Childcare Can Increase the Labor Force
This is not a bad idea. It is one issue long over due and needed if we are to attract more people into the Labor Force. It should be government sponsored to cut the costs of it.
To Increase the Supply of Workers, Our Economy Needs Childcare, Roosevelt Institute, Mike Konczal
Tuesday February 23, the Department of Commerce announced the CHIPS for America Funding Opportunity. This action is a part of the bipartisan CHIPS and Science Act designed to rebuild the semiconductor industry in the US. My colleague Todd N. Tucker gave a rundown of the innovative safeguards and incentives that are included here.
Though it’s just one piece of an overall set of requirements, “applicants requesting Direct Funding over $150 million must submit a plan to provide their facility and construction workers with access to child care.”
As the “CHIPS for America Fact Sheet” notes:
This first-of-its kind commitment will also be essential to getting people and especially women, into the workforce. A recent review of research on childcare costs and women’s labor supply found that a 10 percent decrease in the cost of childcare leads to a 0.5 to 2.5 percent increase in maternal employment. The effect is even stronger for mothers with lower incomes. If women participated in the labor force at the same rate as men, there would be more than 10 million additional workers. Making it easier for women to join the workforce will therefore be critical to the success of individual projects and of the program as a whole.
An additional argument for why this requirement is especially important for our current economy:
While labor force participation has recovered quickly to 2019 levels since the beginning of the pandemic, levels were already too low and declining in 2019 (and in 2007, before the Great Recession). Strong demand, by itself, is not solving this problem. Instead, for the economy to continue to grow, we need policies boosting labor force participation.
There has been a remarkable recovery in the labor market over the past two years: At 3.4 percent, the unemployment rate is the lowest it’s been since the 1960s. The labor force participation rate also provides evidence for the quick recovery (PR is still off by 7 tens of 1% in 2020). Employment-to-population ratios have returned to near where they were before the pandemic, for all groups of people. For some groups, notably Black men, the rates are even higher than they were before the pandemic.
Simply returning to 2019 levels is not good enough. Recently, there has been a big debate among Federal Reserve economists over “missing workers” (who largely turned out to be in their 70s). This debate ignored one group of people from which we know many workers are missing: women.
Our social policy does not give people (in particular women and parents), the support they need to work jobs. Women’s labor force participation increased steadily throughout the 20th century, until it hit a ceiling of 60 percent starting in the late 1990s. It has since declined slightly. This level is well below peer countries, many of which offer more social services designed to help families and workers.
And for further context, Figure 2 shows the age distribution of employment-to-population across age groups in 2022.
Needed are policies continuously boosting labor force participation rates. Though it is possible, demand will pull people into the labor force. Government support in childcare can facilitate the process. Including myself, many people, hoped the demand alone would cause higher increases in labor force participation and reversing the decades of stagnation and declining rates. After two years of higher openings-to-unemployment ratios and other measures of a high labor demand, the increases in labor force participation should also be higher.
Just as we need physical infrastructure like roads to get workers to factories, we need social infrastructure such as childcare supporting workers, too. And just as any individual firms will have an incentive to try to compete away workers from peers in an already tight labor market, coordinating firms to increase participation overall is an important labor market move. Solving these kinds of investment and coordination problems is where the government plays an important role.
As our nation moves to build things, it is important to remember that supporting families is essential to expanding the supply side. As Treasury Secretary Janet Yellen argued in coining the term “modern supply side economics” in January 2022 to describe the Biden administration’s economic approach:
“Labor supply has been a concern in the United States even before the pandemic . . . The lagging labor force participation rate is driven in large part by a combination of factors that disincentivize work, such as inadequate paid leave and high childcare costs.”
Childcare is exactly the kind of thing getting lost in a narrow focus on supply chains and materials. Sponsoring childcare is one of the things we know matters for workers and especially mothers.
Why make it complicated? Go back to a more generous Child Tax Credit. Heck, make it even more generous for under 7 years-old. Give the potential customers more money when they might need childcare the most, but let customers and providers work out specific arrangements. Since most UBI experts claim folks use money pretty wisely, simpler to trust families. And for folks who decide that homecare is their preferred approach, fine, their choices are just as valid as other families’.
And just exactly why do we need to increase the supply of cheap labor?
I don’t know for sure that generations of kids who think “mother” is the TV is the corner of the “child care” room is harming the rest of us, but I really don’t think an army of women who would rather be raising their kids (someting we used to think was important) sitting at assembly lines or serving bad hamburgers is improving my standard of living.
n.b. it may well be that some women really need the jobs, but if I am going to subsidize them I would rather require a higher minimum wage or straight welfare as we knew it, than to subsidize their employers ability to offer a non-living wage.
shocking, of course that all those missing workers were over seventy. we’ve got to do something about that. I know: lets cut social security to incentivize them to keep working at mindless jobs making money for their boss.
I think you hit the nail squarely. Don’t think the intention is to greatly increase labor supply, but to make lower paying jobs more survivable. At the same time some see it as an opportunity to provide tax funding to childcare interests they believe align with them politically. I don’t pretend that giving customers more money via tax credit won’t benefit the same interests, but not doing so directly can help keep them working competitively. It’s a different to try to win business from customers that happen to have an extra $5000/child available than to just get that money directed to you. You might also think the current situation is not so bad really. Parents choose what makes the most sense. High-cost childcare in exchange for income opportunities below a certain level might not make sense. So find lower cost childcare (grandparents frequently) or more potential income or do parental care.
Echoing coberly a bit. If you actually look at working age charts, you see that “activity rate” is increasing and at the highest level ever. I don’t want to increase the labor force for people who should be enjoying retirement.
Home care should be a valid solution. My mom brought up four kids and went back to work in her forties. Clearly, however, my anecdote is not visible in the data as there is no increase in EPOP for females as they get past child-rearing age. Why is that?
Well the story wasn’t really about what’s good for kids, more about how to get mom to accept a job that is barely worth it for her if she buys childcare to do it. Just guessing but maybe Walgreens (just an example) have found their pay is kind of $5/hour short of what makes sense to a lot of moms (a few dads possibly, too), but is $9/hour short of pulling a lot of healthy, reliable 67 year-olds in for 25 hours a week. Mom needs some income, but retirees might be more exacting as to what they are willing to exchange their time for. Sounds not so nice, you get what you pay for and if you find some pretty old workers who will work cheap, maybe it won’t be so great. Might work for a church or that kind of employer, where people sense something more than a paycheck is involved.
This is interesting. Particularly Figure 2.
Is labor force participation for 55+ increasing because better health and fewer physically demanding jobs allows people (who like their jobs) to work longer, or does it indicate that more people are finding that they are not prepared for retirement?
This is a bit chilling:
Sadly I have more questions than answers.
Number of people 75 and older in the labor force is expected to grow 96.5 percent by 2030: November 4, 2021
This is BLS data and includes everyone over 65. The linls are there.
Same data, so same question.
An increase for 75+ is only good if they want to be working. I know a few who do. (They control how much they work.)
my comment was lost. clicking “post comment” brought up an ad I did not need to see.
too bad, the comment covered soe points relevant to the general insanity of government policies to “grow the economy” at the expense a livable life for people who have to work for a living. but i bet you can think of your own examples.
a little troubled about the ads overriding the comments at AB, however.
Dale:
I am not detecting any spam or virus that would take a comment. Sorry it was lost.
Run
see if this appears.
this thread printed two of my comments, the last one saying that my second comment disappeared. i note the “manage your subscriptions message appears here.