Care Labor Demand Shocks and Inequality: How Childcare Costs Exacerbate Inequality among American Families

Working paper number: 
2022-85
Paper Abstract: 
This article argues that care infrastructures can shape family income inequality and examines access to childcare services in the US as a case study. We propose that market-priced childcare systems generate inequalities in how births impact mothers’ income contributions to families and aggravate family income inequality as a result. Using the Survey of Income and Program Participation (SIPP) merged with state-level childcare prices, we estimate individual fixed effects regression models for the consequences of births on family income and on its proximate determinants: mothers’ labor supply and earnings, and partners’ labor supply and earnings. Our models include state and year fixed effects and identify the impact of childcare costs from within-state variation in childcare prices. Our analyses show that births increase family income inequality due to the negative impact of births on mothers’ earnings and that the negative impact of births on mothers’ earnings is not compensated by increases in partners’ earnings or income transfers. We find that higher childcare costs accentuate birth earnings penalties for mothers without college degrees, but not for mothers with college degrees. In all, we show that childcare costs exacerbate family income gaps between women without and with a college degree by 29 percentage points.