POVERTY 74363 THE WORLD BANK REDUCTION AND ECONOMIC MANAGEMENT NETWORK (PREM) Economic Premise DECEMBER 2 1 • Number 2012 JU E Numb 101 18 Grandparents as Child Care Providers: Factors to Consider When Designing Child Care Policies Josefina Posadas Formal child care services can expand women’s economic opportunities and promote equity through early childhood development. However, academics and policy makers often overlook the role of relatives as child care providers. This note discusses how grandparent-provided child care can be factored into child care policies in the context of Organisation for Economic Co-operation and Development (OECD) countries. Omitting the role of relatives when estimating costs and benefits of child care programs can give biased and incomplete results that might even reverse certain programs. The focus of this note is on the opportunity cost of relatives—particularly grandparents—who care for children. Not just governments spend on child care programs —grandparents spend considerable time caring for grandchildren. Depending on their labor market status and work history, grandparents’ opportunity cost could be high or low; governments should factor in such costs when evaluating programs. The Netherlands and the United Kingdom are experimenting with policies that formal- ly support grandparent-provided child care. The Business Case for Public Support for to formal child care increases (i) participation in formal em- Child Care ployment and (ii) the number of hours mothers work. How- ever, the magnitude of effects ranges from null up to a 0.36 To address earnings disparities between men and women, the elasticity of female labor supply with respect to child care World Bank (2011) suggests that one priority policy action is cost. The effect varies across and within countries by type of to increase access to child care through subsidies. The general beneficiary, household income and composition, labor mar- issue is well known: child care responsibilities constrain wom- ket opportunities, and child care institutions (Blau and Cur- en’s time, pushing women to unpaid activities within the rie 2006). home and to occupations that often pay less. Women world- wide spend more time on housework and child care and less Grandparents: Main Providers of Informal time on market work and leisure than do men (World Bank Child Care Services in OECD Countries 2011). Informal care is defined as generally unregulated care that is Child care and its implications for maternal labor supply arranged by the parent in the child’s home or elsewhere and is are complex issues. Government subsidies affect the private provided by relatives, friends, neighbors, babysitters, or nan- supply of child care services. That supply responds to de- nies. Informal child care is widespread (figure 1); even in mand, but can be affected by the public child care provision. countries such as the Netherlands, more than half of children For women, labor supply, fertility, and choice of child care under age two are in informal care. Although informal child services are connected decisions. Evidence shows that access 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise care is used less as children grow, it remains important even services on maternal labor supply. Fortunately, academics for primary school children: 45 percent of children in Roma- have renewed their interest in this topic, and although most nia between ages 6 and 12 receive informal care. studies do not address causality or control for access to other Relatives are the most important informal child care pro- types of child care, they show that access to grandparents’ care viders. In poor countries, older sisters or younger aunts care is positively associated with mothers’ labor supply. Del Boca, for children in the home while the mother works (Skoufias Locatelli, and Vuri (2004) find that having grandmothers liv- and Parker 2006). In middle- and high-income countries, ing near and in good health increases the likelihood of moth- grandparents—often maternal grandmothers —take the re- ers working full time in Italy. Maurer-Fazio et al. (2011) esti- sponsibility. For example, grandparents provide almost half mate that, in China, married women living with their parents of the informal care for U.S. children, and nonrelatives care (or spouse’s parents) are 12 percent more likely to work. Al- for about 30 percent (figure 2). Figures are even more striking buquerque and Passos (2010) find that in 11 European coun- in Australia: grandparents care for 80 percent of children un- tries, a mother with children younger than age six is 12 per- der age three. In Belgium, Greece, and Italy, about half of cent more likely to work if a grandparent cares for her youngest grandmothers between ages 50 and 65 regularly care for child. Finally, Posadas and Vidal-Fernández (2012) use an in- grandchildren at least once a week (Zamarro 2011). strumental variable approach for the United States and find In the United States, more families rely on grandparents that access to grandparents’ child care increases maternal la- and fewer use nannies (Posadas and Vidal-Fernández 2012) bor force participation by 15 percent. despite an increase in the supply of formal child care and the Policy Considerations introduction of subsidies and universal child care programs in some states (Cascio 2009; Fitzpatrick 2010). This section presents links between formal and grandparent- Policy makers interested in alleviating constraints on provided child care services and discusses elements to con- women’s