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Investing in subsidized childcare to reduce poverty

Expanding childcare is often considered as a suitable way to enhance employment opportunities for mothers with young children as well as to reduce child poverty. In this study, the authors critically investigate this assertion by simulating a set of scenarios of increasing subsidized childcare slots and mothers’ employment. For a variety of European welfare states, the impact on poverty and on the government’s budget is estimated using the European microsimulation model EUROMOD. The findings suggest that to achieve significant poverty reductions among young children, both additional childcare slots and increased mothers’ employment should be well targeted. The expenditures for additional childcare slots can to a large extent be recovered by the government receipts generated by the additional employment; however, there appears to be a trade-off between the extra revenue that can be generated and the extent of poverty reduction.