In June, the Center for Global Development and the World Bank’s Early Learning Partnership convened a series of technical workshops aimed at informing the priorities and approach of the newly launched World Bank Group (WBG) Invest in Childcare initiative. A group of experts discussed a range of topics relevant to the initiative’s research agenda and wider operations, including the returns that childcare investments can yield and ways of calculating them.
Although demand for childcare is growing, governments still need to be convinced to prioritize childcare, especially in the context of increasingly constrained resources. Context-specific data on the return on investment (ROI) opportunity can help elevate childcare as a priority among governments, philanthropists, private sector investors, and others—and, in doing so, maximize the reach and impact of investments in childcare.
The conversation began with presentations by Ben Leo, founder and CEO of Fraym; Maria Floro, professor emerita of economics and principal investigator of the Care Work and the Economy Initiative at American University; and Jerome De Henau, senior lecturer in economics at The Open University. Each researcher offered a unique methodological approach to calculating the ROI that childcare can yield, focusing on caregivers’ economic outcomes, such as labor force participation, employment, earnings, and time allocation on market work. Specifically:
- Ben’s team at Fraym conducted large-scale, representative mobile phone surveys in India, Indonesia, Kenya, Nigeria, and South Africa. By asking caregivers about their preferences for childcare provision and potential labor force participation if they were to have access to quality, affordable childcare, the Fraym team was able to estimate the extent to which caregivers’ labor force participation would increase, and by extension, how much additional income they would earn. Fraym estimated the economic benefit primary caregivers could reasonably expect to earn through entering or reentering the labor force. Their studies suggest a range of estimates, from a 3:1 return (i.e., for every $1 invested in quality childcare, $3 in generated income is anticipated) in Nigeria to a 7:1 return in South Africa. Fraym also considered a more conservative scenario that incorporates a discount for the national unemployment rate into the ROI assumptions, which yielded a lower-bound estimate of a 2:1 return in Nigeria and 5:1 in South Africa. See their studies linked here for more details.
- Maria’s team, working through the Care Work and the Economy Initiative, has positioned childcare within the broader context of care provision, including eldercare. In South Korea, for example, researchers from the initiative conducted policy simulations estimating the impact of increasing government spending on childcare, increasing care worker wages, and increasing fertility rates on women’s labor supply, wage incomes, gross domestic product (GDP), and total consumption. They find that an increase in government investment in childcare of 0.15 percent of GDP in each year of 2022-2030, for example, would result in a 1 percent increase in GDP by 2030. See the paper linked here for more details.
- Jerome presented a simulation focused on the United Kingdom, estimating the ROI of overhauling the existing childcare system and instead providing high-quality, free, universal childcare to children ages 6 months to 5 years old. “High-quality” includes low staff-to-child ratios, and higher pay, pension contributions, and training for care workers. Assuming take-up rates of 71 percent (the current take-up rate of childcare in the UK) and 85 percent (the take-up rate in Nordic countries), Jerome’s model estimates that overall, women’s employment would increase by 3.4 and 4.6 percentage points, respectively. See the full paper linked here for more details. Jerome, in partnership with colleagues from the International Labour Organization, has also run similar simulations across 82 economies, providing ROI evidence for women’s economic outcomes across a wide range of contexts.
Details about each approach for estimating childcare’s ROI are summarized below:
Nationally representative household surveys + simulated results
Every $1 invested in childcare programming could yield:
Martín Cicowiez and Hans Lofgren
Simulated results using GEM-Care model
An increase in government investment in childcare of 0.15 percent of GDP in each year of 2022-2030 would result in a 0.6 percent increase in women’s total time in GDP work and a 10.5 percent increase in women’s market GDP care work.
Jerome De Henau
Women’s employment would increase by 3.4 percentage points at a 71 percent take-up rate and 4.6 percentage points at an 85 percent take-up rate.
CGD’s next phase of work on childcare will include summarizing the full range of studies estimating childcare’s ROI across contexts, mapping where evidence already exists and where there are remaining gaps to fill. This mapping exercise will allow researchers and policymakers to find context-relevant evidence to support an expanded childcare agenda. The review will include a broad range of ROI methodologies, including impacts for the great variety of people currently providing childcare, and ways of measuring both direct and indirect impacts, such as increased earnings for children later in life. If you know of other methodological approaches and tools being used to determine childcare’s ROI that we should consider in our review, please reach out to Megan O'Donnell.
Through the Invest in Childcare initiative, and in partnership with other organizations, the WBG will build on existing ROI evidence and methodologies to develop a comprehensive approach on costing and ROI that considers the wide range of benefits to childcare (for women, children, families, businesses, and economies). This approach will be piloted across a number of countries and help promote investments in childcare within country strategies and operations as well as contribute to global data collection efforts. The tools that are developed will be made publicly available.
Participants at the June technical workshop included Megan O’Donnell, Kehinde Ajayi, Shelby Bourgault, David Evans, Amanda Devercelli, Frances Beaton-Day, Tanima Ahmed, Tea Trumbic, Marina Elefante, Elizaveta Perova, Rachel Cassidy, Jacobus Joost De Hoop, Jody Heymann, Laura Addati, Ben Leo, Maria Floro, Elizabeth King, Jerome de Henau, Alaka Holla, Robert Hughes, Patricia Wekulo, Florencia Lopez Boo, Laura Alfers, Sneha Sharma, and Shekufeh Zonji.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.