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HR Policies and Maternal Labor Supply

The Example of Employer-Supported Childcare

Series:

Susanne Schneider

The author asks how far the extension of employer-supported childcare serves as a driver for higher maternal labor supply. She addresses this question by categorizing employer-supported childcare as an efficiency wage introduced by the employer to increase the working volume of mothers. Applying various impact evaluation techniques in an econometric analysis, the author concludes that the availability of employer-supported childcare has a positive impact on the length and working volume of mothers who return back to work after giving birth. Furthermore, the usage of employer-supported childcare by mothers with pre-school age children influences the amount of agreed and actual working hours positively.

 

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2. Framing the Picture: Maternal Employment and Childcare

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2.  Framing the Picture: Maternal Employment and Childcare

The purpose of this chapter is threefold. The first part describes maternal labor supply, thereby contextualizing the employment rates of mothers, comparing them, for example, to male employment rates, or classifying them according to socio-demographic characteristics. The third part deals with maternal LFP and the resulting dependence on childcare. It also discusses the reasons for choosing part-time compared to full-time employment. The third section then discourses the provision of childcare by state and employer before describing the current situation of ESCC.

2.1  Male, female and maternal labor force participation

This section starts by putting the German female LFP into an international context. The subsequent table shows the total and female LFP rate for distinct industrialized countries and groups of countries.1

Table 2-1: LFP rate in certain states in 2014 in percent for women and total aged 15 to 65

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Source: OECD (2015) ← 21 | 22 →

Switzerland’s LFP rate with approximately 84 percent is the highest participation in table 2.1. Germany lies at 78 percent as a whole and 73 percent for females. Compared to the other countries, Germany is in mid-field. The higher the total LFP of a nation, it appears in this table, the higher the percentage of female LFP. For instance: Sweden’s female participation rate of 79 percent shows, like Germany, a five percent gap to total LFP, whereas Japan’s total of 76 percent LFP shows a ten percent gap to female LFP with 66 percentage points. This raises questions in regards to the gender split within LFP rates.

Table 2-2: LFP of men and women between 1960 and 2014 aged 15 to 65 years

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Source: Statistisches Bundesamt (2015)

The table shows an increase of women in the labor force between 1960 and 2014 from 48 to 73 percent. Simultaneously, the LFP rates of men decreased during the same time span from 91 percent to 82 percent. The discrepancy between the employment rates of women and men decreased significantly from 1960 to 2014. These changes over half a century are a reflection of a variety of developments, as married women now started to enter the labor market. Since women were systematically integrated into the labor market as paid labor due to political ideology, former East Germany experienced an even quicker rise of women in the nation’s LFP throughout the centuries (Müller, Handl, & Willms, 1983).

After World War II, many women were forced to work on the one hand due to the large amount of men who did not return from the war or who stayed in captivity, and on the other hand due to economic needs. After returning from captivity and the simultaneous foundation of the Federal Republic of Germany, certain regulations excluded women from performing their employment as before. For ← 22 | 23 → instance, female civil servants, whose husbands were employed in the public sector as well, were allowed to be fired. Hence, during the 1950s, the breadwinner model dominated. Consequentially, the expansion of public childcare facilities stopped, which exacerbated the employment opportunities of mothers substantially. Beginning in the 1960s, the economic growth inhabited primarily an increased demand of labor, which went however along with a raise in fertility rates, impeding entering employment even more. Nevertheless, especially younger women benefitted from the education expansion. The economic growth with the increase in service sector jobs and flexible working arrangements (for instance part-time) increased the demand of workers well suited to the expectations of female workers. Societal developments including the debate on equality starting from 1968 pushed the employment rates of women. Just from the middle of the 1970s onwards, wives were allowed to work without the explicit permission of their husbands. The law was in line with the renunciations of the role model as a housewife in society. The new attitude of women resulted in increased divorce rates, which inhabited that many women needed to work out of financial reasons. Consequentially, the unemployment rates of men increased at the end of the 1970s due to the increased female LFP. Hence, other groups of wives needed to enter employment to compensate the loss of income (Drobnic, 1997). From then to the beginning of the 2000s, the female LFP saturated to 70 percent.

While the table indicates a convergence of the LFP rates between the two genders over time, four substantial differences do prevail in the present. Firstly, women and men are working in different gendered occupations, which is called horizontal segregation. Secondly, they occupy different positions and ranks, when working within the same field, leading to a vertical segregation. Thirdly, the working volume differs between both genders substantially referred to as the gender time gap. These three markers of gender within the labor force then lead to the fourth gap between male and female labor force participants, the often debated gender wage gap, addressing differences regarding the salary practices for men and women (Allmendinger, 2010).

