Based on ILOSTAT data, the current global rate of female labor force participation (FLFP) stands at approximately 47 percent, which is 25 percentage points lower than the participation rate for men. This significant gender disparity is a result of various obstacles that women encounter, including the responsibilities associated with childcare. Women worldwide are often designated as the primary caregivers within their households, leading them to opt for staying at home, working part-time, or temporarily pausing their careers to fulfill these caregiving duties, in contrast to men.
Addressing the burden of domestic care on women through the provision of affordable childcare services, particularly for working mothers, has been gaining increasing attention. Extensive research has demonstrated that access to affordable childcare is a crucial factor in enhancing maternal labor market outcomes. For instance, Olivetti and Petrongolo (2017) conducted a comprehensive analysis of evidence from high-income countries, revealing a strong correlation between overall expenditure on early childcare and improved labor market outcomes for women. Similarly, Halim et al. (2023) reviewed 22 causal studies conducted in lower- and middle-income countries to find positive impacts of increased access to institutional childcare on maternal labor market outcomes.
Nevertheless, an unanswered question remains: can legislation pertaining to childcare services improve women's labor market outcomes? The effect of childcare laws on women's participation in the labor market is, a priori, uncertain. On one hand, the availability of childcare services can enable women to redistribute their time from unpaid care responsibilities at home to paid work in the market, resulting in increased working hours, productivity, wages, and even influencing the nature of employment. On the other hand, women's inclination to seize these opportunities depends on the cost of childcare services relative to their potential income in the labor market, which, in turn, is influenced by factors such as the economic structure, local labor market conditions, social norms, and other considerations.
We study this question in a recent working paper. We specifically examine whether enactment of laws governing the provision of childcare in a country influences women’s labor market outcomes in that country, relative to other countries where a childcare law has not been passed, using a difference-in-difference estimation framework.
To this end, we utilize the new World Bank’s Women, Business, and the Law (WBL) childcare database to obtain information on the dates of enactment and commencement of childcare laws and other regulatory indicators related to availability, affordability, and quality of childcare services across 95 countries. The WBL childcare database is current as of October 1, 2021 and contains 50 data points of which 34 are used in the paper. The selection of indicators within each of the three pillars in the dataset is based on a conceptual framework that considers both demand and supply side constraints of the childcare market that impact parental uptake and provision of childcare services. The indicators are mapped for children below the formal pre-primary school starting age (as this is where the largest legal policy gap exists) and focus on formal center-based childcare settings for effective cross-country comparison and manageable data collection process at a global level.
The WBL childcare data was collected based on the established WBL methodology and expertise. The choice of indicators within each of the three pillars was guided by a thorough review of empirical evidence and a round of consultations with experts. The data were collected by means of desk research. Some questions on availability and affordability of childcare services were also administered to current WBL experts in labor law who completed written questionnaires and provided references to relevant legislation. The WBL team of legal experts then verified that the responses to the questionnaires were in agreement with legislative texts considering a set of standardized assumptions. Both federal and local legislation applicable to a country’s main business city were considered.
We find that the enactment of childcare laws increases FLFP rate by 2 percent, on average. This effect is driven by women who are married, have completed less than primary education, and are between the ages of 35 and 44 – these are subgroups for which a childcare law is more likely to be relevant and that are more “treatable” in terms of their LFP rate in the absence of the law. Moreover, the average effect increases over time, reaching up to 4 percent five years after an enactment (see Figure 1 below).
Figure 1. Dynamic effects of childcare enactment on FLFP rate
What specific element of the childcare attributes regulated in the law is driving this positive impact? Consistent with the existing literature, regulating childcare access and affordability increase FLFP rate. As we show in Figure 2, the magnitudes of the estimated effects of childcare availability and affordability are similar across samples, whereas the estimated impact of childcare quality is somewhat smaller.
Figure 2. Effects of childcare pillars on FLFP rate
Our study also suggests avenues for further investigation to enhance our comprehension of how laws influence women's economic opportunities. For example, what factors contribute to the implementation of regulations designed to promote childcare services? Is it primarily driven by greater awareness, pressure from the international community, labor demands, or a combination of these factors? Moreover, can we examine the effects of childcare laws on women's employment rates and wages? How do companies respond to these laws? Do they modify their recruitment and hiring policies, introducing uncertainty into the ultimate impact of the childcare law? Unfortunately, due to data limitations, we are unable to explore these questions in our current study, leaving them as potential areas for future research.
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