Childcare is using your wage to pay someone else's wage to supervise your child – closing this macroeconomic loop helps us think more clearly about policy settings
Sep 11, 2023·edited Sep 15, 2023Liked by Cameron Murray
This is so interesting to read and thank you Cameron for stating some of the obvious .. by that I mean.. we are just shuffling paper from one side of the desk to the other and calling it 'an industry'..mmmm
I don't have children but I worked in the Admin side of a Kindergarten/Child Care centre for six months many years ago.
I'm not totally into this 'parent should stay at home' to look after the child*ren because I missed out by not attending kindergarten as my mother thought I didn't need it... yet 60 years later I wonder how much I would have benefitted, even just socially, if I'd had at least one day per week if not more by attending Kindergarten.
It turned out to be the most loving thing one parent could do for her child when she asked if there were any time slots/days for her child at the Kindergarten. She realised that, while being at home was a fantastic time and she enjoyed it, that her son actually needed to be around other children in order to be more social and develop (?) more.. Of course I was touched by this as my own childhood was mostly spent at home and not being social and being alone.. All these years later I wonder what my mother was actually thinking of then.. She cooked and cleaned etc., etc., but what was going on in her head!!... She did the best she could for those times but in the end I think it affected her as well socially...
But your post is about the 'swap', the macroeconomics and that I think is 100% important to be thinking about too...
I agree that socialising small children with other children is beneficial. I’m sure that families who don’t use childcare usually find other ways to socialise their kids. Maybe not always. But mostly.
Always thought that childcare was a bit messed so glad someone has done the econ on it! My view has been that any government spending on childcare ought to be more agnostic towards gender and work, but more for my own personal values: why wouldn't you want to spend time with your kid that you brought into the world? I think the biggest barrier to this would be political rather than economic, as I'm not confident that the electorate has the appetite for directly 'paying' other people to have kids. Why someone else getting paid for it is easier to stomach has always confused me.
The strange gender dynamic you describe is similar to the role of domestic helpers (maids) in Singapore who (as some claim) have played a huge role in enabling its relatively high progress in gender equality, the irony being that most of these workers are women themselves and get treated like shit.
Households working in the workforce for 80 hours a week rather than 40 also might also have some more perverse outcomes...
It appears the move for more childcare coincides with:
- rising rates of obesity (fewer home-cooked meals)
- more helicopter parenting because there aren’t plenty of adults at home keeping an eye on the streets
- more anxiety due to helicopter parenting and less free play
- less parental involvement in local community and schools
- higher rates of stress and depression
And it certainly does appear that more women in the workforce has also meant that the mother’s mother ends up with the money, not the mother -- what I mean is it appears much of the increase in household income bids up property prices, which is a perverse way of working women handing over their money to their parents in retirement.
Most research suggests that within a single society, children going to childcare tend to do better on the things you've described. Likely because childcare centres provide some of the things you've described, like cooked meals and spaces where kids can explore without constant supervision. If we take 2 working parents as the norm in society, the kids going to childcare are at least better off than the ones raised by the rare stay-at-home parents or ones with a constant nanny.
Granted, you can find just as much saying the opposite, but I lean on the side that says full-time childcare is by in large going to have a negative effect on kids.
IFstudies is an institute with the goal of promoting nuclear families, not really an impartial source. By far most research points towards childcare having mostly developmental benefits (as long as it is not of the lowest quality). Go to google scholar, and search for development benefits childcare, and you have to go down a bit before you run into articles that are primarily negative https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=benefits+childcare+development&btnG=
If we want mothers working (and I'm not convinced we do), an efficient thing to do would be setting up some stay at home mothers to look after 1 extra kid at their homes. The market rate of that would be far lower than the daycare thing, and it would be more convenient for dropoff and pickup, as well as making local friends, and it also would greatly reduce child swapping.
Yeah this issue is worth unpicking. When I've asked some relatives who work as paediatricians, teachers etc. the response I get is the literature shows how a certain amount of hours of child care is beneficial for children's development. There's also supposedly the idea that it's an egalitarian equaliser in the case of children from disadvantaged homes. And finally, the idea that more educated women with higher skills can go back to add that productivity while lower skilled child care workers do that labour.
