EXECUTIVE SUMMARY Better Jobs and Brighter Futures: Investing in Childcare to Build Human Capital Amanda E. Devercelli and Frances Beaton-Day DECEMBER 2020 FOR MORE INFORMATION, THE FULL PAPER CAN BE ACCESSED AT: https://openknowledge.worldbank.org/handle/10986/35062 The full paper includes detailed annexes with additional research, guidance for countries and specific policy and country examples. Additional paper resources, including translated versions, a short video and blogs, can be accessed at: https://www.worldbank.org/en/events/2021/03/04/better-jobs-and-brighter-futures-investing-in-childcare- to-build-human-capital Executive Summary In this paper, we present the evidence on why childcare matters for building human capital, look at the current status of childcare provision worldwide, including an estimate of the global gaps in access and propose specific actions countries can take to expand access to quality, affordable childcare for all families that need it, especially the most vulnerable. This paper was originally drafted prior to the COVID-19 pandemic and has been updated to include new content, taking into account the unique challenges that the COVID-19 pandemic poses for families, children, governments and the childcare industry, as well as the importance of investing in childcare to drive countries' economic recovery. Scaling up families’ access to quality childcare has the potential to unlock pathways out of poverty, build human capital and increase equity - all of which are cornerstones of a country’s economic growth and productivity. Expanding quality childcare can yield multi-generational impacts by promoting equity and improving women’s employment and productivity, child outcomes, family welfare, business productivity, and overall economic development. OVERVIEW OF THE BENEFITS THAT ACCRUE FROM ACCESS TO CHILDCARE Benefits Short-term Long-term Higher female labor force participation Be er quality employment (higher income and productivity, be er job BETTER security, more formal sector opportunities) WOMEN'S EMPLOYMENT Increased confidence and empowerment for women Increased family income and investments that improve family welfare INCREASED FAMILY Increased school a endance of older siblings, especially girls, with reductions in early marriage and adolescent fertility WELFARE Improved school readiness Be er nutrition outcomes IMPROVED CHILD Be er education outcomes and lifelong learning DEVELOPMENT OUTCOMES Improved employment prospects and earning Increased economic growth and business productivity Increased tax revenue INCREASED PRODUCTIVITY AND ECONOMIC Reduced burden on government systems GROWTH (crime, health, etc) Though benefits are categorized into those that accrue to individuals, families and economies /societies, we recognize there is substantial cross-over between categories. EXECUTIVE SUMMARY 3 CHILDCARE: DEFINITION, TYPES OF CHILDCARE AND OTHER CLARIFICATIONS Quality care is essential for all children; as children get older, more formal early learning opportunities, including with other children, become more important More formal Quality Care learning opportunities Age 0 Transition to primary In this report, we refer to childcare as a service with the primary objective of caring for children while parents are working while ensuring children are safe and have opportunities to learn and develop positive relationships with caregivers and peers. Quality care is critical for all children, and as children get older they also need more formal learning experiences to help them prepare for primary school. Ages of children: This report covers children from Types of settings: Childcare can be provided in many birth up to primary-school-entry age. Sometimes, different settings and is called different things in a distinction is made between services for children different countries. Types of childcare tend to fall into below 3 years of age and children between age 3 three categories: home-based care, center-based care and improvised and unremunerated family and primary-school-entry age. Provision for these arrangements. different age groups may be provided separately due to differences in regulations, program design Home-based care: Broadly speaking, home- and children’s needs. Some countries, however, also based care falls into two types: (i) care by have approaches that cover children from birth up to someone in the child's own home who is primary-school-entry age in a single setting and/or sometimes called a nanny or au pair; (ii) have consistent regulation for the whole age range. childcare provided for a group of children in a caregiver’s home. Is preschool childcare? The primary objective of Center-based care: Centers providing care preschool is to prepare children for primary school for young children are generally called by supporting their cognitive, socio-emotional and daycares, nurseries or crèches. Preschools physical development, but the quality of care remains and kindergartens can also serve such a critical. Preschool can serve as a childcare solution, childcare function. though often it is only a partial solution for working Family and other informal arrangements: parents, if a preschool operates for a half-day only. These are arrangements that put the burden for care on a friend or family member. This could include taking the child to work or leaving the child with a neighbor, friend, sibling, grandparent or other relative. This type of care may or may not be remunerated. 