Starting with horizontal segregation, Allmendinger (2010) refers to the variance of occupations in which women are working. Around half of all employed women are working in five out of 87 employment groups. Approximately 20 percent work in “office-related” occupations such as secretarial jobs, another ten percent in health services, nearly eight percent in retail, around seven percent in social services, and six percent are employed in custodian jobs. In comparison, around one quarter of all employed men are employed within five different occupations. Here, just six percent of all employed men are working in “office-related” occupations, five percent of the men work in company management and consultation, five percent are employed in jobs related to transportation, and 4 percent work as engineers and technicians. Hence, it can be concluded that the distribution of job employment by men is spread more diversely, compared to the distribution of jobs occupied by women (Allmendinger, 2010). Horizontal segregation is not only visible over the range of occupations, but also across economic sectors. ← 23 | 24 →

Table 2-3: Proportion of LFP of women and men in various economic sectors in 2014

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Source: Bundesagentur für Arbeit (2015)

The clear gender bias in certain fields leads to the construct of so-called “women’s occupations”. Eighty-one percent of the employees in human health and social work activities, 71 percent of the education and 63 percent of the workers in public administration and social security are women. These sectors are all service sectors, which grew in the past due to the decline of the production-related sectors. Furthermore, fields in which one can identify a high proportion of female workers often employ a high amount of part-time workers. Men, to the contrary, mainly work in sectors with higher full-time employment. This division of gendered labor forces will be discussed in more detail below.

Allmendinger addresses, thereby illuminating vertical segregation, the recently introduced women’s quota (Frauenquote), making it necessary to explore the qualification distribution in the workforce first. In 1991, nearly eleven percent of women and 16 percent of men held tertiary degrees. In the last 25 years, this difference has decreased significantly. In 2013, the proportion of women having a university degree had more than doubled since 1991, which marks an increase of 200 percent versus the male 30 percent increase for the same time span. More than half of all men and women in the labor force have a vocational education still and the number of uneducated women has dropped from roughly 25 to 16 percent. In comparison, the proportion of men without any degree is nearly constant and just slightly lower in 2013 compared to the women. It follows that women have engaged in improved education models more extensively than men (Statistisches Bundesamt, 2014). Considering the gender split in employment mentioned in the discussion of horizontal segregation, it comes as no surprise that 14 percent of female employees assess that they are overqualified for their occupation, while just ten percent of males feel this way (Statistisches Bundesamt, 2016b). ← 24 | 25 →

The women’s quota has been introduced to increase the number of women in leadership positions in the private and public sectors. Passed on 6th of March 2015, under the legislation, more than 100 companies that are listed and that have co-determination (i.e., employee representation on their supervisory boards) will be required to set aside at least thirty percent of the new board seats for women from 2016. As of 2018, the proportion of women must be increased to fifty percent. About 3,500 medium-sized companies that are either listed or co-determinant would be required to set their own targets to increase the proportion of women on their supervisory boards (Aufsichtsrat), executive tier (Vorstand) and at top management levels. If the quota is not met, the companies will be required to fill any vacant positions with women or leave them empty (BMFSFJ, 2016a).

The proportion of women in the executive tier of the 200 top-selling companies is currently at six percent. Within this group, nearly half of the DAX companies as well as companies with partial public ownership already reached the quota. The proportion of women serving on supervisory boards accounts to 20 percent among the top-selling companies. The proportion of women in leading positions is even higher in the public sector, where women make up 15 percent of executives and 30 percent of supervisory board members (Holst & Kirsch, 2016). Next to the supervisory boards and the executive level, which are mostly just available in great companies, it is worthwhile analyzing the occupation of management position over all companies. Women have occupied 25 percent of the first management level including the management as itself, executive board, owners, board of directors, branch management, and management committee since 2004. The second management level has urged a continuous increase in female employment. It increased by six percent in 2004 to 39 percent in 2014. Comparing these numbers to the proportion of women in the labor market as a whole (43 percent) reveals that the women are underrepresented in leading positions in relation to their total employment numbers. Women in the first management level in companies with one to nine employees are around 26 percent while the same number accounts to 16 percent in companies with more than 500 employees. Hence, it can be demonstrated that the proportion of women in leading positions increases with the size of the company. Since 2004, the percent of women working in the first management level in former East Germany has increased by three percent points, while it stays constant in former West Germany. With regard to the second management level, an increase of five percent can be observed for former West Germany, while it increases by seven percent in former East Germany (Kohaut & Möller, 2016). Firstly, one may argue that pre-unified West Germany already promoted an equal integration of women, which might have a positive effect on later career advances (Erler, 2011). Secondly, the size of companies is generally smaller in former East Germany compared to former West Germany (Kohaut & Möller, 2016).

It needs to be addressed that women are more likely to lead if they work in the service sector. 43 percent of women in the first management level as well as 72 ← 25 | 26 → percent in the second management level work in education or social services. Generally, it seems that fields considered to be women’s occupations also have a larger share of women in leading positions. One exception is the finance and insurance related sector. Here, the female share of the working population is at 55 percent, yet in the executive level only twelve percent holding leading positions are women (Kohaut & Möller, 2016).

Another aspect of the vertical segregation refers to the number of employees led by the superiors. While two-thirds of all leading employees assess that they are superior to another employee, male executives are typically in charge of 27 employees and female executives are on average in charge of 20 employees. This difference exists mainly due to the fact that women in leading positions are mostly employed in smaller companies and that women who enjoy leading positions in greater companies are seldom superiors in higher leading positions. With regard to the women in leading positions, it needs mentioning that the proportion of women aged 18 to 34 compared to the proportion of women aged 35 to 54 years who work in leading positions differs marginally by only one percent (31 percent for the younger group, 30 percent for the older group). Women above 55 in leading positions account for only 20 percent, which might be explained by the fact that fewer women earned a university degree 25 years ago than in recent years. However, a strong nine percent increase can be observed here from 2001 onwards (Kohaut & Möller, 2016).