The last one is ironic given the push to make the sector more educated and professionalised (i.e. more HECS debt), which drives up the costs for child care workers. And you would think higher skilled women could use their wage to pay the cost of lower skilled women and keep their premium (although perhaps the EMTRs gets in the way of that).
My intuition is maybe there are some merits to a certain amount of childcare subsidies up to a few days. But beyond this we would be better off just providing parenting payments. Especially when there is a capacity in many households for other relatives to help out with childrearing.
It'd be great if you could add someone who knows about community and human development in a post like this, rather than only rhetorically playing with your ignorance on the topic. To put this in perspective, historically and globally, it's clear that the idea of biological parents going it alone with their kids is an outlier, and some even argue rising mental health issues are related to this. Alloparenting, where lots of people help raise a child, seems to be one of the things that make us different from other apes. Plus, compared to apes, we humans are uniquely good at learning from our peers.
With that in mind, why would you want to switch from raising kids collectively to isolating children in nuclear families? It seems like that would take away some valuable experiences from kids and diminish the quality of their learning environments.
One of the big challenges of raising human kids is finding the right balance between socializing them and helping them become independent thinkers. If kids only hang out with their own parents, they will encounter less kids and adults in general, and of less diverse backgrounds. This reduces opportunities to learn and socialise. Think about it – which kind of society do you think would produce better-adjusted kids: one where children explore different situations in different settings, or one where children are constantly supervised by a single person?
And it's not just bad for kids; it's tough on parents too. Parents who go it alone are less likely to get help or have reference material to interpret their own kid’s development. A parent might not notice if their kid has developmental delays or is neurodivergent, which would at least mean adjustment to these factors are delayed. Dedicated childcare roles allow for the development of expertise, which then can be shared.
Getting rid of collective child-rearing setups, a thing childcare provides, would be a big loss for kids, parents, and wider society.
Sure, there are other dimensions to the question. But the policy debate seems to run on economic arguments, and the macroeconomic elements are rarely considered.
I agree that socialising children is important, and perhaps more so in 2023 with so much activity now online. But do we think that before the childcare industry that children did no socialise with others, with grandparents, with neighbours, etc?
I haven't argued to get rid of childcare. I have merely raised the question that if we are going to subsidise having someone else look after your child, why not also offer that subsidiy to looking after your own child? It's a more flexible approach that would suit many families I'm sure, without a macroeconomic loss.
Sure, in the blip of human history when people in the West were raising children in the nuclear family without childcare, the children weren't completely isolated. Family and neighbours do tend to come from similar socio-economic and cultural backgrounds. In addition, those neighbourhood and family ties have significantly diminished in the last decades. When I grew up practically everyone up to 2 streets down knew my name, now many cannot recognise the faces of the kids three houses down the street. There is no doubt in my mind that children raised at home will socialize significantly less than those at childcare.
The benefit childcare offers does partly rely on it being popular, if not the norm, and as such, I think it makes sense that the subsidies at least concentrate there. Half of the people dropping out can diminish the overall gains, as people will likely have to travel further to a daycare centre. Building friendships with children far away your child will never run into outside of daycare is not as useful as someone they will occasionally run into. I'm not against own child raising subsidy per se, but I find it hard to equate them as interchangeable or that they should be equal. From the child's and society perspective, they seem very different.
I think it makes more sense to just give parents a (Us term) Child Tax Credit. and let them outsource child care at some ages or not. One thing to consider about outsourcing is comparative advantage/opportunity cost of the parent's time. [I guess one might question as well the staffing ratios. Might not the optimal ratio depend on the physical set up of the center.]
Yes it is all stupid policy. The reverse of Pigou’s quip about a man reducing GDP by marrying his housekeeper. The Treasury is the enemy of the family… or the would be self sufficient family. The Treasury stupidly assumes neoclassically that the production of future taxpayers is fixed and does not realise what classical economists understood - that taxes on labour and families reduce GDP by reducing the supply of future useful labour. Fiscally forcing women away from having the babies they night like to have and nurture into the office is a foolish interference with free choice. Childcare subsidies and family payments should be turned into universal income splitting with children.
This is so interesting to read and thank you Cameron for stating some of the obvious .. by that I mean.. we are just shuffling paper from one side of the desk to the other and calling it 'an industry'..mmmm
I don't have children but I worked in the Admin side of a Kindergarten/Child Care centre for six months many years ago.