formal work must measure the effect of child care sider when making policy recommendations about child care Figure 1. Use of Informal Child Care Arrangements in a Typical Week, 2008 60 age 0–2 age 3–5 age 6–12 50 40 percentage of children 30 20 10 0 United States Romania Cyprus Slovenia Estonia United Kingdom Hungary Italy Bulgaria Portugal Australia France Lithuania Latvia Finland Korea, Rep. of Germany Norway Greece Poland Luxembourg Austria Spain Ireland Iceland Sweden Netherlands Czech Republic Slovak Republic Denmark Belgium Sources: OECD Family Database; U.S. Census Bureau. Note: Data for Cyprus are for the southern part of the island. Data are for 2007 in France, 2009 in the Republic of Korea, and 2005 in the United States, for which the last group is aged 6–14 and includes multiple care arrangements. Australia includes only grandparents. 2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise Figure 2. Informal Child Care Providers a. Australia b. United States nonrelative nonrelative other relative other relative grandparent grandparent 0 20 40 60 80 100 0 10 20 30 40 50 60 percentage of children percentage of children Source: ABS Childhood Education and Care, Australia 2010. Source: Laughlin 2010. Note: Children age 0–2. Note: Children age 0–5. programs, with implications for employment regulations and The magnitude is smaller in developing countries (see Chi- pension systems. oda and Verdú [2011] for Brazil and Colombia). Most No free lunch. Grandparent-provided child care is obvi- studies conclude that subsidized child care is not cost-effi- ously not free. Grandparents could work in the labor market cient because the additional tax revenue collected from or enjoy leisure time. Zamarro (2011) finds that women age mothers’ earnings will not cover government expenses for 50–65 in European countries are less likely to work if they child care; thus, the care must be justified on equity care for grandchildren. Ho (2008) finds the time transfers grounds—either for gender equality or childhood develop- from U.S. grandmothers to daughters through child care ser- ment. However, such studies do not consider who was vices are an important factor in retirement decisions. Accord- minding the children before the program was set up, so ing to the American Health and Retirement Study, women they are unable to account for an additional positive effect and men ages 51–61 spent 880 hours and 370 hours in the of freeing grandparents’ time. previous 12 months, respectively, caring for grandchildren One exception is Carvalho et al. (2011), who evaluated (Rupert and Zanella 2011). expansion of public child care in poor neighborhoods of Rio Complements or substitutes? Grandparent-provided de Janeiro. Similar to previous studies, the authors find the child care can either complement or substitute for formal program affects female labor force participation (an increase care, depending on availability of formal care, employment in 10 percentage points from a base of 36 percent), but has no characteristics (part time versus full time), and cultural fac- effect on the hours mothers worked. Interestingly, the ran- tors. High prices for child care encourage parents to rely on domized control trial design allows identification of crowd- grandparents, especially if such costs represent a high per- ing-out effects by looking at child care used by the control centage of the mother’s potential wages (Zamarro 2011; Al- group. The study finds that 30 percent of control group wom- buquerque and Passos 2010; Ho 2008; Del Boca, Locatelli, en (mothers randomly placed on a waiting list for public child and Vuri 2004; Leibowitz, Klerman, and Waite 1992). Lim- care) ended up sending their children to private care, suggest- ited opening hours and a lack of part-time jobs can make ing that public care is most likely to displace care by mothers grandparents’ and formal child care complements (Del Boca or informal care by relatives or nonrelatives. More integrated 2002). Thus, regulation of both child care facilities and labor studies are needed that take into account all of the possible markets will affect either the substitutability or the comple- beneficiaries: mothers and other relatives. mentarity of the two types of care. Grandmothers’ low opportunity cost. Some developed Crowding-out effect. Potential links between formal countries promote grandparent-provided care by providing and grandparent-provided child care suggest that formal transfers to those who care for grandchildren. In 2007, the child care may crowd out informal care. For example, uni- Netherlands introduced a grant for grandparents who regu- versal child care programs have a large take up, but a low larly care for grandchildren. Parents receive an allowance if effect on labor market participation and hours that moth- the grandparent is registered on a host parent agency and ful- ers work. In some cases, this crowding-out effect is close to fills a set of requirements (mostly safety related). In Notting- 100 percent (Havnes and Mogstad 2011; Fitzpatrick hamshire in 2004, the United Kingdom considered a similar 2010; Cascio 2009; Baker, Gruber, and Milligan 2008). policy of paying caregiver grandparents weekly. 3 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise Such policies can be appropriate when grandparents en- Blau, D., and J. Currie. 2006. “Pre-School, Day Care, and After School joy good health and expect to live long, especially if the coun- Care: Who’s Minding the Kids?