While the age of women in leading positions seems to be influential, motherhood has further implications. 71 percent of all women in leading positions do not live in a household with children (until 16 years old). In comparison, the same amount for men accounts to 63 percent. Women in leading positions in West Germany generally give birth to their first child at the age of 29 years, which is three years older compared to other female employees. The situation is remarkably different in East Germany, where the average age of women having their first child and working in leading positions is 25 years (Kohaut & Möller, 2016).

Relating the first two dimensions to each other, Busch-Heinzmann et al. (2015) highlight that horizontal segregation is less extensive at the level of leading positions compared to non-leading positions. In 2013, 20 percent of women in a leading position worked in a traditional women’s job and 64 percent of women in non-leading positions. This observation implies that women’s jobs do less often offer leading positions compared to jobs which are traditionally categorized as male-dominated jobs. These so-called women’s jobs inhabit a further characteristic, which is known as the gender time gap, mentioned as a third division of gender within labor force, and refers to the average working time of an individual. ← 26 | 27 →

Table 2-4: LFP rates and weekly working hours from 1991 to 2014 for women and men

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Source: Hober, Pfahl, & Weeber (2016a)

The table reveals that the employment rates of men decreased slightly from 1991 to 2000 by seven percent and then returned to the prior numbers by 2014. In comparison, the employment rates of women increased nearly constantly from 57 percent in 1991 to 70 percent in 2014 by 18 percent. The average weekly working time of men decreased from 41 hours to 39 hours, the average working time of women from 34 hours to 30 hours per week. Hence, it can be concluded that the number of employed women raises over the time, however the larger amount of working mothers is employed at a smaller level. Hence, the gender time gap has its peak in 1991 with approximately ten hours per week. Considering the aforementioned horizontal segregation makes these changes also occupation-relevant next to personal preferences of working time. Men in staff and technical jobs, for example, are often dependent on labor union decisions encouraging full-time employment. Contrary, jobs in the service sector inhabit predominantly working time with strong deviations from the standard employment relationship of around 38 hours per week (Hausmann, Kleinert, & Leuze, 2015). Thereby, it is important to note that deviations might inhabit a wide spread ranging from a minimum of one hour per week to more than 40 hours per week (Wagner, 2015). Therefore, a closer look is taken on the development of the working hours per week. ← 27 | 28 →

Table 2-5: Types of working hours per week in percent for women from 1991–2014

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Source: Hobler, Pfahl & Weeber (2016b)

Nearly half of all employed women worked less than 32 hours per week in 2014. The distribution of employed women on the different groups of working hours changed substantially between 1991 and 2014. The proportion of women with an average working time between 36 and 39 hours per week declined by more than half. In 1991, approximately one third of all women worked this amount of hours. In 2014, around one seventh of women worked between 36 and 39 hours. Thereby, the proportion of women with a weekly working time of 40 hours or more declined until 2003 significantly, but increased in the following years. Furthermore, the proportion of women with a working time of less than 15 hours per week more than doubled in the observation period from six percent in 1991 to 14 percent in 2014. The proportion of women with a part-time volume of 15 to 31 working hours per week increased from one fourth of all women in 1991 to one third in 2014. The working time of 31 to 35 hours per week, which can be regarded as part-time employment, increased as well, nearly doubling by 2014. Regarding the gender time gap, an investigation of employment rates over a lifetime is relevant as well. Therefore, the following figure shows the employment rates of women and men in different life stages. ← 28 | 29 →

Table 2-6: LFP rates during life stages for men and women in 1980, 2005, and 2014

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Source: derived from Statistisches Bundesamt (2004, 2016c)

The above table shows that both women and men enter the work force equally until the age of 24 in 2005 and 2014, and are both substantially lower than in 1980. The observations for the two youngest age groups are equally applicable to the LFP of men and women. It depends on the extension of education in general and especially tertiary education during the last decades. For all older groups, substantial differences between both genders prevail (Allmendinger, 2010). Above all age groups, the greatest divergence occurred in 1980s. While the LFP of men approach even close to 100 percent in certain groups, the LFP of women experience a setback during the years of birth giving and child raising. Over the life cycle, the LFP does not recover. While a drop also appears in the LFP of women in 2005, the employment rates increase afterwards again. Since the LFP of men decreases all about the life cycle compared to 1980 by about ten percent in each group, the rates of both men and women become far closer. In 2014, the LFP of men and women becomes closer above the three years. While the LFP of men increased from the level of 2005 again, the one of the women increased on an even stronger level. Next to the general rise over the life cycle, especially the drop after childbirth decreased substantially. Altogether, the table revealed that both LFP of men and women seem to be dynamic and converging over time, however still mainly distinct due to the drops in LFP during the times of child raising.

