Poland’s child benefit “Family 500+” decreases female labor force participation
A working paper co-authored by IZA World of Labor author Iga Magda for the Institute for Structural Research (IBS) looks at the impact of Poland’s Family 500+ child allowance on female labor supply in Poland.
“Family 500” is a child benefit introduced by the Polish government in 2016 with the aim to increase fertility from a low level and reduce child poverty. The benefit is universal for every second and further child and means-tested for the first child.
In a previous IZA World of Labor article on the motherhood wage penalty’s impact on pronatalist policies, Olena Nizalova writes, “The current strategy in many post-socialist countries of offering so-called “baby bonuses” to increase fertility is not working. Alternative policies aimed at reducing the motherhood wage penalty may be more effective: for example, publicly provided childcare and moderate length parental leave combined with a campaign to promote cultural support for maternal employment.”
Increasing out-of-work income significantly, the transfer reduces the incentive to participate in the labor market through an income effect. For example an unemployed single mother of two children taking up a job that pays the average wage would retain less than 20% of her earnings as a result of taxes and benefit withdrawal. Once taking childcare costs into account, which can be very expensive in the private sector, she would actually lose money.
IBS’s working paper finds that the labor market participation rate of women with children has decreased after the introduction of the benefit compared with childless women. The estimates suggest that by mid-2017 the labor force participation of women decreased by 2.4% as a result of the 500+ benefit. The effect was higher among women with lower levels of education living in small towns.
The paper suggests that it will be interesting to assess whether the benefit has an impact on fertility, as intended by the government. However, they note it will be difficult to distinguish the reform effect as the country’s booming economy, the improved labor market, rising incomes or better access to childcare services will have made it easier for families to have more children.
Read more about Poland’s labor market.
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