The Impact of the COVID-19 Crisis on Childcare and Implications for Participation in the Labour Market

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In this blog, Dr Sara Hassan looks at the impact of COVID-19 on the childcare sector, a sector already facing significant challenges before the pandemic, which then saw a massive drop in usage when lockdowns began. 

Since lockdown, many working parents have experienced difficulty in being able to work with some childcare providers closing their doors. Covid-19 has severely impacted on the systems and structures in place to support these parents. Formal childcare providers such as nurseries, childminders, babysitters and nannies are an essential part of that support structure. In addition, they are the major route to delivery of government entitlements for free early education. These entitlements are fundamentally a lifeline for families from low income and vulnerable groups. This stress to families across the UK had potentially an overwhelming effect on the ability to work and participate in the labour market.

Impact on Children and Parents

During the lockdown, almost all the children aged (0-4) ceased use of childcare except for vulnerable and key worker children. Furthermore, even after easing the restrictions in July 2020 only 25% returned to their childcare provider settings, this went up to 47% in September 2020 (see statistics here). The closures of childcare providers to most families during COVID-19 has highlighted the importance of access to childcare providers not only as means of shaping young children’s environment and affecting their mental wellbeing but also to support paid work for these families. Unsurprisingly, ONS data in July 2020 shows that more women have carried out more childcare duties overall (see website here). The consequences of having to care for children in this early years’ stage hit women’s employment disproportionately as a report by Working Families charity indicates (see report here).

Impact on the Childcare Sector

Many childcare providers saw a long-lasting fall in demand for their services while they attempted to get their business back at an ever-increasing cost of providing a service that is in line with the social distancing rules and requirements. A report by the Institute for Fiscal Studies (IFS) questions whether the childcare sector will recover and return in the next 6–12 months as the support from the government is phased out. The childcare market was argued to witness a huge turnover in services provision even before the pandemic. With providers increasingly facing cuts in support from local councils, many providers leave and new businesses open, trying to adjust to parents’ preferences. The instability of this market threatens the support of working parents and increases the likelihood of socio-economic inequalities.

Many childcare providers saw a long-lasting fall in demand for their services.

The report recommends two approaches to support the childcare market. One is the support of businesses reliant upon parent fees and the other is to prioritise support towards publicly funded childcare through free early years’ entitlements. Although the government kept directly public-funded hours for childcare during lockdown, most childcare providers were still in a vulnerable position as many combine public and private income and so were often still vulnerable during the lockdown. This signals a turbulent future for the market as it adjusts to changing levels of demand. The drop in demand triggered by the pandemic poses a risk and a challenge to both childcare providers’ finances and policymakers. Both need to monitor the capacity and demand for all types of providers for all age groups.

Research by LSE and Centre for Economic performance suggests that the providers who faced a significant deficit during lockdown are those who operate in more deprived areas, those providers with highly qualified staff and smaller providers such as self-employed childminders (see report here). Failure to support childcare providers risks the closure of otherwise healthy businesses that ‎tipped into temporary deficit as a result of the pandemic. ‎Providers who rely on free entitlements were financially more cushioned than those who relied on parents’ fees. The unprecedented drop in demand coupled with the impact of lockdown restrictions and following social distancing and hygiene measures can have a negative impact on their incomes in 2021.

Demand on these providers is further affected by changing perceptions of working parents. In a report, by the Working Families’ charity (See the report here), 1,063 working parents and carers were surveyed many of whom experienced flexible working during the lockdown. The survey shows that 89% of working parents and carers did not want their employers to revert to business as usual after lockdown is lifted. For some parents, their hours may have been reduced because their employer has less work for them to do. Whilst this may be welcome for some families because schools and childcare settings have closed, it will affect their earnings. This illustrates the inter-related challenges faced by working parents, childcare providers and employers.

References:

Claudia Hupkau and Barbara Petrongolo, 2020, Work, care and gender during the Covid-19 crisis, CEP COVID-19 ANALYSIS, Paper No.002, Centre for Economic Performance, LSE

Jo Blanden, Claire Crawford, Elaine Drayton, Christine Farquharson, Megan Jarvie & Gillian Paull, 2020, Challenges for the childcare market: the implications of COVID-19 for childcare providers in England, IFS Report R175, Institute for Fiscal Studies

Working Families, June 2020, COVID-19 and flexible working: the perspective from working parents and carers

Working Families, 2020, Weathering the storm: the COVID-19 pandemic and working parents

ONS website

Attendance in education and early years settings during the coronavirus (COVID-19) outbreak, Education statistics website.


This blog was written by Dr Sara Hassan, Research Fellow, City-REDI / WM REDI, University of Birmingham.

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Disclaimer: 
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI / WM REDI or the University of Birmingham

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