M1's editorial partner, Charter, spoke with researchers about the power of access to child care on women's employment, women's earnings, and firm productivity.

One change in the current U.S. administration's budget reconciliation bill is a $16 billion investment in caregiving in the form of tax credit programs.

The new law benefits families both directly—through the expanded Child and Dependent Care Tax Credit and Child Tax Credit—and indirectly through their benefits packages, by raising the limit for employer-sponsored Dependent Care Flexible Spending Accounts and tripling the tax credit for businesses to provide child-care benefits.

(Critics note the bill does little to increase the child-care supply, and low-income workers and hourly workers without workplace child-care benefits will be left out of many of these provisions—the same families who will likely suffer most from the bill’s cuts to the Supplemental Nutrition Assistance Program, Medicaid, Medicare, and the Children’s Health Insurance Program.)

In a recent National Bureau of Economic Research working paper, researchers uncover the benefits of comprehensive public investment in child care for both companies and individual workers. Using empirical data from Quebec, where the provincial government introduced government-subsidized, universal child care in 1997, the authors analyzed women’s career progressions and firm outcomes.

Charter spoke with Elena Simintzi, associate professor at UNC Kenan-Flagler Business school and co-author of the paper, to learn more about her research findings and the most important insights for employers. Here are takeaways from the conversation:

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The effect on women: The researchers analyzed administrative tax filing data from Canada’s national statistics agency, which include information on employment, earnings, and family structure, as well as reasons for job separation and firms’ financial information.

They found that by “providing child-care access to women, you see gains in terms of new mothers’ employment as well as their earnings,” says Simintzi. (A similar effect was not observed among new fathers.) Beyond that, access to child care reshaped women’s job selection. “Providing them child-care access allows them to reallocate their careers to more demanding types of employers, to previously unattractive employers,” she says.

Nobel-Prize-winning economist Claudia Goldin has dubbed these jobs, which pay premiums for long hours and inflexible schedules, “greedy work.” In her 2021 book, Career & Family, she explains how these greedy jobs exacerbate the gender pay gap. “Men generally opt for the jobs that have greater time demands but pay more,” Goldin notes. “Relative to women, they generally care less about the time flexibility and more about the earnings advantage.”

In other words, “there are some child-care frictions that limit women’s career progression,” says Simintzi. “Once you alleviate those frictions, in this case via that policy in Quebec, you see that the allocation of human capital is improving because [women] choose careers that they couldn’t or they wouldn’t choose to follow before.”

Between 1998 and 2021, the gender pay gap in Quebec shrunk from 83 cents earned by women to every dollar earned by men to 91 cents. In the US, the pay gap remains at 85 cents for women to every dollar earned by men.

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The impact on firms: The positive effects of universal child care weren’t limited to workers. When women have child-care access, companies “are able to hire more women and they become more productive and they do better as well,” as measured by sales growth, labor productivity, and return on assets, says Simintzi.

Before the reform, “these firms didn’t have access to a certain pool of talent,” she explains. “Now they can access that pool of workers and that improves their bottom line.” Across all firms, mothers had reduced absenteeism after gaining access to child care, further supporting increases in productivity.

To be sure: There are limits to how generalizable the study’s results are to most American employers today, given the study’s specific context. Still, “Canada is not very different than the US in terms of the general pay gap or in terms of female participation in the workforce,” Simintzi says.

The one key difference, she says, is the more market-based approach to many social services in the US, both historically and today. “We have firms that are voluntarily providing child-care benefits to their workers… something that presumably was not available to the same extent in Quebec in 1997,” she points out.

Her prior research on parental leave benefits indicates that these kinds of employer-based programs can also help attract and retain caregivers, while boosting firm performance. “Firms that voluntarily offer these types of benefits attract women and do better,” she says.

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Michelle Peng is a senior reporter for Charter, a media and insights company that publishes articles, shares original research and hosts events for workplace decision-makers. This content is brought to you through M1's partnership with Charter. More information about gift subscriptions for our members can be found here. 

Copyright 2025, Charter. This article is reprinted with permission from Charter. All rights reserved.