A Study on the Effectiveness of Childcare Subsidy

Abstract

The purpose of this study is to evaluate the effect of the expansion of childcare subsidy in 2012 on labor participation and birth intentions of women. In 2012, the government expanded childcare subsidy from the lower 70% of income bracket to the entire households with children aged 0 to 2 years and 5 years. However, despite the rapid increase in investment in childcare, critics argue that the impacts on womens labor participation and the fertility rate, which are the objectives of childcare policy, are not obvious. Thereby, this study was conducted by analyzing the difference in difference of mothers work status and the intention to give birth between mothers who are eligible for the free childcare service and those who are ineligible before and after 2012. The data of 2009 and 2012 National Childcare Surveys were used to compare the differences before and after the expansion. Womens characteristics such as age, education, and disability, and households characteristics such as income, assets, the number of children, number of infants, and whether the grandparents cohabit or not were used as covariates. The results of this study are summarized as follows: the expansion of childcare subsidy in 2012 was not effective on the policy goals. First, the expansion has a negative impact on womens participation in labor, especially those with children aged 0 to 2. Second, the expansion has an insignificant impact on womens intention of giving birth. The results of this study suggest that it is necessary to differentiate the level and method of policy intervention for each target group or to set short-term and more measurable policy goals instead of labor participation and fertility rate of women. In addition, comprehensive social policy interventions, such as reducing work hours at the workplace, securing work-family compatibility, and equalizing family roles, will be needed in addition to efforts to improve the quality of childcare service to provide reliable services to whom that need the service.