When Childcare Disappears: Household Labor Supply, Gender Inequality, and Informal Work

• In Event: Policy Influences on Labor Force Participation and Employment over the Life Course

Abstract

Care responsibilities are central to household organization and to the persistence of gender inequality in labor markets. Care work, which involves activities that support dependent individuals (Batthyány, 2015), is disproportionately performed by women, particularly when it remains largely unpaid (McConnon et al., 2022). The presence of young children reshapes intra-household time allocation, often leading mothers to reduce labor supply, shift into informal employment, or exit paid work (Goldin, 2021). These adjustments contribute to persistent gender gaps in employment and earnings, including the “motherhood wage penalty” (Kleven et al., 2018; Aguilar-Gomez et al., 2026). While public childcare provision can relax these constraints and increase maternal employment (Baker et al., 2008; Bauernschuster & Schlotter, 2015), little is known about the consequences of withdrawing such support. This paper examines the labor supply effects of the abrupt 2019 termination of Mexico’s Programa de Estancias Infantiles (PEI), a large-scale childcare subsidy targeting low-income women without access to social security. Using a panel of Mexican municipalities from 2017–2019 and exploiting cross-municipal variation in pre-termination program intensity, we implement a dose–response difference-in-differences design. Municipalities with higher baseline enrollment experienced a larger childcare shock, allowing us to estimate how households more exposed to PEI adjusted relative to less exposed areas. We find that households in high-exposure municipalities reduced weekly hours worked by approximately one hour (about 2 percent relative to pre-termination levels). This adjustment operates primarily along the extensive margin: the probability that at least one adult household member is employed declines, while hours conditional on employment remain unchanged. We do not detect short-run declines in total household income or shifts into informal employment, suggesting selective withdrawal from employment rather than broad reductions in work. These average effects mask substantial heterogeneity. Labor supply contractions are concentrated among households with children aged 0–2, for whom no universal public substitute exists, while households with older children show no significant changes. Effects are substantially larger among female sole providers and informal workers, particularly in occupations such as street vending and domestic work, where weekly hours decline by 4 to 7 hours. These patterns indicate that the interaction between caregiving intensity and labor market precarity generates disproportionately large labor supply responses, amplifying pre-existing gender and socioeconomic inequalities. By focusing on policy dismantling rather than expansion, this study provides causal evidence on how the removal of childcare infrastructure reshapes household labor allocation. These findings are directly relevant to the U.S., where childcare policy is increasingly shaped by state-level variation amid a shrinking federal role. As pandemic-era supports expire and investments become uneven across states, reductions in childcare access are likely to lower maternal employment, increase reliance on informal care, and widen gender and income inequalities. This evidence underscores that childcare functions as essential labor market infrastructure, and that policy retrenchment can have measurable consequences for both family well-being and economic participation.

Author

• Johabed G. Olvera, Pennsylvania State University
  Presenting Author