I'm not totally into this 'parent should stay at home' to look after the child*ren because I missed out by not attending kindergarten as my mother thought I didn't need it... yet 60 years later I wonder how much I would have benefitted, even just socially, if I'd had at least one day per week if not more by attending Kindergarten.
It turned out to be the most loving thing one parent could do for her child when she asked if there were any time slots/days for her child at the Kindergarten. She realised that, while being at home was a fantastic time and she enjoyed it, that her son actually needed to be around other children in order to be more social and develop (?) more.. Of course I was touched by this as my own childhood was mostly spent at home and not being social and being alone.. All these years later I wonder what my mother was actually thinking of then.. She cooked and cleaned etc., etc., but what was going on in her head!!... She did the best she could for those times but in the end I think it affected her as well socially...
But your post is about the 'swap', the macroeconomics and that I think is 100% important to be thinking about too...
I agree that socialising small children with other children is beneficial. I’m sure that families who don’t use childcare usually find other ways to socialise their kids. Maybe not always. But mostly.
Always thought that childcare was a bit messed so glad someone has done the econ on it! My view has been that any government spending on childcare ought to be more agnostic towards gender and work, but more for my own personal values: why wouldn't you want to spend time with your kid that you brought into the world? I think the biggest barrier to this would be political rather than economic, as I'm not confident that the electorate has the appetite for directly 'paying' other people to have kids. Why someone else getting paid for it is easier to stomach has always confused me.
The strange gender dynamic you describe is similar to the role of domestic helpers (maids) in Singapore who (as some claim) have played a huge role in enabling its relatively high progress in gender equality, the irony being that most of these workers are women themselves and get treated like shit.
As do stay at home mothers with lots of kids. My Mum and Dad raised lots of taxpayers for a useless ungrateful Treasury.
Households working in the workforce for 80 hours a week rather than 40 also might also have some more perverse outcomes...
It appears the move for more childcare coincides with:
- rising rates of obesity (fewer home-cooked meals)
- more helicopter parenting because there aren’t plenty of adults at home keeping an eye on the streets
- more anxiety due to helicopter parenting and less free play
- less parental involvement in local community and schools
- higher rates of stress and depression
And it certainly does appear that more women in the workforce has also meant that the mother’s mother ends up with the money, not the mother -- what I mean is it appears much of the increase in household income bids up property prices, which is a perverse way of working women handing over their money to their parents in retirement.
Most research suggests that within a single society, children going to childcare tend to do better on the things you've described. Likely because childcare centres provide some of the things you've described, like cooked meals and spaces where kids can explore without constant supervision. If we take 2 working parents as the norm in society, the kids going to childcare are at least better off than the ones raised by the rare stay-at-home parents or ones with a constant nanny.
Sure, two working parents is the norm, and I'm saying I think that's worse for parents and the kids than only one parent working.
And there is plenty of research showing that extensive childcare has bad effects: https://ifstudies.org/blog/measuring-the-long-term-effects-of-early-extensive-day-care
Granted, you can find just as much saying the opposite, but I lean on the side that says full-time childcare is by in large going to have a negative effect on kids.
IFstudies is an institute with the goal of promoting nuclear families, not really an impartial source. By far most research points towards childcare having mostly developmental benefits (as long as it is not of the lowest quality). Go to google scholar, and search for development benefits childcare, and you have to go down a bit before you run into articles that are primarily negative https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&q=benefits+childcare+development&btnG=
If we want mothers working (and I'm not convinced we do), an efficient thing to do would be setting up some stay at home mothers to look after 1 extra kid at their homes. The market rate of that would be far lower than the daycare thing, and it would be more convenient for dropoff and pickup, as well as making local friends, and it also would greatly reduce child swapping.
There are still family day care centres. I think it's a great model and it is also supported by subsidies (see the infographic in the post)
We used to have family day care
Yeah this issue is worth unpicking. When I've asked some relatives who work as paediatricians, teachers etc. the response I get is the literature shows how a certain amount of hours of child care is beneficial for children's development. There's also supposedly the idea that it's an egalitarian equaliser in the case of children from disadvantaged homes. And finally, the idea that more educated women with higher skills can go back to add that productivity while lower skilled child care workers do that labour.
The last one is ironic given the push to make the sector more educated and professionalised (i.e. more HECS debt), which drives up the costs for child care workers. And you would think higher skilled women could use their wage to pay the cost of lower skilled women and keep their premium (although perhaps the EMTRs gets in the way of that).
