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Measuring the Impact of Child Care Subsidies on the Incomes of Mothers Returning to Work

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  • Deborah Schofield
  • Josh Polette

Abstract

The cost of child care is one of the greatest financial barriers faced by mothers returning to work. In recognition of this cost, the federal government provides child care subsidies to assist families to meet the cost of child care. This paper models the use of child care services and the provision of child care subsidies to determine how effective the Australian government child care support programs are in reducing the financial barriers that make returning to work difficult for many mothers. Both childcare assistance and the newer childcare cash rebate are modelled. The impact of these assistance measures is examined for couples and sole parents on different incomes with one or two children in child care. It was found that child care subsidies are highly progressive and make a substantial contribution to vertical equity by offsetting child care costs related to employment. They also contribute to horizontal equity, by providing greater assistance in meeting child care costs for families with more than one child in care, in recognition of their greater need. Sole parents derived the greatest benefit from child care subsidies, particularly those on low incomes working full‐time and with two children in care.

Suggested Citation

  • Deborah Schofield & Josh Polette, 1998. "Measuring the Impact of Child Care Subsidies on the Incomes of Mothers Returning to Work," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 31(1), pages 47-62, March.
    • Handle: RePEc:bla:ausecr:v:31:y:1998:i:1:p:47-62
    DOI: 10.1111/1467-8462.00050
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    Cited by:

    1. Stephen Whelan & Anu Rammohan, 2005. "Child Care and Female Decisions," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(2), pages 203-225, June.
    2. Elisa‐Rose Birch, 2005. "Studies of the Labour Supply of Australian Women: What Have We Learned?," The Economic Record, The Economic Society of Australia, vol. 81(252), pages 65-84, March.
    3. Deborah Cobb-Clark & Amy Liu & Deborah Mitchell, 1999. "Reassessing the Role of Child Care Costs in the Work and Care Decisions of Australian Families," CEPR Discussion Papers 409, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    4. Rammohan, Anu, 2004. "Child care and female employment decisions: A theoretical note," Working Papers 3, University of Sydney, School of Economics.
    5. Anu Rammohan & Stephen Whelan, 2006. "Child Care Costs and the Employment Status of Married Australian Mothers," CEPR Discussion Papers 517, Centre for Economic Policy Research, Research School of Economics, Australian National University.

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