The three previously presented differences in male and female employment rates are distinct. Salary differences for employment between men and women can be regarded as a direct consequence. Korpi, Ferrarini, and Englung (2013) summarize that there are on the one hand individual characteristics like education and effort, and on the other hand inter-industry segregation as well as intra-industry segregation promoting an increase of the gender pay gap. Furthermore, labor market ← 29 | 30 → institutions like the labor unions have an influential role, albeit to a smaller extend. Schäfer and Gottschalk (2015) analyze the gender pay gap in Germany. Equal pay regulations are covered by the 2006 General Equal Treatment Act (Allgemeines Gleichbehandlungsgesetz), replacing an earlier anti-discrimination clause in the German Civil Code which was merely of nominal importance. The results of Schäfer and Gottschalk do not only reveal a ‘wage penalty’ for full-time workers in the female-dominated health sector as compared with manufacturing and finance, but also a substantial gender earning gap within each sector. With regard to the gender pay gap for employees in leading positions, Busch-Heinzmann et al. (2015) assess that the gap is currently decreasing, from 29 percent in 2001 to 25 percent in 2007 and further to 20 percent in 2013. However, this development appears to be less drastic, when one applies a standard median instead of the arithmetic mean2. Here, the gender pay gap has decreased only by two percent, from 29 percent in 2001 to 27 percent in 2013. In addition, findings speak to the gender pay gap generally being higher for women living in the former territory of West Germany than East Germany.

Women, however, can be analyzed further than in comparison to men, when one addresses women with and such women without childcare obligations.

Table 2-7: Age distribution and LFP of women with and without adult children in 2010

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Source: BMFSFJ (2012b, p. 16) ← 30 | 31 →

The figure shows that the age distribution of the comparison group needs to be considered. Above 98 percent of the mothers with children below 18 years are between 20 and 55 years old. The figure reveals furthermore that during the time of life (age) that women enter motherhood, there is a drop of women in employment. The greatest difference concerns the age group of the 25 to 30 year old women. Afterwards, the LFP start to converge. The maternal employment rate just reaches the female LFP shortly before retirement age. Hence, work interruptions due to childbearing and raising have long-term consequences. The (re-)entrance into work is thereby the one important determinant for the long-term employment history of mothers (BMFSFJ, 2012b). Therefore, the next figure contains information on the working time arrangements of mothers with children below three years from 2006 to 2012. This time is especially worth mentioning since the child rearing funds, usually referred to as parents’ money (Elterngeld), reform took hold in January 2007. It inhabited a paradigm shift of supporting an earlier entrance of gaining employment after childbirth (for more information, see section 3.6.1.1. “Historical flashback of monetary leave policies”).

Table 2-8: LFP rates and working time of mothers from 2006 to 2012

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Source: BMFSFJ (2014)

The figure reveals that the type of employment of mothers is largely dependent on the age of the children. In 2006, 19 percent of mothers were working during the first year after childbirth. In 2012, the LFP of mothers in the same group decreased to ten percent. This implies that the reference period of one year, introduced within the parents’ money reform, is comprehensively used. Forty-one percent of mothers with children aged one and two years old work. A number that rises to 54 percent when the children turn two. These numbers increased compared to 2006. The increase in ← 31 | 32 → employment due to the introduction of the parents’ money reform favors part-time employment between 15 and 32 hours per work, even though mothers working in full-time employment increased between 2006 and 2012 from eleven to 15 percent (BMFSFJ, 2014). This trend also appears in numbers related to mothers of three or more children below 18 years of age.

Table 2-9: Working time types of mothers by age of child and women without children in 2011

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Source: BMFSFJ (2014)

The above table analyzes the working hours of mothers after the age of the youngest child and shows that the steepest increase can be observed for all three working time types from the first to the second year after giving birth. The employment quotes of mothers are just approaching a nearly similar level of LFP compared to non-mothers when the child is turning twelve years. The working volume is still remarkably smaller, even if the child is between 15 and 18 years.

It has been demonstrated earlier that there are wage differences between men and women. A “motherhood wage penalty” can be observed as well. Imagine there is a woman with a vocational education and giving birth at the age of 30. After a three-year work interruption and working part-time afterwards, she suffers from a gross wage loss of 190,000 Euro by the age of 45. In comparison, taking a one-year leave and working part-time for about five years leads to a loss of 150,000 Euro (Boll, 2009). Mothers interrupting their employment for a longer than the legally stated time are penalized in earnings. Especially mothers with a lower education experience a greater and often permanent reduction in their salary (Schmelzer, Kurz, & Schulze, 2015). ← 32 | 33 →

This section has demonstrated that the working volume of mothers is comparably lower compared to the one of men, and also to the one of women without childcare obligations. Therefore, the next section will approach in how far mothers are satisfied with the reduced working volume.

2.2  Maternal working preferences

The following section investigates preferences of mothers regarding their own employment status as well as exploring possible obstacles in increasing or lowering their work volume.

One third of mothers returned to their jobs between twelve and eighteen months after giving birth in 2012. 21 percent would like to return to work even earlier. Nine percent of mothers would like to return back to work after eighteen months after giving birth, 14 percent after 24 months or later (BMFSFJ, 2014). The BMFSFJ concludes that the interest in an early job return is high, but does not provide further explanations in regards to these preferences. IGES (2013) analyze the non-employment of mothers still at home with children aged four to six. The main reasons given for continued unemployment included missing childcare facilities, not finding an appropriate workplace, and inflexible working conditions. A divergence between preferred and actual working time does not only refer to the timing of the return to work after childbirth, but as well to the working volume of mothers with young children, who are in employment.

