New research examines which of these two approaches produces the best outcomes for children.
Paid parental leave and subsidised childcare are key family policies across developed countries, aimed at increasing female labour-force participation and facilitating a better work-life balance for young parents.
In the context of ageing societies, restrictive migration policies and pronounced labour shortages, it is vital to support parents—both mothers and fathers—in the labour market through such policies. But arguably an equally important consideration for society is the impact of paid parental leave and childcare subsidies on children’s development.
Are they equivalent or does one produce better outcomes for children? Are children affected differently, depending on their socio-economic background? We analyse these questions in a new report.
Long-run consequences
Investments in early childhood, particularly before the age of three, can be especially valuable, as this is when the brain is in its most critical phase of development. Additionally, skill acquisition is a dynamic and self-productive process. Put simply, early skills facilitate the learning of additional skills. Through this, the early years of a child have long-run consequences for school performance, health outcomes and, beyond that, the labour market in later years.
In high-income countries, more children than ever are attending formal institutional childcare. Scandinavian countries were the forerunner by providing formal care for infants and toddlers from the 1960s and 70s, but other countries have followed suit over recent decades.
This has been accompanied by a change in social norms, reflected by a large drop in the number of respondents to the European Values Study agreeing with the notion that pre-school children suffer when their mother is working. In fact, childcare can be an essential tool for enabling parental employment, particularly when other forms of care are not available.
Broader evidence base
Over the past two decades, fuelled by the increasing availability of large-scale data and the use of sophisticated statistical tools, the evidence base on the effects of paid parental leave and formal childcare on child development has broadened substantially, allowing us to draw some general conclusions and provide recommendations for policy-makers.
Perhaps unsurprisingly, it has been found that the mode of the alternative to parental care matters greatly. When other care arrangements for children are informal and unregulated, expansions of parental leave tend to have positive effects on child development, as evidenced in studies from Austria and Norway. Long-run outcomes considered are test scores in school, health measures and even labour-market outcomes, measured many years after parental-leave expansions took place.
No such positive effects of expanding parental leave are found however in contexts where children would instead have had access to high-quality childcare, such as in Denmark or Sweden. The effects of parental leave on child development generally depend on the age of the child and the length of the leave period. But when alternative care arrangements are informal the evidence points overall towards positive effects mostly materialising in the first six months. If parental leave is expanded under other circumstances, other justifications are demanded beyond positive effects on children’s development.
Benefits of formal childcare
A concern often raised about formal childcare is that it may be detrimental for children as they experience fewer one-to-one interactions in childcare institutions in contrast to parental (mostly maternal) care at home. Children may however learn a different set of (social) skills when attending childcare and this type of care can be complementary to parental care.
Evidence from settings with high-quality childcare, with a high staff-to-child ratio and qualified care staff, provides little support for the idea that childcare is generally detrimental to children. In fact, children coming from more disadvantaged backgrounds (measured by parental education, household income or migrant origin) tend to benefit disproportionately from attending childcare at younger ages.
Universal childcare can help promote equality of opportunity and be a public investment with high returns for children and society as a whole. Children from affluent backgrounds are commonly affected much less in their development but tend also not to be hurt by it. Childcare holds the promise to promote maternal employment and at the same time reduce inequalities in child development by socio-economic background.
Childcare does not however always produce positive or neutral effects and, in some settings, negative effects on child development have been identified. These studies commonly stem from contexts where indicators of quality in institutional childcare are poor by international comparisons. Expanding childcare rapidly at the expense of providing a high-quality service is thus likely to be a bad deal for children and may have negative effects on children at a crucial point in their development.
Policy recommendations
A tentative policy recommendation from the recent evidence is to provide paid parental leave for at least six months. This enables parents to take time off work when their child is very young, benefiting both parents and children.
High-quality universal childcare enables both parents to return to employment subsequently if desired, reducing socio-economic inequalities in child development. If there are insufficient qualified childminders available, however, it may be sensible to extend paid parental leave, as low-quality childcare or other informal care arrangements can negatively affect children’s long-term outcomes.
Mothers still take a large share of parental leave, even in systems that are de jure gender-neutral, allowing parents to divide the total leave available freely. Parental leave designated for fathers is increasingly being implemented in several countries. In August 2022, the EU directive granting fathers some parental leave directly after childbirth and beyond came into effect. The effects of leave taken by fathers on children’s development will be fascinating to observe in the coming years.
This first appeared on the EUROPP blog of the London School of Economics
Nabanita Datta Gupta is a professor of economics at Aarhus University.
Jonas Jessen is a postdoctoral researcher at IZA, the Institute of Labour Economics, in Berlin.