Taking Care of Children...and the Economy

Japan and the United States both lack an affordable daycare system that keeps women in the workforce. Korn Ferry’s Evelyn Orr asks: Is that hurting these countries’ economic growth?

At a time when the world needs strong leadership, it’s all hands on deck. Yet data shows that women continue to be an underleveraged resource. In this regular column, Evelyn Orr, vice president and chief operating officer of the Korn Ferry Institute, will explore the intersection of career, relationships, and gender, and their impact on families, organizations, and society.

“It was the best of times, it was the worst of times.”

When my first child was born, it was already too late to get her into a high-quality infant daycare. My husband chose to stay home with her for the first year—meaning, from an economic perspective, one less person in the workforce, and less discretionary income for us.

As a toddler, our daughter attended a new daycare, experiencing some growing pains as teachers established routines. One week she was bitten by another toddler. When she was bitten again the next day, I stayed home with her for a couple of days—meaning, from my employer’s perspective, lost productivity.

A country’s gross domestic product (GDP) relies on two things: increased labor force and increased productivity. Two of the world’s biggest economies are not building the infrastructure and support to maximize their human resources and grow their GDP.

Could lack of daycare be what’s keeping economic growth in the 2% range?

Japan has record low unemployment and a significant labor shortage. The decreasing birth rate has meant a net decrease of one million people per year on average, contributing to sluggish growth. At the current rate, demographers project that Japan’s population will drop to 80 million people by 2060, down from a peak of 128 million in the early 2010s.

Rather than turning to immigrant labor, Japan has tried to encourage people to have more babies. New babies need a lot of care, and the Japanese government has shown its support by offering subsidized programs. But that only helps if there are enough spots to go around.

Here is the other wrinkle: people who work in childcare are primarily women. When they get pregnant and have their own babies, social norms and policies prevent these new mothers from going back to work—taking care of babies and children so that other parents may also go back to work.

If women who are mothers are not welcome to work at daycare centers, what work environment could possibly be open to them? Some industries, like construction, have tried to recruit women to their predominantly male ranks with amenities like decorative pink toilet seats. But unpredictable work hours persist, making it impossible for new parents to plan for childcare—which, as I’ve mentioned, is already scarce.

While birth rates have risen slightly, women are marrying and having children later in life. They want to stay in the workforce and contribute their skills, and delaying marriage and family is one way they avoid the pressure to give up their careers.

Connecting the dots between demand and supply and the positive outcomes should be easy. After all, economics uses rationality and logic as a foundation. But when logic fails, we are in the realm of behavioral economics, which catalogues dozens if not hundreds of biases that interrupt a purely rational system based on individual choices and cultural norms.

Japan is not the only economy constrained by lower rates of women in the workforce. In the United States, women’s participation in the workforce was on the rise until the year 2000, and has been in slow decline this century. There are many factors, but a shortage of affordable daycare is one reality.

The US Department of Health and Human Services suggests that families should not spend more than 10 percent of their household budget on daycare costs. The same government agency reports that the median income for a family of four is $73,298.

So what’s the problem? The average cost for infant childcare at a daycare center is $1,230 per month or $14,760 per year. For families to follow government guidance, they either need their salaries doubled or their childcare bills cut in half.

In developing economies, businesses often take responsibility for building infrastructure that allows them to grow. If the economy of supply and demand is not sorting itself out when it comes to daycare, companies that want to keep skilled workers who are also parents may want to factor daycare into their business plans.