Table 2-10: Preferred and actual weekly working time of employed mothers in 2011

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Source: BMFSFJ (2014) ← 33 | 34 →

There are several things to consider when analyzing the divergence between the actual and preferred working volume based on table 2-10: firstly, many mothers currently working with reduced working time up to 15 to 20 hours per week would like to extend their working hours. Secondly, many mothers would like to extend their working time to nearly working full-time (for instance 25 to 30 hours per week). Thirdly, around ten percent of mothers work more than full time (for instance above 40 hours), but just two percent would maintain this level of intensity.

According to BMFSFJ (2012b), reasons for not extending the weekly working hours differ substantially between mothers living in the former territory of West and East Germany. Mothers raised in former East Germany said that they would prefer working more hours, but state missing childcare does not permit them to do so. In former West Germany, many mothers state that being home is more important, thus “family reasons” are more important for them. These results can be supported by an older study from 2009 by Kelleter. Kelleter (2009), however, does not differentiate between men and women. He shows that 17 percent of the parents in former West Germany and 56 percent of the parents in former East Germany would like to work full-time, but do not find a suitable job. 51 percent of the parents living in former West Germany would increase their working hours if they had childcare options, while 17 percent of the parents from former East Germany would do it. An international study conducted by the Thomson Reuters and Rockefeller Foundations (2015) revealed that 21 percent of German mothers do not regard children as an obstacle for their career, which is the second to last place in this ranking. Over all G20 nations, an international forum for the governments and central bank governors from 20 major economies, 47 percent of the mothers supported this argument.

Children and maternal employment shall not only be seen in relation to work, but to mothers and their overall life satisfaction. Berger (2013) concluded that mothers who have left the labor force for family reasons, and mothers working part-time, are significantly less happy than mothers in full-time employment. Both the financial effects, like forgone earnings, and the non-financial effects, like psychological strains, play a substantial role in the lower degree of satisfaction. Moreover, these effects show to be particularly harmful to mothers in low-income households and those afraid of poor job opportunities. Overall, non-participation due to family-reasons like missing childcare is thereby revealed to have more harmful consequences on happiness for mothers compared to involuntary unemployment due to market reasons.

2.3  Role of childcare in maternal employment

One may assume that childcare is generally a private matter, decided on by individuals who are solely responsible for it. It thus may be of interest to review why childcare is heavily subsidized by the state, and also look at both the advantages and disadvantages of childcare alternatives. The following will trace the effects of childcare provisions on maternal labor before shifting the focus to family-friendly HRM, more explicitly to ESCC. How to approach ESCC in the broader field of HR ← 34 | 35 → policies, its historical development, as well as its international outlook is an essential part of this section, as well as selected statistics on ESCC in Germany will be presented.

2.3.1  Reasoning of public childcare and childcare options

Childcare in Germany is organized by the state, heavily subsidized instead of being contracted to the private market. From a state-economic point of view, and more explicitly from within allocation theory, government intervention should be supported solely in the case of market failure. Such market failure implies the inefficient allocation of goods and services and might occur in one or several of the following cases: in case of market power as monopolies have the market power to set prices, in case of public goods to prevent the free rider problem, due to asymmetric information to prevent damaging consequences for consumers from poor choices and in case of externalities implying that there are (indirect) effects to other individuals.3 The following paragraphs will address the different types of failures and relate them to childcare.

Starting with market power, the establishment of a monopoly requires that high fixed costs of providing the good must be confronted to variable costs of usage (Thater, 2015). This situation cannot be expected to occur in childcare: requirements and demands for human resources and facilities change with the amount of children.

Secondly, public goods have two main characteristics: They are non-rival in consumption, meaning that consumption by one individual does not affect the opportunity of another individual to consume the same good, and they are non-excludable, meaning that opportunity for consumption cannot be denied. Both attitudes of public goods do not apply to childcare (Samuelson, 1954). For instance, parents can be excluded from buying into private childcare due to free market price mechanisms. Rivalry in consumption creates an exclusionary environment. Moreover, Blau (1997) argues that the quality of a childcare facility may be influenced by adding just one additional child, negatively impacting the care of the other children.

Thirdly, asymmetric information flows may affect the selection processes of private childcare (Akerlof, 1970). Possibly, parents are not able to observe the provided childcare to assess its quality substantially. In such a case, private providers could reduce the quality of their provided care, if the higher quality of care is connected to additional costs. As a consequence, the provider of childcare with the lowest costs will remain the most profitable in the market. It is unlikely that asymmetric information in form of moral hazard is applicable here, as it implies that parents would complicate the provision of childcare by external providers. Until now, there has been less empirical evidence about the factors shaping the quality of childcare. Love, Meclstroth, and Schochet (1996) identify two categories to evaluate childcare quality, called structural quality and process quality. Structural quality refers to the ← 35 | 36 → caring environment, such as group size, showing a significant but small influence on the development of children (Blau, 1997; Blau & Mocan, 2002). Process quality refers to the quality of the caring as itself: interactions between the staff and the children. Empirically, it is hard to prove a relationship between the process quality and the human capital accumulation of children. Mocan (2007) used 19 different characteristics in determining structural quality in evaluating the effects of adverse selection in (private) childcare. He found that parents usually evaluate the quality of childcare facilities correctly. However, parents do not use all available information to assess the quality. It is cost intensive to improve the quality of childcare facilities for the provider (Mocan, 1995, 1997). There could be an incentive for adverse selection. Government intervention due to asymmetric information thus might make sense. However, the availability of adverse selection does not necessarily imply market failure and thereby force the government to provide childcare. The sufficient condition implies that the government finds a more efficient allocation compared to the previous market. The state could also define minimum standards and remain responsible “only” for the supervision and certification of it.

