Investing in subsidized childcare to reduce poverty

Abstract

Expanding childcare is often considered as a suitable way to enhance employment opportunities for mothers with young children as well as to reduce child poverty. In this study, the authors critically investigate this assertion by simulating a set of scenarios of increasing subsidized childcare slots and mothers’ employment. For a variety of European welfare states, the impact on poverty and on the government’s budget is estimated using the European microsimulation model EUROMOD. The findings suggest that to achieve significant poverty reductions among young children, both additional childcare slots and increased mothers’ employment should be well targeted. The expenditures for additional childcare slots can to a large extent be recovered by the government receipts generated by the additional employment; however, there appears to be a trade-off between the extra revenue that can be generated and the extent of poverty reduction.

A review of model-based scenario analysis of poverty for informing sustainability

“…Microsimulation models were usually used to analyze the impacts of economic and climate changes on poverty. A tax-benefit model EUROMOD, a form of microsimulation model, was applied to analyze the impact of subsidy reform policies on finances, income distribution, and poverty risks (Fuchs et al, 2017), and simulate a set of scenarios of increasing subsidies for childcare and mothers' employment and estimate their impacts on child poverty (Hufkens et al, 2020). The impact of climate change on household-level poverty by 2030 was assessed by combining the physical impact assessments of climate change in various sectors with a global database of household surveys in 92 countries (Hallegatte and Rozenberg, 2017).…”

Microsimulation of Child Benefits: A Review of Studies

“…To estimate the impact of these services on the income distribution, researchers must upgrade the model with additional policies. Hufkens et al (2015) undertake this process by using EUROMOD for the calculation of the fees paid by parents for "early childhood education and care" (ECEC) services, which usually depend on the parents' income. The difference between the total value of ECEC services (measured as the cost of their production) and the fee paid by the parent equals the "net subsidy".…”

“…The "net subsidy" appears as the main component in the analysed benefit package. Hufkens et al (2015) calculate concentration coefficients of the packages and their components, showing that the "net subsidy" has a concentration close to zero and is sometimes negative, i.e., it strongly reduces income inequality. In contrast, maternity and parental benefits have high positive concentrations in some countries (e.g., Belgium), which is not surprising because the amounts of these benefits depend on earnings, which constitute the largest segment of family income.…”

“…Furthermore, tax credits (both central and regional) give more to higher-income families. Hufkens et al (2015) Benefit incidence EUROMOD; Belgium, Estonia, Greece, Hungary, Italy, Sweden, United Kingdom (2009) maternity and parental benefits; home child care allowances, "early childhood education and care" (ECEC) services; tax reductions on the ECEC services Poverty: FGT(α=0); Income (re)distribution:…”

“…, Cantó et al (2014), Hufkens et al (2015) FGT(α=0,1) Immervoll et al (2000), Sutherland & Piachaud (2001), Corak et al (2005), Figari et al (2011), Levy et al (2013), Popova (2013), Salanauskaite & Verbist (2013), Popova(2016)FGT(α=0,1,2)Levy(2003),Matsaganis et al (2007),Levy et al (2009),Salanauskaite and Verbist (2009), Avram & coefficients for taxes and benefitsMatsaganis et al (2007),Hufkens et al (2015) …”