Into the Great Wide Unknown: Untangling the Relationship between Childcare Service Use and In-Work Poverty

In the literature on in-work poverty (IWP), childcare services are often assumed to be an effective policy instrument in reducing the number of working poor. However, such assumption has never been properly put to the test. This chapter provides, for the first time, empirical evidence on the role of childcare services in combating in-work poverty. First, a conceptual overview of the pathways through which childcare service use is expected to reduce in-work poverty. Second, a comprehensive overview of the literature on the employment effects of childcare use is provided. Third, drawing on the 2012 wave of the European Union Statistics on Income and Living Conditions (EU-SILC), the link between using formal childcare and IWP is examined at both the micro and the macro level. The results provide evidence for an aggregation paradox: there is no link between the level of formal childcare use and the IWP rate at the country level, while using childcare at the household level is related to a lower risk of being working poor. This can be explained by the fact that families using formal care are also families with higher levels of work intensity. Finally, we argue that the type of care matters much as we find that informal care arrangements are related to higher levels of IWP.