How the Child Care Crisis Became a Global Economic Fiasco

(Bloomberg) -- The numbers are crushing: By the end of April last year, less than half of the women in Brazil were employed, the lowest level in 30 years. In Australia, around the same time, nearly a tenth of women exited the workforce, while in Japan, women lost jobs at nearly twice the rate of men. In March, U.S. Vice President Kamala Harris deemed the exodus a “national emergency,” with 3.5 million mothers of school-aged children in the country having left their jobs between March and April 2020.

“You can’t be a prosperous country with half of your workforce sitting on the sidelines,” said Titan Alon, assistant professor of economics at the University of California, San Diego.

The forces driving the global purge of working women are strikingly similar country to country: School shutdowns, day-care center closures, remote schooling and the ensuing juggle between employment and caregiving forced some parents to cut their hours or leave their jobs altogether. Women, who on average get paid less than men, ultimately bore the brunt — abandoning the workforce more frequently than their husbands. Factor in the reality that women were also more likely to work in industries hit harder by the pandemic, and the result is a once-in-a-century crisis.

“Because we lacked a care infrastructure heading in, everything was worse for women and women's labor force participation,” said Wendy Chun-Hoon, director of the Women’s Bureau at the U.S. Department of Labor.

The child-care crisis has driven a workforce gender gap for decades. The pandemic — which some economists have dubbed the U.S.’s first female recession — has made it undeniably worse. According to Oxfam, the pandemic cost women globally at least $800 billion in lost income in 2020, “equivalent to more than the combined GDP of 98 countries.” When it comes to economic growth, Bloomberg Economics research estimates that if labor force participation and education for women were on par with men by 2050, $20 trillion — nearly the size of the U.S.'s annual output— would be added to global GDP.

After ignoring the statistics, some countries are finally addressing their broken child-care systems. Bloomberg examined seven economies to see what new policies — from the incremental to the experimental — have been put in place since the start of the pandemic and what’s still being considered.

Australia

As women began dropping out of Australia’s workforce in April 2020, the government surprised the country with a radical move: Child care would be made free to all for about three months.

The temporary policy was meant to build a bridge to a post-coronavirus economy, a particularly unexpected move coming from Australia’s conservative center-right government. Parents could maintain their spots at day-care centers, while keeping 200,000 child-care worker jobs intact. 

It worked. Research found that the program helped support an eventual bounceback in women’s employment because it kept many day-care centers from closing permanently, preventing supply issues later on. By September 2020, women’s labor force participation in Australia had rebounded stronger than that for men.

While the jobs and output lost in 2020 were fully recouped early this year, the delta surge put about half the Australian population back in lockdown by August. This time around, though, there’s no free child care.

Early data show an outsized fallout among women. In New South Wales, where Sydney is located, payroll jobs worked by women tumbled 5.3% in the first half of July compared with 3.5% for men.

In an effort to jumpstart a return to work for women, the Australian government announced additional spending in the May 2021 budget that would increase child-care subsidies for families — an average of A$2,260 ($1,656) per year for a quarter of a million families. Danielle Wood, chief executive officer at the Grattan Institute, an independent think tank in Melbourne, said the new policy “does bring down some of those disincentives a bit for families, but it’s a long way from transformative.” — Michael Heath

Canada

The pandemic’s toll on parents was the final push Canada's government needed to finalize a nationwide child-care plan that first surfaced almost two decades ago.

In 2005, the country’s Liberal government had signed agreements with all 10 provinces to roll out a national child-care program, only to fall apart a year later when the Conservative government took over. Earlier this year, Prime Minister Justin Trudeau took advantage of the pandemic-induced political tailwinds to revive the Liberal plan: The government would invest up to C$30 billion ($23.74 billion) over five years for child care for all families, helping cover half the costs with provinces that sign on to the agreement.

The plan is largely modeled after Quebec’s subsidized child-care program which launched more than two decades ago, and has since enabled more women to engage in the province’s labor market. Trudeau’s program would reduce child-care costs per child to an average of C$10.00 ($7.94) per day by increasing staff and openings for kids in regulated child-care centers. So far, the government has signed agreements with seven of 10 provinces. 

The effort risked crumbling again during the Sept. 20 election but the incumbent Liberals earned enough votes to form a stable government. Canadian economist and research fellow at the Atkinson Foundation Armine Yalnizyan says the new policy is critical. “There won’t be a full recovery without a she-covery,” she said, “and there won’t be a she-covery without child care.” —Shelly Hagan

United States

Child care in the U.S. has long been a precarious patchwork of day-care centers, home-based providers, nannies and the family members willing to fill in the gaps. More than half of Americans live in child-care deserts, or areas where there’s more demand than supply, and it’s often prohibitively expensive. Looming over all of this is the knowledge that the U.S. almost nationalized childcare 50 years ago: In 1971, Congress passed the Comprehensive Child Development Act, but President Richard Nixon vetoed it, deriding it as “radical.”

Child-care advocates are hoping the pandemic, which battered sectors with high female employment and led millions of women to leave the workforce, will be a turning point. Congress’s nearly $2 trillion stimulus package passed this March expanded the child tax credit and appropriated $24 billion to help child-care providers. For millions of American families, that expansion meant monthly payments starting in mid-July of up to $300 per child. But the boost is temporary. 

