Tuesday, July 20, 2010

Offering childcare to unemployed actually helps

Unemployed workers who stay unemployed for a long time are a cost to society, because they receive unemployment insurance and other social benefits, and because their human capital depreciates and they will thus less be able to contribute in the future. That does not preclude unemployment insurance from being useful, it should just not be used more than necessary. How could this be guaranteed? There is plenty of literature about the optimal design of unemployment insurance, but this helps little when unemployed workers face concrete hurdles to returning to work.

Ulrika Vikman looks at Sweden where some unemployed workers are eligible for free childcare conditionally on returning to work. While the probability of transitioning to a job is unaffected for men, it definitely works for women, especially if they have two children. Clearly, offering these services lowers significantly the reservation wage for mothers. By how much would give an interesting insight how mothers value childcare, unfortunately the data used here does not include wages.


Mark B. said...

That seems to make sense intuitively, especially in a single-parent household.

sienasimmons said...
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