The wage cost of a lack of access to affordable childcare in Aotearoa New Zealand

Abstract

AbstractAccess to suitable and affordable childcare is a prerequisite for labour force participation for many mothers. We use data from the Growing Up in New Zealand longitudinal study to investigate how lack of access to childcare affects mothers’ work in New Zealand, a nation with high-quality but expensive childcare. We find many mothers whose young children are not in childcare due to a lack of access report being prevented from working by childcare access issues. However, just over a fifth of mothers whose children are not in care due to access issues do work, and some mothers whose children are in care still report they are unable to work due to childcare issues. By combining information on work status and reasons for not working with earnings data for working mothers of young children, we estimate New Zealand mothers with children under age three who are not working only because they can’t access childcare may be foregoing an average of $1,970 each per year. This equates to total foregone earnings of $116 million per year, presenting a considerable cost to the New Zealand economy.KEYWORDS: Affordable childcareaccess issuesmothers’ workforegone earningsGrowing Up in New ZealandSubject classification codes: J13J17J22 AcknowledgementsThe authors thank Deb Potter (Ministry for Ethnic Communities), Riripeti Reedy (Manatū Wāhine Ministry for Women), Fuatino Ma’anaima Soa-Lafoa’i (Pasifika Advisor), and seminar participants at Manatū Wāhine Ministry for Women for helpful feedback and discussion. This report uses Growing Up in New Zealand (GUiNZ) data collected by the University of Auckland. The data have been accessed and used in accordance with the GUiNZ Data Access Protocol. The views and interpretations in this report are those of the researchers and are not the official position of Manatū Wāhine Ministry for Women or NACEW.Disclosure statementNo potential conflict of interest was reported by the author(s).Notes1 We focus on the first three years because at the time of the data collection New Zealand children became eligible for 20 h of free childcare when they turned three. This is unlikely to entirely resolve access issues but is expected to reduce them.2 Throughout this paper, our focus is on mothers’ paid work and its relationship with childcare. For conciseness, we refer to this as ‘work’, while acknowledging that parenting is also real and valuable work, though unpaid.3 In November 2022, the government announced a substantial increase in the generosity of childcare support. This policy change is expected to decrease wages lost due to lack of access to childcare by making childcare more affordable, though the magnitude of the change is left for future research. The policy change is described in more detail in Section 2.4 This equates to about NZD$135 per capita, which is substantially higher than the NZD$22 per capita of wages foregone in New Zealand. However, Gould and Blair (Citation2020) use a different methodology to calculating foregone earnings, which likely contributes to the difference between our results.5 These are estimated proportions of the total New Zealand population.6 An improvement in access to childcare might induce more or different types of mothers to have children, which would affect calculations of the value of childcare access for future cohorts. Estimating such effects is beyond the scope of this paper.7 This cohort of mothers was affected by the Covid-19 pandemic, which we do not model. Our estimates can be considered to apply to a counterfactual cohort of mothers who had a child at this time, but were not affected by the pandemic.8 The sum of these values is greater than the 1,750 we estimate for the full population despite this not being a comprehensive list of ethnicity groupings because we categorise mothers using total response ethnicity.9 As a robustness check we additionally control for whether the mother was married, in civil union, or living with a partner antenatally. This makes very little difference to the results (not presented).10 We base counterfactual earnings on mothers’ education because of the available data this is the most discriminating in terms of earnings. Industry of employment is not collected in the GUiNZ survey, and occupation is not broadly collected in the data source from which the counterfactual earnings are drawn.11 GUiNZ does not contain information on childcare costs at 9 months, so we do not estimate counterfactual childcare costs at 9 months.12 Mothers can be expected to know their work situation and to generally report truthfully on it. However, their reasons for their work situation may be complex, and mothers may not fully understand the reasons behind their decisions at a conscious level.13 Along similar lines, the 2017 Childcare in New Zealand Survey found childcare not being available at the times it was needed was a common issue with childcare (Statistics New Zealand, Citation2018a).Additional informationFundingThis research was funded by Manatū Wāhine Ministry for Women and the National Advisory Council on the Employment of Women (NACEW), New Zealand.