4 Better Jobs and Brighter Futures: Investing in Childcare to Build Human Capital Children’s earliest years are a period of rapid and consequential development that lay the foundation for future life success; while family influence is critical during this period, many children spend substantial time in some form of childcare outside the home. The first five years of a child’s life are a period of rapid brain development and a critical window to intervene to promote healthy growth and development. Count- less studies have demonstrated the long-lasting returns to quality early interventions and the importance of ensuring that children are in safe and stimulating environments. Access to good quality childcare is essen- tial for child development, but for many families, childcare is a binding constraint that restricts decisions on whether to work and what type of work in which to engage. The childcare challenge impacts all working parents, but it is especially acute for parents with young children, who are not yet old enough to enroll in primary school (when accessible government-supported services become available in most countries). With rural-urban migration on the rise and more families removed from the traditional extended family struc- tures that could otherwise offer childcare support, the magnitude of the challenge will continue to grow. THE IMPLICATIONS OF COVID-19 ON CHILDCARE The COVID-19 pandemic has laid bare the deep inadequacies in the current system of childcare provision, including uneven access, poor quality, the need for public finance, poor terms of employment for the workforce and the overall vulnerability of the sector. Smart investments to support families and the childcare industry—through a variety of channels—are an essential part of recovery efforts across countries to enable parents to return to work and provide children and families with support. In many countries, this may include channeling resources to childcare providers in financial difficulty so they can reopen. As childcare services begin to reopen, some adjustments will be needed to keep children and staff safe. The experience that so many parents have had in the last few months of struggling to balance childcare and their work responsibilities may also open new opportunities, increase public empathy, and generate policy momentum to address inadequacies in childcare provision worldwide that leave so many families with limited choices and children in settings that do not ensure their safety, let alone promote development. While childcare is an issue that impacts all working parents, it is particularly important in the context of efforts to improve women’s employment opportunities and productivity in both the formal and informal sectors. Lack of affordable childcare often keeps women out of the workforce or from reentering the work- force after childbirth. It also limits the quality of employment and income earning opportunities that women can pursue. This can have a wide range of negative impacts, including on family economic security, gender equality and empowerment and business and economic growth. When women earn and control their own incomes, more resources tend to be channeled to support their children’s health, education and overall family welfare. When women exit the workforce, firms lose valuable employees, resulting in increased costs related to attrition and reduced business productivity, as well as missing out on the benefits of a more diverse workforce. Too many children are spending their early years in suboptimal environments, with negative implications for their development and lifetime opportunities. In the absence of other options, many working parents are forced to leave their children in unsuitable or even unsafe environments. Children may be left alone or with a sibling, or may accompany their parents at work in unsafe conditions. Aside from safety, the develop- ment consequences for children who do not have access to quality childcare and early learning opportunities emerge quickly, as children arrive to primary school without the skills to succeed and then fall further behind more advantaged peers during primary school. An estimated 53 percent of children in low- and middle-income countries are living in “learning poverty,” unable to read and understand a simple story by the end of primary school. In the poorest countries, this figure can be as high as 80 percent. These early deprivations and poor learning outcomes impact countries’ human capital as children grow into adults who cannot achieve their full potential: The Human Capital Project estimates that 56 percent of children born today will grow up to be, at best, half as productive as they could have been. Older siblings, especially girls, are also impacted by the childcare challenge when they are forced to take on childcare responsibilities, with consequences for their own education opportunities and life choices. Keeping adolescent girls in school longer has positive implications for delaying marriage and first pregnancy. EXECUTIVE SUMMARY 5 3 out of 10 children do not need childcare 7 out of 10 children need childcare 4 out of 10 children need childcare and do not have it. The size of the unmet need for childcare is substantial: we estimate that over 40 percent of all children 4 