
| Jan-21 | -1.45 | -2.55 | -1.38 | -1.69 |
| Feb-21 | -1.13 | -2.52 | -1.66 | -1.45 |
| Mar-21 | -0.92 | -1.92 | -1.73 | -1.82 |
| Apr-21 | -1.20 | -2.03 | -1.57 | -2.83 |
| May-21 | -0.99 | -2.37 | -1.44 | -2.42 |
Source: Author's analysis of Current Population Survey
To further examine the relationship between childcare and labor force participation, it's possible to zoom in on just households with children. What's happened to men and women with multiple kids? Or younger kids?
To settle the noise in monthly estimates, Figures 2 and 3 show the difference in labor force participation between January 2020 and spring 2021 (an average of January to May). The more kids in the household, the larger the decline in labor force participation—and it's worse for women. Women with one child had a decline in the spring that averaged 1.2 points lower than their level in January 2020, but for two kids that was 2.5 points, and for three kids, it was 3.9 points. Notably, men with three children also saw a significant decline of 2.1 points.
Figure 2: Total Change in Labor Force Participation Rates (age 18–55) Between Pre-Pandemic 2020 and Spring 2021 by Number of Children in Their Household
| One Child | Two Children | Three or more Children | |
|---|---|---|---|
| Men | -0.8 | -0.9 | -2.1 |
| Women | -1.2 | -2.5 | -3.9 |
Source: Author's analysis of Current Population Survey
Figure 3 shows the same households and time frame but sorted by the age of the oldest child. The largest labor force declines—3.3 points—are for women with a 2- to 7-year-old at home. Figure 3 shows something else interesting as well: Women with children younger than 2 saw an increase in participation, and men in that group saw the largest declines. This could speak to the labor market effects of being able to work from home with a newborn for those who typically take a leave from work (women) or typically don't (men), but more research is needed to understand what the changing rates could be attributed to.
Figure 3: Total Change in Labor Force Participation Rates (age 18–55) Between Pre-Pandemic 2020 and Spring 2021 by Age of Oldest Child in the Household
| 13-17 Years Old | 8-12 Years Old | 2-7 Years Old | 0-1 Years Old | |
|---|---|---|---|---|
| Men | -1.1 | -1.2 | -0.6 | -1.8 |
| Women | -2.7 | -1.8 | -3.3 | 1.1 |
Source: Author's analysis of Current Population Survey
Overall these figures suggest that the greater the childcare need, the larger the labor force decline, particularly among women. These aren't new constraints, of course. U.S. women's labor force participation has been stagnant since 1999—in no small part because the cost of childcare is incredibly high, and subsidies for it are so limited and unevenly disbursed.
The greater the childcare need, the larger the labor force decline, particularly among women.
Share on TwitterWhat the pandemic arguably has altered is the potential gain from investing in childcare. Labor force participation is lower now across all workers, but especially among women with children. There is ground to recover as well as room to grow.
Another lasting effect may come from how vividly the pandemic revealed the widespread consequences of the lack of childcare. A parent who stops working reduces the income of their family—but they also leave an employer and a national labor force in need of workers. In January 2020, the childcare debate was centered on the mothers it enabled to work. By January 2021, childcare was an issue for the economy writ large, making that $226 billion an investment not in a sliver of the population, but in all of it.
Kathryn Anne Edwards is an economist at the nonprofit, nonpartisan RAND Corporation and a professor at the Pardee RAND Graduate School.