President Joe Biden is now pushing to build longer-term infrastructure. He proposed the $1.8 trillion American Families Plan which includes provisions spanning from universal preschool to paid family leave and an extension of the child-tax credit expansion. It also calls to ensure low- and middle-income families spend no more than 7% of their income on child care. 

Democrats are still debating the contents of a $3.5 trillion tax and spending package anticipated to pass through a process known as reconciliation. Voting is expected to fall along party lines, meaning Senate Democrats will have to get West Virginia’s Joe Manchin on board, who already said he won’t support a package of that size.

After the U.S. Treasury Department released a new report last week detailing the failures of the current child-care system, Treasury Secretary Janet Yellen put the need for change in stark terms. “The free market works well in many different sectors,” she said, “but child care is not one of them.”  — Reade Pickert

U.K. and Germany

In the U.K., where schools closed for months and child-care costs are among the highest in the OECD — accounting for almost 40% of the average salary earned during the pandemic — women disproportionately took unpaid time off. Economists at Bristol University found that British women were 4 percentage points more likely to have lost their jobs during the pandemic than men, a gap widening to 10 percentage points for families with small children.

Despite the growing pressure for parental benefits like paid leave, the U.K. Treasury didn’t include any financial support for child care in its most recent budget statement in March. Instead, says Christina Palmou, an economist at the Tony Blair Institute for Global Change, the research group founded by the nation’s former prime minister, “the U.K. has set priorities for recovery heavily skewed towards male-dominated sectors such as construction, infrastructure and tech.”

Meanwhile, in Germany, data collected by the Institute of Labor Economics revealed that during the early stages of the pandemic there was a “sizeable gender gap” in terms of time spent looking after children, but with a twist: Women were no more likely to lose their jobs. Why? The country already had what would be considered revolutionary in most places: An extensive furlough program subsidized by the government, along with additional compensation for working parents.

The existing policy that enabled parents to have their salaries partially compensated if they missed up to 10 days of work to care for a sick child was expanded to cover school closures during the pandemic. The number of days parents could claim benefits annually increased to 30 per child and per parent — meaning, a couple with one child could get up to 90% of their net pay back for a combined 60 days of missed work.

While those policies helped women who were already in more stable employment, it still left more vulnerable workers exposed. Those same benefits do not apply to so-called “mini jobs” — positions that pay less than 450 euros ($528) per month, common in hospitality and domestic work, industries hit particularly hard in the pandemic. —Lizzy Burden and Carolynn Look

Brazil

In a region that still struggles with one of the widest gender gaps in labor force participation, the pandemic drove Brazil to a new historic low. Less than half of the country’s women remained employed — 46.3% in comparison to 65.5% of men — at the onset of the pandemic, the lowest number in three decades.

More than a quarter of the women who left the workforce last year said they were doing so to take care of their families, according to the Inter-American Development Bank (IADB). Sixty-six percent of the women still out of work in the country say they can’t rejoin the labor force right away for the same reason, compared to only 7% of men, said IADB economist Livia Gouvea Gomes.

Latin America experienced the longest school closures in the world. Even in Sao Paulo, where schools began reopening in April, in-person capacity is limited in order to comply with social distancing measures. In addition to the 207,000 enrolled children still at home in South America’s largest city thanks to the partial closures, another 2,600 weren’t able to secure spots in public day-care centers as of March. Sao Paulo's city government has promised to create 50,000 more child-care spots in the next four years. Meanwhile, mothers who have to keep their children at home get direct payments of about $38 a month.

President Jair Bolsonaro is seen as unlikely to enact any long-term child care reforms. He has repeatedly defended child labor, once noting he began working when he was 12. A local investigation reported his government has left one-third of the budget geared at women’s programs unused. —Augusta Victoria Saraiva and Maria Eloisa Capurro

Japan

Japanese women were on an eight-year streak of increased labor force participation until Covid-19 hit. The rise had less to do with the culture’s shifting attitude toward working women than the stark reality that the country was faced with an aging and shrinking population in need of more workers.

While Japan wasn’t thrust into extreme lockdowns, the consequences of the culture’s ingrained sexism still revealed itself. Most of the millions of women who had joined the workforce in recent years opted for more flexible roles that could be adjusted around family needs — and it was those roles, particularly in the service sector, that were battered. Roughly 700,000 women left the workforce in April 2020, compared to 390,000 men.

Though schools have largely remained open, day-care centers and municipalities have requested that parents minimize their hours in order to limit Covid-spreading risk, making it harder for parents to fully return to work. Some people are even rethinking the prospect of children due to pandemic-related uncertainty and lacking availability of care. Last year, the number of pregnancies reported to authorities fell 4.8% from 2019.

The Japanese government has given cash handouts to lower-income households with children, and aims to get the number of preschool children who can't secure a care facility spot to zero (as of April this year, that number had fallen to around 5,000 across the country). But that hasn’t been enough to address a falling birthrate and now a shrinking female workforce. —Yuko Takeo

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