Can parents afford to work? Childcare costs, tax-benefit policies and work incentives

Arbeitspapier

Childcare policies play a crucial role in helping parents reconcile care and employment-related tasks. This paper quantifies the net cost of purchasing full-time centre-based childcare in OECD countries taking into account a wide range of influences on household budgets, including fees charged by childcare providers as well as childcare-related tax concessions and cash benefits available to parents. Building on these calculations, family resources are evaluated for different employment situations in order to assess the financial trade-offs between work and staying at home. Results are disaggregated to identify the policy features that present barriers to work for parents whose employment decisions are known to be particularly responsive to financial work incentives: lone parents and second earners with young children requiring care. The results indicate that the cost of purchasing childcare services should be analysed in conjunction with other social and fiscal policies that affect family incomes. While childcare fees can be very high, high prices may not impede employment if tax-benefit systems incorporate well-balanced provisions that help parents pay for these services. Conversely, even highly subsidised childcare markets can leave parents with little financial gain from employment if high tax burdens or benefit claw-back rates give rise to adverse work incentives.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 1932

Classification and Topics

• Classification: Wirtschaft ; Household Production and Intrahousehold Allocation ; Fiscal Policies and Behavior of Economic Agents: Household ; Fertility; Family Planning; Child Care; Children; Youth ; Demographic Economics: Public Policy ; Time Allocation and Labor Supply
• Subject: childcare costs ; work incentives ; labour supply ; tax-benefit systems ; Arbeitsangebot ; Kinderbetreuung ; Familienleistungsausgleich ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Immervoll, Herwig ; Barber, David
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2006

Further information

• Handle: http://hdl.handle.net/10419/33515
• Last update: 10.03.2025, 11:45 AM CET