Should we compensate mothers who choose to remain at home?
These are results from Finland, and one might question the generalizability of them; however, it is not the first time that results of this kind have been found:
We investigate the effects of a policy that offers financial incentives to mothers who choose not to participate in the labor force while their children are still younger than three years old. We show that the Finnish Home Care Allowance (HCA) decreases maternal employment both in the short term and in the long term by using regional and over time variation to demonstrate our point. The effects are significant enough for the provision of a home care benefit system to account for Finland’s significantly higher short-term child penalty in comparison to that of other nations in the same situation. Children who receive home care benefits have lower scores on early childhood cognitive tests, a lower likelihood of attending an academic high school, and a higher rate of juvenile delinquency. Additionally, these children are more likely to commit crimes. By analyzing a day care fee reform that had the opposite effect of raising incentives to work – with correspondingly opposite effects on mothers and children compared to HCA – we are able to confirm that the mechanism of action is shifting the balance of work and at-home child care responsibilities. Our research suggests that moving child care responsibilities away from the home and into the market leads to higher labor force participation and better outcomes for children.