My intuition is maybe there are some merits to a certain amount of childcare subsidies up to a few days. But beyond this we would be better off just providing parenting payments. Especially when there is a capacity in many households for other relatives to help out with childrearing.
This guy gets it! Bring parents home!
One more thing you didn't mention is that a subsidy is worse than a wash in that it shifts incentives and sabotages comparative advantage.
A mom who earns little is incentivised (on the margin) to work for little money instead of providing childcare for her own children.
It'd be great if you could add someone who knows about community and human development in a post like this, rather than only rhetorically playing with your ignorance on the topic. To put this in perspective, historically and globally, it's clear that the idea of biological parents going it alone with their kids is an outlier, and some even argue rising mental health issues are related to this. Alloparenting, where lots of people help raise a child, seems to be one of the things that make us different from other apes. Plus, compared to apes, we humans are uniquely good at learning from our peers.
With that in mind, why would you want to switch from raising kids collectively to isolating children in nuclear families? It seems like that would take away some valuable experiences from kids and diminish the quality of their learning environments.
One of the big challenges of raising human kids is finding the right balance between socializing them and helping them become independent thinkers. If kids only hang out with their own parents, they will encounter less kids and adults in general, and of less diverse backgrounds. This reduces opportunities to learn and socialise. Think about it – which kind of society do you think would produce better-adjusted kids: one where children explore different situations in different settings, or one where children are constantly supervised by a single person?
And it's not just bad for kids; it's tough on parents too. Parents who go it alone are less likely to get help or have reference material to interpret their own kid’s development. A parent might not notice if their kid has developmental delays or is neurodivergent, which would at least mean adjustment to these factors are delayed. Dedicated childcare roles allow for the development of expertise, which then can be shared.
Getting rid of collective child-rearing setups, a thing childcare provides, would be a big loss for kids, parents, and wider society.
Sure, there are other dimensions to the question. But the policy debate seems to run on economic arguments, and the macroeconomic elements are rarely considered.
I agree that socialising children is important, and perhaps more so in 2023 with so much activity now online. But do we think that before the childcare industry that children did no socialise with others, with grandparents, with neighbours, etc?
I haven't argued to get rid of childcare. I have merely raised the question that if we are going to subsidise having someone else look after your child, why not also offer that subsidiy to looking after your own child? It's a more flexible approach that would suit many families I'm sure, without a macroeconomic loss.
Sure, in the blip of human history when people in the West were raising children in the nuclear family without childcare, the children weren't completely isolated. Family and neighbours do tend to come from similar socio-economic and cultural backgrounds. In addition, those neighbourhood and family ties have significantly diminished in the last decades. When I grew up practically everyone up to 2 streets down knew my name, now many cannot recognise the faces of the kids three houses down the street. There is no doubt in my mind that children raised at home will socialize significantly less than those at childcare.
The benefit childcare offers does partly rely on it being popular, if not the norm, and as such, I think it makes sense that the subsidies at least concentrate there. Half of the people dropping out can diminish the overall gains, as people will likely have to travel further to a daycare centre. Building friendships with children far away your child will never run into outside of daycare is not as useful as someone they will occasionally run into. I'm not against own child raising subsidy per se, but I find it hard to equate them as interchangeable or that they should be equal. From the child's and society perspective, they seem very different.
I think it makes more sense to just give parents a (Us term) Child Tax Credit. and let them outsource child care at some ages or not. One thing to consider about outsourcing is comparative advantage/opportunity cost of the parent's time. [I guess one might question as well the staffing ratios. Might not the optimal ratio depend on the physical set up of the center.]
We used to have tax deductions for children which recognised ability to pay, in effect additional tax free thresholds for dependant spouses and kids.
Yes it is all stupid policy. The reverse of Pigou’s quip about a man reducing GDP by marrying his housekeeper. The Treasury is the enemy of the family… or the would be self sufficient family. The Treasury stupidly assumes neoclassically that the production of future taxpayers is fixed and does not realise what classical economists understood - that taxes on labour and families reduce GDP by reducing the supply of future useful labour. Fiscally forcing women away from having the babies they night like to have and nurture into the office is a foolish interference with free choice. Childcare subsidies and family payments should be turned into universal income splitting with children.