Our latest working paper sets out to analyse the extent to which child related benefits offset the costs families make out of pocket for childcare, two policy areas that feature prominently in rEUsilience recommendations.
Our first area of interest was to what extent child-contingent benefits compensate for the out-of-pocket costs of formal childcare services at different income levels. Based on our newly introduced compensation ratio measure, we showed that the combination of child contingent benefits and out-of-pocket costs tends to be low-income targeted, in the sense that lower-income families pay lower fees for childcare and/or receive higher benefits. In Poland and Sweden, the out-of-pocket expenses for childcare tended to be lower (on average) across the income distribution than child-contingent benefits, whereas high-income families in Belgium and Spain paid more for childcare than they received as financial support.
Secondly, we asked to what extent child-contingent benefits compensate for the out-of-pocket costs of formal childcare services for different family types. Here, we found that generally (with the exception of Spain) families with more children receive higher child-contingent benefits relative to their out-of-pocket costs for childcare, compared to families with fewer children. In all the four countries studied here, single-parent families receive higher child-contingent benefits relative to their out-of-pocket costs for childcare, compared to two-parent families.
Finally, we asked to what extent child-contingent benefits compensate for the out-of-pocket costs of formal childcare services when families transition into paid work. Here, we found that, generally, the compensation ratio was higher for families on social assistance or employment at low wages, compared to families working at higher wages. This holds for single-parent families (with the exception of Poland) as well as two-parent families. Moreover, the extent to which the compensation rate was lowered with employment and at higher wage levels differed between countries, with the drop particularly notable in Belgium and moderate to absent in Poland. For average wage employees, the compensation ratio was lowest in Belgium compared to the other countries included here.
Examining child related benefits and what parent(s) contribute out of pocket for formal childcare services in context allows us to get a better picture of the interaction of these policy areas. An interaction which is essential when designing policies to improve the accessibility of childcare services for all families, in particular the most financially vulnerable families.
Read more here.