Economists Michael Baker, Johnathan Gruber and Kevin Milligan have just produced a remarkably important research study.
We all know about the studies (here, here and here) that show that Quebec’s $5 a day child care had really significant positive impacts on women’s labour force participation. The employment rate of Quebec women went from substantially below the rest of Canada to substantially above. The fixed, predictable parent fee removed a major barrier to mothers’ employment.
And Pierre Fortin and his colleagues (here) have given us good reason to believe that these increases in women’s employment generated by predictable parent fees brought in enough additional tax revenue to more than pay for the costs of the child care program.
But this paper by Baker, Gruber and Milligan goes farther and deeper than that. This paper uses Labour Force Survey data and anonymized tax records to:
- Show that the short term rise of about 9% in mothers’ employment generated by the Quebec program stayed at a permanently higher level, rather than being temporary. Most of this employment was full-time
- Show that over time mothers who were affected by the child care program had incomes that grew much faster than they otherwise would have, as a result of their attachment to the labour force and not losing skills when their children were young
- Show that there is a substantial fall in family poverty in the childbearing years
- Show that the program was particularly important for those without a university education – the policy did not provide a significant employment boost to those with university degrees but had a consistently strong effect on mothers with lower levels of education.
- Confirm that even if we only consider income taxes and social benefit savings, Quebec’s $5 a day child care reforms generated enough government tax revenues to pay for the costs of the program (or very close). Earlier work had calculated that the short run fiscal return to governments was nearly 40% of the program cost. These new results show that the fiscal return over the lifetime of those mothers affected by the program is approximately enough to cover the total cost (between 75% and 117% of the total cost depending on what discount rate is used in the calculations).
Our Carney government needs to hear this message. Most provincial and territorial governments are telling him now that the current federal commitment of money to this program – about $8 billion per year – is too small to keep it alive for the next five years. Some are talking about leaving the program altogether or changing it dramatically to make parents pay more. It makes no sense to ditch a social program that helps hundreds of thousands of Canadian families, raises employment, raises women’s earnings, and increases tax revenues sufficiently to pay for the program.
But there is more in this study that the federal government should hear. One way of viewing the results of this study is to focus on the message – “Universal child care can pay for itself!”.
But, a second way of viewing these results is that there is strong evidence here that universal child care dramatically improves women’s lives for the better.
As many of us know, having children tends to have strong negative effects on women’s labour market outcomes, but not on men’s. This has come to be called the “motherhood penalty”, or sometimes the “child” penalty. For example, Canadian economists have found that, even ten years after a birth, mothers’ earnings are typically 34.3 percent lower than they were before birth, and on average nearly 15 percent fewer of these mothers are employed. That’s a huge motherhood penalty.
But, the research in Baker-Gruber-Milligan paper shows that Quebec mothers who benefited from its universal $5 a day child care program in the early 2000s had much higher earnings later in life as a result. This earnings impact was progressive, reaching an average of 27% by the time these mothers reached age 50.
So, not only did Quebec’s child care program more or less pay for itself, it also dramatically reduced the motherhood penalty that Quebec women faced throughout their lives. If that’s not a good news story, I don’t know what is.
And what it means for our government is that the investments they make right now in child care will make mothers’ lives better and family incomes higher for years and years to come. It sounds to me like the Canada-Wide Early Learning and Child Care program is just the kind of Major Project that Prime Minister Carney should be investing in. And while many of the Major Projects being discussed appear to be somewhat male-oriented, this one dramatically helps women to overcome the barriers that hold them back in the workforce.