of them do not have access (nearly 350 million) who are below primary-school-entry age worldwide need childcare but do not have access to it. More specifically, 72 percent of all children below primary-school-entry age need some form 2 out of 10 children without access live in HICs and UMICs of childcare (593 million), and 59 percent of these children who need childcare do not currently have access 8 out of 10 (349 million). The childcare challengechildren that disproportionately impacts families in low- and lower-middle-income need childcare countries: nearly eight out of ten children and do not haveneed childcare but do not have access are living in low- and who accessliving lower-middle-income countries. A child live in in a low-income country is nearly five times less likely to have low- and lower- access to childcare than a child living in a high-income country. These figures likely underestimate the global middle-income 8 out of 10 children who need childcare and need, as they do not factor in parents who are prevented from entering countries. the workforce due to a lack of child- don’t have access live in LICs and LMICs care. These excluded families are likely some of the most vulnerable and could benefit the most from child- care. The gap in access is particularly acute for children below the age of 3, because costs are generally higher for this age group and few countries have policies or widespread provision that covers them. For children ages 3 to 6, preschool, where available, can offer a partial solution, often providing at least a half day of services. Despite progress in preschool expansion, however, nearly 40 percent of all preschool-age children globally are not enrolled in preschool, and in low-income countries 80 percent of preschool-age children are not enrolled. Global estimates: Substantial gaps in access to childcare Over 40 percent of children (nearly • Worldwide, 7 out of 10 children need childcare but 4 of out 10 do not have access. 350 million) who are below primary- school-entry age need childcare but do not have access to it. The childcare challenge dispropor- • 3 out of 10 7 out of 10 children need childcare children do not 4 of them do not have access (this is 43% of tionately impacts families in low- and need childcare all children - 349 million - who are below lower-middle-income countries: nearly primary-school-entry age worldwide) 8 out of 10 children who need childcare 8 out of 10 children that need childcare but do not have access but do not have access are in low- and live in low- and lower-middle-income countries. lower-middle income countries. A child living in a low-income country • is nearly five times less likely to have access to childcare than a child living 2 out of 10 8 out of 10 children without access children without live in LICs and LMICs in a high-income country. access live in HICs and UMICs It is not just a question of access; the quality of childcare that children receive is paramount to ensuring that the various returns can be realized. In considering both current childcare services and childcare expan- sion, it is critical that quality be at the forefront of any policies and program designs to ensure children’s development and learning. Quality is essential, both to ensure good outcomes for young children and also as a “signal” to motivate parents to enroll their children in the first place. If quality is low, children will not benefit and may even be harmed, and parents may be unwilling to leave their children in facilities that do not feel safe or likely to benefit their children. Unfortunately, many childcare settings currently are not of high enough quality to positively impact child development. 6 Better Jobs and Brighter Futures: Investing in Childcare to Build Human Capital REFERENCES 7 Expanding the childcare economy offers substantial employment opportunities: we estimate that the expansion of the childcare workforce to meet current needs could create 43 million jobs globally. These jobs are important for the future of work, as they are much less vulnerable to automation than some other employ- ment opportunities. Given that one of the most important aspects of quality is a capable, caring and qualified workforce, appropriate training opportunities for these practitioners are crucial. Expanding childcare could also create millions of small business opportunities (for center-based and home-based provision) that could generate income while meeting community needs. In the context of the COVID-19 pandemic, ensuring access to childcare will be essential to enable parents to return to work and is, in its own right, a source of potential job creation for childcare providers. Childcare policies and service delivery are fragmented in many countries, which exacerbates the challenge of ensuring quality and planning. In many countries, the regulation and provision of childcare do not fit neatly into one agency or ministry mandate, and the roles of different stakeholders are often unclear. In the absence of clearly defined roles and responsibilities, childcare may fall through the cracks, and the robust and effective planning, regulation, quality assurance and monitoring needed to ensure adequate provision never materializes. The result is millions of families without reliable childcare, leaving millions of children in inad- equate or even unsafe care settings. A comprehensive