Fourthly, externalities appear when disadvantages and advantages are not exclusively related to the supplies and demander of the childcare. The private provision of childcare could lead to an undersupply in case of positive externalities while it would lead to an oversupply of childcare in case of negative externalities. Private marginal costs and advantages would be balanced in an equilibrium, but social marginal costs and advantages would not be considered at all or just partly. Hofmann and Werding (2005) analyze the fiscal balance for one child in Germany over the life cycle of a child and found that the state is able to expect a fiscal surplus of 76,900 Euro for each child on average. 42,800 Euro are stemming from the child itself and 34,100 Euro are stemming from the children’s children. Hence, from the purely fiscal perspective, the state might be interested in supporting additional children. Public childcare might be an instrument to pursue these interests by influencing the fertility as well as the reconciliation of family and work. The majority of studies supports a positive, but minor, relationship between childcare facilities and fertility rates (Del Boca, 2002; Hank & Kreyenfeld, 2003). Furthermore, the early provision of institutionalized childcare has a positive influence on the human capital accumulation of children (Gupta & Simonsen, 2010). Especially socially disadvantaged children benefit here (Heckman, 2006; Heckman & Masterov, 2007). An early education improves later labor market prospects, in turn improving expected employment profits. From a welfare perspective, early institutionalized childcare can be supported also because human capital accumulation reduces probable social costs. According to Heckman and Masterov (2007), early institutionalized childcare has a positive impact on latter criminal rates and unemployment rates. Next to effects on children’s futures, employment rates of mothers tend to correlate positively (see section 2.3.2. “Stylized facts on childcare and maternal employment”). An increased female LFP affects the economy positively, for instance by reducing the pressure on the welfare state or addressing potential skilled labor shortcomings. Any evaluation of cause and effect chains in relation to the economy must also consider demand ← 36 | 37 → and supply elasticities of labor. An increase in employment often goes along with a reduction of the actual wage level, which in turn might lead to reduced tax revenues. Thus it cannot be stated whether this effect might be smaller or greater compared to the advantages of additional employment (for example, increased number of tax payer) (Bergstrom & Blomquist, 1996).

Altogether, there is clearly some justification for government intervention in childcare due to market failures as a consequence of (fiscal) externalities. The possible challenge of adverse selection might be avoided as a side effect. Adverse selection is unlikely in case of state intervention since the state benefits from fiscal effects and additionally from well-educated children. A precondition of overcoming the adverse selection process could be that municipalities (Kommunen) assess the quality of their provided childcare facilities.

The legal and economic dimensions of childcare provision can generally be funded through two different legal channels, either as “object related” (Objektbezogen – §74 Kinder- und Jugendhilfegesetz) or as “subject related” (Subjektbezogen – §77 Kinder- und Jugendhilfegesetz). While object-related funding concerns the providing institution, subject-related funding is requested by those interested in the services rendered. The city-states (Stadtstaaten) provide more and more subject-related funding on childcare, while the area-states (Flächenländer) focus generally on object-related funding (Egbert & Hildenbrand, 2014).

Public childcare is predominantly financed by the individual municipalities. On average, they provide about Euro 6,700 per child in 2014. This is an increase from 2006 by over 52 percent, possibly due to the expansion of childcare to include children below the age of three. During this eight-year time span, the number of children being cared for increased from 3,000,000 to 3,430,000. There are substantial differences in childcare expenses within the federal states. Berlin spent Euro 9,400 Euro, while Mecklenburg-West Pomerania paid Euro 3,600 per child per year (Textor, 2016). Altogether, funds from the municipalities, states and the federal government amount to Euros 35.5 billion annually. While the state absorbs the main burden of the public childcare costs, parents are obliged to pay a contribution. Thereby, the prices vary between Euro 0 and 696 per month in the 100 biggest cities in Germany in dependence on the family structure (for instance income of both partners, amount of children) (Goerres & Tepe, 2013).

