This document proposes a plan for universal free childcare in the UK to address lack of affordable, high-quality childcare and barriers to women's employment. It estimates the costs of providing childcare for all children aged 6 months to primary school by qualified staff paid comparable to teachers or living wages. While the total annual public investment would be £55 billion or £33 billion respectively, employment effects could create 1.7 million jobs and increased tax revenue would fund 88-96% of costs. Universal childcare would boost gender equality, economic growth, and is argued to be more beneficial than austerity policies.

1. Costing a Feminist Plan for a Caring
Economy: Free Universal Childcare in
the UK
Jerome De Henau
The Open University, and UK Women’s Budget Group
j.de-henau@open.ac.uk
Seminar: ‘Plan F – Better Economic Policy’
VATT Institute for Economic Research
Helsinki, 30 November 2016

2. A well-known solution to a well-known problem
• Lack of high quality, affordable and accessible childcare in UK
– Inadequate market-based supply (expensive and rationed)
– Low pay for staff and uneven qualifications
– Very unequal take-up
– Free 15h childcare for 3-4 year olds (to be extended to 30h) but
underfunded and not year-round
– Cash support to low-income families creates work disincentive for
second earner
• Universal early years childcare is beneficial:
– Early socialisation and learning with lasting
benefits
– Equalisation of opportunities
– Freeing up time for main carer / ease on their
cost burden

3. A gender-equitable employment recovery plan
• Feminist economic policy: gender equality and sustainability
• Focus on boosting employment by tapping on larger reserves
than the unemployed and promoting gender equality
– Targeting female-dominated occupations
– Removing barriers to employment for carers
– Promoting attractive working conditions (rebalancing gender
segregation?)
• Alternative to austerity and public spending squeeze
– Massive public investment in infrastructure
– Social infrastructure as well as physical
• Childcare as part of social infrastructure
• Not the building of centres but the paying of staff
– Long-term perspective necessary to maintain the social fabric
– Not just childcare for which investment case is easier to make but also
long-term care

4. What sort of universal childcare provision?
• Direct subsidy to supply / direct public provision
• At high levels of qualification, pay and staff/child ratios
• What cost and is it affordable?
 Simulating employment effects and tax revenue
 Free universal publicly-funded provision as follows:
– All children aged 6 months to primary school age (5 years) covered
– Existing staff/child ratios (by age)
– Higher pay than current
• One scenario on primary school teacher scales
• Another scenario on lower level of qualification at living wage
– Working hours on a full-time basis (35h a week)

5. Gross annual public investment
• £55bn is 3.4% of GDP; £33bn is 2.1% GDP (current public spending on
childcare is 0.4% of GDP)
• Cost of gaining qualifications and building facilities included
• Living wage scenario cheaper but need to look at employment effects
Staff:Child ratio
% of
qualified
supervis.
staff
Total cost with staff
paid at teacher
level
Total cost with staff
paid at living wage
level
Current Statut. p.h. (£) p.a. (£m) p.h. (£) p.a. (£m)
Children 6m - 1y 2.5 3 33% 14.49 17,849 8.68 10,923
Children 2y 3.2 4 50% 11.63 12,432 7.09 7,608
Children 3&4y 6 8 50% 7.84 24,330 4.98 14,889
All pre-school chi 11.25 54,611 6.88 33,419

6. Employment effects – demand side
• Using input-output tables for calculating indirect and induced
effects on employment (full-time equivalent jobs)
• Assuming gender segregation unchanged
• 1.7m FTE jobs created (4.3% pts empl. rate increase; 75% women)
• Gender hourly wage gap down from 18% to 16% (teacher pay)
0%
1%
2%
3%
4%
5%
6%
7%
All Women Men
%ptsincreaseinempl.rate
Other jobs
(teacher pay)
Childcare jobs
Other jobs
(living pay)

7. OECD comparison: investing 2% of GDP in
either care or construction industries
• Larger effect on women’s employment if investment in care than in construction
(reflects gender segregation in both industries) -> reduces gender employment gap
• Greater employment effect overall if investment in care means that men’s
employment rises by almost as much as if investment was in construction
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
const care const care const care const care const care const care const care
AUS DEN GER ITA JAP UK USA
%ptsincreaseinemploymentrate
Women
Men

8. Employment effects – matching supply?
• Freeing up time for mothers / main carers
– Childcare needs is main constraint to increasing labour supply for women
– Current (FTE) employment rate for mothers of children 0-4 is 41%
(compared to 82% for childless mothers aged 25-34 and 84% fathers of
young children)  the gap is a potential 1.2m jobs on supply
• Reducing work disincentives of existing support
– Means-Test of tax credits (including for childcare)
– Work disincentive for second earner in low income couples
– New ‘Universal Credit’ system slightly more generous with childcare (85%
of cost) but still disincentive compared to free childcare
• Full simulation would require micro-modelling of labour supply

9. How to pay? Mostly will pay for itself
• Increased revenue from income tax and
national insurance
• Increased revenue from consumption
taxes
• Reduced spending on social security
benefits
• Reduced spending on knock-on effects
of bad quality care and education
(unemployment, health, etc.)
• Boost to economic growth (reduces debt
ratio)
• Productivity improvements

10. Estimated sources of funding
• 88% of gross costs recouped in short-term (96% at current
wages):
– Direct tax revenue (between 28% and 37% in living and teacher pay
scenarios respectively)
– Indirect tax revenue (17% and 18%)
– Social Security spending reduction (35% and 24%)
– Current CC funding (15% and 9%)
• Remainder for living pay: £1.4bn and for teacher pay: £6.5bn
• Compares with £6bn income tax give-aways per annum still
to come by 2020 – to middle and higher earners (71% of
amount to men)
• If statutory staff ratios instead (still more generous in this case
as much better qualified staff than currently):
– Teacher pay: 91% (£4bn net cost)
– Living pay: 98% (£600m net cost)

11. In sum – we can’t afford not to care
• Valuing care work (paid and unpaid) makes sense:
• Narrow economic case: employment stimulus, growth engine,
productivity improvement, infrastructure with long-term benefits
• Extended economic case: more gender equality, greater social
protection, health benefits
• It goes along with investment in sustainable resources and
processes
 Caring for people and their environment
• Investing in a caring economy may be expensive (and will
require substantive public funding) but
– Rewards far greater than austerity policies
– Necessary feature of a modern, lasting and
civilised economy