Can Mothers Afford to Work in Poland: Labor Supply Incentives of Social Benefits and Childcare Costs

35 Pages Posted: 9 Jan 2018 Last revised: 12 Jan 2018

Date Written: January 8, 2018

Abstract

This paper analyzes the incentives to labor supply faced by families, particularly mothers, with young children in the context of a recently introduced fertility promotion benefit in Poland. The paper is based on an adapted version of the Organisation for Economic Co-operation and Development's Tax-Benefit Model, which estimates households' net earnings after taxes and social transfers at different levels of wages. Since the recent introduction of the 500 benefit, some households face steep marginal tax rates due to the benefit withdrawal rules. Single parents with two children, and second earners with one child can expect their income to increase by only 30 and 25 percent of the minimum wage, respectively, if they take up a job at minimum wage. If they must also pay for childcare, having all adults working can cause losses of up to 30 percent compared with if one adult stayed home. Although the 500 program radically contributed to reducing child poverty, in the absence of complementary reforms, these disincentives could affect more than half a million households, disproportionately in the lowest quintile. Vouchers for private childcare have been adopted by some municipalities in Poland to counter unmet demand for public nurseries. A 75 percent subsidy of typical childcare costs would restore the financial viability of low-paying work for mothers with young children. Alternative remedies include a reform of the eligibility and withdrawal rules of the 500 program.

Keywords: Disability, Technology Industry, Technology Innovation, Gender and Economic Policy, Economic Assistance, Gender and Economics, Services & Transfers to Poor, Economics and Gender, Gender and Poverty, Access of Poor to Social Services

Suggested Citation

Bargu, Ali and Morgandi, Matteo, Can Mothers Afford to Work in Poland: Labor Supply Incentives of Social Benefits and Childcare Costs (January 8, 2018). World Bank Policy Research Working Paper No. 8295, Available at SSRN: https://ssrn.com/abstract=3098572

Ali Bargu

University of Oxford

South Parks Road
Oxford, OX1 3QZ
United Kingdom

Matteo Morgandi (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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