The object related funding is actually the predominant form of government intervention in childcare. Just from 2012 to 2015, one policy in form of subject-related funding was introduced: childcare was subsidized with funds directed at the parents (Betreuungsgeld). Parents received between EUR 100 and 150 for every child born after August 2012. These benefits were paid to the parents if they cared for their child during the second and third year of living without utilizing public daycare offers. In July 2015, the Federal Constitutional Court ruled that due to the lack of legislative competence of the federal state these policies were unconstitutional. The provision of childcare belongs to the legislative power of the federal states, and the introduction of the subsidy was and remains controversial. Supporters argue that experiences in other countries, especially Anglo-Saxon countries, show that the ← 37 | 38 → subsidy can lead to a greater variety of childcare offers. Furthermore, parents are able to seek individualized care addressing their wishes and requirements (Breyer & Buchholz, 2008). Bünnagel and Henman (2007) argue that the effort by the state in children below the age of three reduces the freedom for parents to choose home care substantially, as it is connected to the expectation that parents start working early after childbirth. Thereby, childcare for three to six year old children is however supported by this group. Opponents of childcare subsidies argue that distinct societal groups would make use of the subsidy, like families with a lower income, less education, or those with a migration background. For the first group, it might influence the children’s latter educational abilities, as it has been explained earlier. Concerning immigrant families, Boll (2015) argues that the subsidy may hinder the integration of children, especially if the parents are not able to speak German. Then, the subsidy would work as an anti-integration policy.

The media report frequently that the public childcare facilities should be expanded. Egbert and Hildenbrand (2014) reveal that the BMFSFJ is promoting the extension, but there are issues in infrastructure that need to be addressed. Regarding the financing, childcare is mostly financed by the municipalities over the federal government and federal states. However, they are just benefitting to a small degree from the expenditures. The tax revenues are collected by the federal government and para-fiscal institutions. There are fewer incentives for the municipalities to put effort into additional childcare. Furthermore, the object-related way of financing disregards the preferences of parents, which could otherwise improve the qualitative dimension of childcare. Another argument concerns the fact that childcare is generally assumed to be public responsibility including the recognition of the principle of subsidies. This implies that the municipalities can act selectively when choosing and supporting a provider creating, potentially, a market imbalance. Egbert and Hildenbrand (2014) mention that one-third of childcare facilities are provided by public institutions and two-thirds by non-profit institutions in Germany. High fixed costs and requirements intervene with the establishment of a commercial system. As a consequence, there is just a small degree of competition. Quality control may be affected through more competition since there is currently no pressure to compete and the users are not considered in the implementation process. This situation, however, looks different in other countries. Feierabend and Staffelbach (2015) observe a kind of crowding out effect for Switzerland in this context. Switzerland has a relatively high proportion of ESCC (17%) and a higher degree of parental involvement. Working parents’ commitment to companies with their own childcare services is far lower than in less family-friendly cantons compared to family-supportive cantons with numerous public childcare services.

Egbert and Hildenbrand (2014), based on Becker (2009), argue that an increase in the education of skilled labor is central for quality improvement of childcare provision, linking quality of the employees and the quality of the supplied care. While the German system employs predominantly vocational education, most OECD countries do focus on a tertiary education here. It is not planned that the vocational education will be reformed. With regard to the tertiary education, BMFSFJ advises to employ ← 38 | 39 → in every childcare facility at least one person with a tertiary education until the year 2020. To achieve this goal, the amount of tertiary educated employees in the year 2011 must be doubled. As a consequence of the academization in this occupational group, the skilled labor with tertiary degrees would expect a higher wage, which could not be paid due to the labor agreements in the public sector. These persons would probably switch to the commercial sector then. As a result, the quality of employees would probably lessen in the public sector. Looking abroad, Brennan, Cass, Himmelweit and Szebehely (2012) argue for the Nordic and liberal care regimes, hoping for a paradigm change to take place. Childcare users change from citizens to consumers. The national governments need to adjust the provision of childcare to another behavior and claim of the users.

Esping-Andersen (2008) distinguishes between three kinds of childcare – familialism, purchased private care, and public responsibility. Obviously, the first one refers mainly to the parents, whereby the grandparents can also play a role here. However, this role is often limited due to external circumstances like the distance to their place of residence or the family members’ health status. The second kind of childcare relates to private care, whereby parents outsource the childcare to a nanny, child-minder, au pair etc. The main characteristic of this kind of childcare is that it adjusts to the individual wishes of the parents. Public childcare facilities form the third group and are financed via the aforementioned government and co-pay options. Recent studies show that parents would like to use it, however, there is a tangible gap between demand and supply (Schober & Spieß, 2014; Spiess & Wrohlich, 2008).

Underlining the differences between the various kinds and to demonstrate the potential challenges in choosing one, the following table reflects a selection of advantages and disadvantages to be considered. While they might differ in individual situations, the following statements shall be regarded as general issues seen from the perspective of parents. ← 39 | 40 →

Table 2-11: Advantages and disadvantages of various kinds of childcare

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Source: BMFSFJ (2013a), Lenbet (2014) ← 40 | 41 →

Summarizing the table, with regard to the advantages, the common issues of public and corporate childcare deal with equipment and staff offerings and limitations. Furthermore, both provide structured and organized days for the children. In contrast, the childcare within the family and private care are marked by individual attention towards the child and flexibility. Concerning the disadvantages, a major concern in public childcare might be less intensive individual attention. Private childcare might be less favored due to the lack of childcare-education of the caretaker and since it is hard to find a replacement caretaker in case of illness. One outstanding issue regarding the corporate childcare deals with the mixture of private and working life. The table reveals that the provision of childcare by the employer can have important implications when it is preferred over other kinds of care. Since the different kinds of childcare have its own characteristics, the next section will address the distribution of it.

