Global Thoughts

Australia is not alone in it’s challenges regarding women in leadership roles – and the need for talented educated people to stay in the workforce to deliver economic growth. What we see is people and particularly governments simply are not prepared to think big on the issue – but Free Childcare would provide significant employment growth on many fronts – From Denmark, The Netherlands to Chile – other economies, academics and business leaders are taking a serious look at what could be possible with a Free Childcare economy:

FREE CHILDCARE PAYS FOR ITSELF – Bernard M.S van Praag – The Netherlands

A modern women can not and will not be content with a jobless existence, now even more than 35 years ago, when I first pleaded for free childcare in the Netherlands. A very large majority of women want to participate in paid labour. And that is no longer only a preference but a sheer necessity, because most households are no longer able to get by on one income. Many families are facing a difficult choice: they have to choose between work and children. This is a terrible dilemma that is usually solved by postponing children which more and more results in cancellation. Opting for children leads to extra costs in terms of extra food, clothing accommodation but for women there is also the lack of a prosperous career, and sometimes this also applies to men. All this implies that having children has become a luxury, a luxury which only high incomes are able to afford. Now one can argue that the choice for children must be left to every single individual including all the consequences that follow from this choice. I believe however that such a position would be at odds with the fundamental equality all human beings, man and woman, poor or rich. Every couple that wishes so should have the possibility to opt for children without having to face serious disadvantages for their careers, now and in the future.

The question then arises who should pay for childcare facilities and who has to pay for all measures connected to children. It is often suggested – and this is what happens on a large scale in the Netherlands- that employers should make a very large contribution. I am against this. The current practice is completely wrong. It creates employers who are looking for staff without children or for staff whose probability of having children is small. The recently proposed change where the employer is obliged to pay for every worker, irrespective if s(h)e has children or nor, is better but not good enough, because it leads to an increase in the price of the factor labour. Childcare must be regarded as a public good just like the provision of roads, education and safety. This implies the financing out of general taxation. In my article of 35 years ago I argued that the cost of childcare can be more than paid for out of the extra tax income that is generated by the working women. Suppose that a woman who starts working earns €25.000 and that she pays around €8.750 in taxes. Suppose that childcare for four children costs €30. 000, than it is clear that this extra cost can be paid with the extra tax money of these four mothers. And in this example I have not yet looked at the additional benefits following from the fact that these women will continue to work and pay taxes long after their children have left the household, while without childcare they would not have started a job or they would have had to accept a lowly paying job of bad quality.
We can of course discuss the exact amounts in this example, this is something I will leave to others, but the principle is clear: a large part of the cost for childcare will be covered by the tax revenues of the working mothers. To this one should then also add extra VAT revenue and multiplier effects.

There is one point where the situation in 2006 clearly differs from 1970, when I first advocated the case of free childcare. In 1970 very few women worked and every working woman meant additional income tax revenues. At present most women are working and their tax revenues are already used for other government expenditures. The previous calculation implies a different spending of at least part of current tax revenues for more childcare. The Dutch Labour party thinks that the extra costs are around €2.3 billion. Even if this is an estimate, which may be too low, it shows that we are talking here about a manageable amount, when compared to an overall state budget of €250 billion. Moreover even this measure will still trigger an impulse for the economy and lead to extra tax revenues.
There is another reason why we should welcome such a measure. And that is because of the demographic impulse that may emanate from it which could mitigate ageing. It is not a surprise that the Scandinavian countries are much less aged than the rest of Europe. This has much to do with generous childcare and paternity leave schemes. The deceleration of ageing will exert a positive influence on the Dutch economy. The question is also if we should distinguish working mothers and not working mothers when providing free childcare. The (Dutch) Labour party says no while the Conservatives would like to limit free childcare to working mothers. In view of the argument presented above I do not see any reason why we should make child care facilities available for free to nonworking
mothers (or fathers).

Prof. dr. Bernard M.S. van Praag is an economist; he is university professor at the University of Amsterdam This an English translation of an article appeared in the Dutch newspaper NRC-Handelsblad on 28/9/2006.

The OECD started the conversation about the change in society – the following article outlines how the limitations of childcare are causing limitations to the growth of OECD economies

Concern about child care has grown strongly in OECD countries in recent years. This reflects a growth in the demand for “quality” child care of a sort which facilitates the social and educational development of young children. There are many reasons for this. They include changes in household composition, rising female participation in the labour market (especially by mothers
of young children), the growing number of women who are heads of one-parent families… down load full article

More than twenty years ago the Swedes began the debate about the impending difficulties facing its economy if it could not supply consistent and effective childcare to all Swedes.

High Demand for child care… Swedish women have one of the hightest employmennt rates in the western world – around 80% of all Swedish women with children under the age of seven are gainfully employed. It should be pointed out that an unusually large number work part-time… Download full article.