approach to ensure that country systems and enabling environments support quality is currently lacking in most countries. Expanding access to quality, affordable childcare will generate a number of positive externalities, and should be a priority area for public intervention and finance. The current system in many countries does not meet the needs of most families and the market alone is unlikely to yield a solution that maximizes both female labor force participation and child development. Childcare should be a priority area for public inter- vention; without government support, childcare will not be accessible to the most vulnerable families. There are a range of policy options available to governments to correct the current market failure. A whole-of-gov- ernment approach will be needed to leverage diverse solutions and financing mechanisms and build a strong enabling environment to expand access to quality, affordable childcare. At the country level, a range of existing financial sources and programs could be better leveraged to begin to fill the gap. But that would just be a start— additional resources will be needed in most countries. Table 1 lays out some of these potential entry points across sectors. 43 million new jobs could be created if we expand the childcare economy to meet the global need. 8 Better Jobs and Brighter Futures: Investing in Childcare to Build Human Capital TABLE 1 POTENTIAL SECTORAL ENTRY POINTS TO INVEST IN CHILDCARE SECTOR EXAMPLES OF WAYS TO SUPPORT CHILDCARE ­­­­­­­ • Increasing early childhood education and preschool programs with consideration as to how they also serve a childcare function (hours, location, etc) • Developing and implementing regulation and quality standards for all early learning EDUCATION provision, including childcare (in collaboration with other sectors) • Offering childcare to facilitate participation in skills and training programs • Using skills and training programs to build the childcare workforce • Using childcare facilities to reach children with services to address malnutrition and reduce stunting, especially during the critical first 1,000 days • Leveraging health and nutrition programs to support childcare HEALTH AND • Using childcare facilities as referral points and to improve the efficiency of community NUTRITION health workers • Taking into account the burden of childcare placed on older female siblings, with implications for adolescent girls’ enrollment in school and ultimately for delaying marriage and reducing adolescent pregnancy • Expanding childcare to improve women’s employment • Supporting women entrepreneurs to provide childcare services GENDER • Promoting complementary policies around maternity / paternity leave and breast- feeding at work • Establishing childcare provision to maximize participation in and completion of active labor market and empowerment programs, including skills and training programs and public works schemes (e.g. mobile creches) • Encouraging childcare to increase female labor force participation SOCIAL • Promoting cash transfers or child assistance grants, which could be used for childcare PROTECTION and / or maternity benefits AND JOBS • Promoting complementary policies and regulations around maternity / paternity leave • Expanding coverage of complementary benefits, such as maternity/paternity leave, to workers in both the formal and informal sectors (e.g. through establishing voluntary contribution to social security) AGRICULTURE • Establishing childcare to ensure children are safe and increase agricultural productivity • Establishing childcare facilities for women workers in industrial zones and urban URBAN public spaces (e.g. markets and waste dumps) DEVELOPMENT • Investing in childcare facilities as part of “slum upgrading” programs • Encouraging childcare to increase female labor force participation and business productivity PRIVATE • Establishing childcare to maximize participation in training programs SECTOR • Supporting childcare expansion through innovative financing mechanisms • Prioritizing childcare sector in funding for Micro, Small and Medium Enterprises (MSME) EXECUTIVE SUMMARY 9 We suggest five policy goals that governments should focus on to ensure that childcare is available, afford- able, of decent quality and meets the needs of all families: (i) expand access to childcare by promoting diverse types of provision; (ii) prioritize childcare coverage for the most vulnerable families and ensure low-cost and free options are available; (iii) allocate sufficient financing to make quality childcare affordable for families; (iv) define clear, workable institutional arrangements and build system coherence; and (v) ensure that chil- dren are in safe and stimulating environments through a robust quality assurance system and a supported and capable workforce. Table 2 highlights these goals and summarizes actions that governments could take to achieve them. Investing in more and better quality childcare is an important strategy for countries seeking to build human capital and could bring transformational change to many government priority areas. Over 40 percent of all children (nearly 350 million) who are below primary-school-entry age worldwide need childcare but do not have access to it. Achieving quality, affordable childcare for all families that need it will require substantial increased political and financial