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Excerpt from On The Economy Blog of the Federal Reserve Bank of St. Louis
How Child Care Impacts Parents’ Labor Force Participation
By Alexander Bick, Victoria Gregory, Oksana Leukhina
July 10, 2023
As of February 2023, the number of child care workers in the U.S. was about 6% below its pre-pandemic level while the cost of child care was up by 14%. The shortage of child care workers and rising child care prices have been deemed partly responsible for the lackluster rebound of labor force participation (LFP) rates. Consistent with this hypothesis, a larger share of nonworking parents of young children and those working only part-time currently report child care needs as the main reason for their low work hours. This fraction increased from about 15% prior to the pandemic to 18% in February 2023.
How Household Needs Vary
We begin by considering time trends in LFP rates of different groups of households. If the child care hypothesis were the main factor behind the LFP dynamics, we would expect to see weaker labor supply rebounds for households with small children. In this blog post, we focus on the demographic groups qualified by gender (man or woman), presence of partner in the household, and age of the youngest child in the household, i.e., below 6 or between 6 and 17.
The figure above shows the index of LFP for women with at least one child in the household by relationship status and age of the youngest child. For all groups, the index is normalized to 100 in February 2018. The LFP index dropped sharply for all groups at the start of the pandemic (March 2020).
All groups, except single women with young children—the group that also experienced the largest impact during the initial shutdown period—have returned to their pre-pandemic LFP levels by the end of the sample (February 2023). Interestingly, women with a partner and young children—the group we expected to be most sensitive to child care prices—showed the strongest rebound with their LFP index having surpassed its pre-pandemic level. As a result, we do not see clear evidence for weaker labor supply rebounds among households with small children by early 2023.
Source: How Child Care Impacts Parents’ Labor Force Participation. (n.d.). Www.stlouisfed.org. Retrieved July 12, 2023, from https://www.stlouisfed.org/on-the-economy/2023/jul/how-child-care-impacts-parents-labor-force-participation
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