� In Handbook of the Economics of Education, Vol. 2, ed. E. Hanushek and F. Welch. Amsterdam: try has early retirement options or a large share of grandmoth- Elsevier. ers out of the labor force. For example, in Eastern Europe, the Carvalho, M., T. Lunde, P. Olinto, and R. Paes de Barros. 2011. “The retirement age is relatively low, and in Southern Europe, Impact of Access to Free Child Care on Women’s Labor Market grandmothers seldom work because of low opportunity costs. Outcomes.� Economist Forum Conference, World Bank, Washing- However, such policies should be accompanied by an increase ton, DC, March. Cascio, E. 2009. “Maternal Labor Supply and the Introduction of in affordable, flexible, and high-quality formal child care. Fu- Kindergartens into American Public Schools.� Journal of Human ture generations of grandmothers will have a higher opportu- Resources 44 (1): 140–70. nity cost of caring for grandchildren, because they will be Chioda, L., and R. Verdú. 2011. “Work and Family: Latin American more engaged in labor market activities and will have more and Caribbean Women in Search of a New Balance.� World Bank, experience. Washington, DC. Cortés, P., and J. Tessada. 2011. “Low-Skilled Immigration and the La- More comprehensive data. Clearly there is a need for bor Supply of Highly Skilled Women.� American Economic Journal: more comprehensive data on child care, even in OECD coun- Applied Economics 3 (3): 88–123. tries. Survey instruments must be flexible to record multiple Del Boca, D. 2002. “The Effect of Child Care and Part-Time Opportu- child care providers; intensity of care; complementarity and nities on Participation and Fertility Decisions in Italy.� Journal of substitution among providers; and constraints from child Population Economics 15 (3): 549–73. care services, households, and labor markets. Information can Del Boca, D., M. Locatelli, and D. Vuri. 2004. “Child Care Choices by Italian Households.� Working Paper 983, Institute for the Study of be gathered from formal facilities, household surveys, or Labor, Bonn. health and retirement surveys. Ehrenberg, R. G., and R. S. Smith. 2008. Modern Labor Economics, 10th Edition. Pearson Education. Conclusions Fitzpatrick, M. 2010. “Preschoolers Enrolled and Mothers at Work.� Journal of Labor Economics 28 (1): 51–85. Child care policies have a central place in discussions about Havnes, T., and M. Mogstad. 2011. “Money for Nothing?� Journal of promoting women’s economic opportunities. Child care can Public Economics 95: 1455–65. affect fertility decisions, and some discussion aspects can be Ho, C. 2008. “Grandchild Care, Intergenerational Resource Allocation, applied to elder care, whose burden also falls mainly on wom- and Retirement.� World Bank, Washington, DC. en (Sattar 2011). However, better data and more analysis are Laughlin, L. 2010. “Who’s Minding the Kids? Child Care Arrange- needed, given the degree of complexity surrounding child ments: Spring 2005/Summer 2006.� Current Population Reports, U.S. Census Bureau. care regulations; labor markets; and households’ decisions Leibowitz, A., J. Klerman, and L. Waite. 1992. “Employment of New over fertility, labor supply, and choice of child care provider. Mothers and Child Care Choice.�Journal of Human Resources 27 Studies show that governments affect the supply not only (1): 112–33. through subsidies, but also through regulation of child care Leibowitz, A., L. Waite, and C. Witsberger. 1988. “Child Care for facilities and labor markets (part-time jobs, unemployment Preschoolers.� Demography 25 (2): 205–20. Maurer-Fazio, M., R. Connelly, L. Chen, and L. Tang. 2011. “Child rates, and flexible work schedules). Fundamentally, universal Care, Elderly, and Labor Force Participation of Married Women child care is justifiable on equity grounds related to early in Urban China, 1982–2000.� Journal of Human Resources 46 (2): childhood development and school readiness. 261–94. Posadas, J., and M. Vidal-Fernández. 2012. “Grandparents’ Child Care About the Author and Female Labor Force Participation.� Working Paper 6398, Insti- tute for the Study of Labor, Bonn. Josefina Posadas is an Economist in the Gender and Develop- Rupert, P., and G. Zanella. 2011. “Grandparenting and Labor Supply.� ment Unit of the Poverty Reduction and Economic Management World Bank, Washington, DC. Network. Sattar, S. 2011. Opportunities for Men and Women. Washington, DC: World Bank. References Skoufias, E., and S. Parker. 2006. “Job Loss and Family Adjustments in Work and Schooling during the Mexican Peso Crisis.� Journal of Albuquerque, P., and J. Passos. 2010. “Grandparents and Women’s Population Economics 19 (1): 163–81. Participation in the Labor Market.� Working Paper 16, School of Wang, Y., and D. Marcotte. 2007. “Golden Years?� Working Paper Economics and Management, Technical University of Lisbon. 2629, Institute for the Study of Labor, Bonn. ABS (Australian Bureau of Statistics). 2010. “ABS Australian Social Trends 4102.0, June.� ABS, Canberra. World Bank. 2011. World Development Report 2012. Washington, DC: Baker, M., J. Gruber, and K. Milligan. 2008. “Universal Child Care, World Bank. Maternal Labor Supply, and Family Well-Being.� Journal of Political Zamarro, G. 2011. “Family Labor Participation and Child Care De- Economy 116 (4): 709–45. cisions.� Working Paper WR-833, RAND, Santa Monica, CA. The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. They are produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect those of the World Bank. The notes are available at: www.worldbank.org/economicpremise. 4 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK    www.worldbank.org/economicpremise