commitments in many countries, and it is imperative that governments act now. Too many families are desperately struggling to make a living and give their children the best possible start. These families are not in a position to consider the optimal balance between women’s employment and child development. They need and deserve solutions now. We are failing this generation and future generations. The expansion of quality childcare presents an incredible opportunity to deliver better jobs and brighter futures by improving women’s employment and productivity, child outcomes, family welfare, busi- ness productivity, and overall economic development. Childcare should be a priority area for public intervention and finance given the positive externalities and that the market alone is unlikely to yield a solution that maximizes women's employment and child development, especially for the most vulnerable families. Governments should ensure that childcare is available, affordable, of decent quality and meets the needs of all families. 10 Better Jobs and Brighter Futures: Investing in Childcare to Build Human Capital TABLE 2 SUMMARY OF POLICY GOALS AND PRIORITY ACTIONS TO ENSURE QUALITY, AFFORDABLE CHILDCARE THAT MEETS FAMILY NEEDS POLICY GOALS ACTIONS GOVERNMENTS COULD TAKE TO ACHIEVE THE GOALS • Conduct country-level diagnostics to understand family needs and adjust programming accordingly. GOAL 1: • Use multiple levers to support the expansion of childcare provision (various policy options Expand access to exist, including direct government provision, financial support for families, incentives for the childcare by promoting nonstate sector and mandated employer-supported childcare). diverse types of provision • Integrate childcare into other existing public programs (e.g. childcare alongside training or public works programs to maximize participation). • Prioritize childcare options for vulnerable families (e.g. allocated spaces, targeted provision). • Heavily subsidize childcare costs at least for the most vulnerable families (through financial support to families and/or subsidies to nonstate providers that serve vulnerable families). • Consider the needs of, and solutions for, informal workers, including identifying spaces that GOAL 2: could be used to provide services for informal workers near their worksites or neighborhoods. Prioritize childcare • To ensure equity, consider the needs of especially disadvantaged children (e.g. children with coverage for the most disabilities, ethnic or linguistic minorities, refugee populations or others affected by violence vulnerable families and and conflict, etc). ensure low-cost and free options are available • Apply conditions/means testing to ensure government-supported and nonstate sector provision is accessible for low-income families. • Build on existing programs that serve vulnerable populations (e.g. using them to identify target populations and / or piggy-back on services). • Allocate sufficient public funding to make childcare affordable for all families. GOAL 3: • Consider diverse funding streams—public funding, employer funding, reasonable individual Allocate sufficient contributions (for those that can afford it), and various types of private-sector funding. financing to make quality • Leverage existing financing by integrating childcare into programs for win-win investments. childcare affordable for families • Ensure sufficient budget to build and maintain a robust quality assurance system. • Define institutional arrangements to cover services for children from birth to primary school entry to ensure child safety and promote child development. • Identify a clear institutional anchor(s) with the mandate and resources to promote access and GOAL 4: ensure quality, along with clear roles and responsibilities for other sectoral and agency Define clear, workable engagement. institutional • Collect data on usage and quality to inform implementation and policy. arrangements and build system coherence • Take a whole-of-government approach to optimize programs and policies to promote both child development and women’s employment and ensure system coherence (taking into account other complementary policies such as child benefits and parental leave). • Establish registration requirements that apply to all types of providers, reflect local conditions, and are feasible enough to encourage registration. • Develop comprehensive and coherent quality standards (with clear minimum standards and progressive pathways to improve over time). GOAL 5: • Establish monitoring systems with inspectors trained in early child development. Ensure children are in safe and • Encourage parental engagement and establish mechanisms to help parents support their stimulating children’s development and advocate for quality services. environments through a • Develop and support quality initial and ongoing training and support for childcare and early robust quality assurance learning practitioners with a strong focus on practice. system and a supported • Professionalize the childcare and early learning workforce with formal qualifications, career and capable workforce pathways, and suitable remuneration. • Provide supports for home-based providers and other entrepreneurs (networks, training and coaching programs, peer support, access to learning resources etc). 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