Professor Alan Barrett:

Child care subsidies are a fascinating area. It is unusual to have an area where one can simultaneously achieve a range of policy goals. I will develop that theme slightly. The Deputy began by addressing the labour supply dimensions of this, which is correct. There is evidence to suggest that the cost of child care is genuinely an obstacle to people's participation in the labour force. Coming back to an earlier theme, one could abolish or reduce the universal social charge for everybody in a phenomenally expensive way and there will be a limited labour supply effect. With something like child care subsidies, the issue around labour supply is seeing a much more targeted focused, with euro or tax dollars being used to try to alleviate a particular difficulty. Doing something really substantial on child care will have an impact on labour supply.

The Deputy touched on the gender pay gap which leads to the next possible benefit. Research going back years from many jurisdictions shows that by far the dominant reason for the gender pay gap is the fact that women interrupt their careers. Judging by their reaction, members probably did not need an economist to tell them that. We added the science to the gut feeling that was there. It is not just women. For people who are unemployed for significant periods, the same effect happens. They come back into the labour market. They do not even go back to where they were, they often go down and certainly never get back to where they would have been if they had an uninterrupted career trajectory. If one examines the data and accounts for those career breaks, statistically one eliminates the gender pay gap. It really is all about breaks in careers. To the extent that this is a critical dimension in interrupted female careers, child care subsidies allow one to do much on the equality agenda. It is unusual that there is a labour supply effect - which is a real economist’s efficiency effect - and that there is also an equality effect. There is this tremendous benefit for kids, on the assumption that it is good quality child care. I am conscious that the economic evidence was dismissed earlier on. However, if there is one area where economists have done evaluation after evaluation, the benefits of quality early child interventions are extraordinary.