2.3.2  Stylized facts on childcare and maternal employment

The following graph shows the development of children visiting childcare facilities for two different age groups.

Table 2-12: Number of children in public childcare facilities from 2006 to 2015

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Source: BMFSFJ (2016b)

The amount of children below three years of age who are in childcare facilities has grown from about 290,000 children in 2006 to approximately 630,000 children in 2015. The number of children aged three to six with 2,300,000 children is nearly eight times higher compared to the younger age group. The absolute number must however be seen in relation to the proportion of all children cared for in an age group. In 2015, ← 41 | 42 → 33 percent of children three years and younger used childcare facilities. The proportion of children enrolled in daycare below the age of three years is in 68 out of 77 administrative districts over 50 percent. The preferred amount by parents, however, was at 43 percent, which makes a difference of seven percent. Ninety-five percent of preschoolers three years and older were enrolled in provided care. The preferred quota is just slightly higher. Seventy-three percent of employed mothers and 60 percent of employed fathers value the public childcare support as “important” or even “very important.” Seventy-eight percent regard the external childcare facilities as a central requirement for their employment. Hence, parents value the provision of public childcare support highly, implying a certain degree of dependency. In line with this argumentation, restrictions in the provision of public childcare facilities hinder the employment status of many mothers. Altogether, 18 percent of all mothers regard missing childcare facilities as an obstacle for extending their working hours or starting employment, according to the BMFSFJ (2012b). This percentage is higher for single parents (22 percent) compared to family-unit parents (17 percent). With regard to the age of the children, mothers with children below three years have the greatest need for local childcare facilities with 21 percent. Mothers having children between three and six years regard the childcare facilities to a lower extent as decisive (twelve percent) compared to mothers with children between six and 14 years (17 percent) of age. A variety of provided care options may further explain these differences in polls.

Table 2-13: Care combinations of children in different age groups in 2013

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Source: BMFSFJ (2014)

The table reveals that older children have a tendency to be cared for at facilities outside the family. Simultaneously, parental care contributions decrease. The groups ← 42 | 43 → of interest, namely the children below one year and children between one and three years of age, are much more often cared for by the parents. The BMFSFJ identifies several socio-economic dimensions which influence the decisions of parents for certain care combinations. The proportion of children between one and three years who are exclusively cared for by their parents is twice as high in former West Germany (34%) than in former East Germany (15%). Single parents do rely much more often on informal care compared to couples. 20 percent of children of single parents until six years of age are cared for in full time facilities and by other people, whereas nine percent of the same age group are cared for in the same manner for family units. Especially in the first year of a child, 40 percent of single parents rely on care by friends and relatives, while just 20 percent of couples do. Other socio-economic dimensions include the amount of children in the family and the mother’s employment status. Households which have three or more children use public childcare facilities less and often require less flexible care arrangements, as they rely on other people less often. With mothers employed full time, nearly one third of all children between one and three are enrolled in childcare programs. This number drops to nineteen for children of the same age group whose mothers work part time (BMFSFJ, 2014).

A redistributive perspective of public provision of private goods is often used as a further perspective to explain childcare preferences (Borck & Wrohlich, 2011; Stadler, 2014). Richer individuals prefer private provision to public or mixed provision and prefer mixed to purely public provision (Borck & Wrohlich, 2011; Stadler, 2014). Moreover, cultural preferences seem to be influential. Children whose parents immigrated are above all age groups more often exclusively cared for by their parents. With regard to inner-German cultural differences, Schober and Stahl (2014) make the following observations: Since 2006, there has been a significant rise in the probability of children with single mothers, or whose mothers have a university or vocational qualification, attending a daycare facility in former West Germany. For children, whose mothers have a low level of education, or whose parents are at risk of poverty, this rise was less pronounced. In former East Germany, considerable growth was observed in daycare attendance among children with highly educated or single mothers as well as of children at risk of poverty. However, mothers from former West Germany with a university qualification and single mothers in former East Germany still frequently make use of informal childcare options.

IfD (2013) found out that 75 percent of the parents expect early advancements in public childcare facilities if they enroll their children at the age of one. The parents expect a long-term benefit for the child, as well as the facilitation of the employability of mothers in the short-term. This expectation in early learning is an important consideration since the childcare costs are often higher than expected. Around three quarters of households state that they are well informed about the local childcare facilities. For example, two thirds of parents are aware of the fact that childcare costs are subsidized by private and public institutions. However, around 40 percent of the parents do not know the details of the finances of childcare costs.

With regard to the satisfaction of the parents using public childcare facilities, most are “satisfied” or even “very satisfied” (IfD, 2013). Around 13 percent of the ← 43 | 44 → parents give a negative evaluation. Parents less satisfied often name the opening times of the facilities as problematic, with 20 percent of parents acknowledging a lack of flexibility. Afternoon hours do not extend far enough into the evening and closing time during holiday season extends too much to accommodate working parents. Camehl, Stahl, Schober and Spieß (2015) tracked the lowest satisfaction stats regarding both cost factors and lacking opportunities for parental involvement in the daycare center. With regard to overall satisfaction with the daycare center, however, cost plays no role at all — here the key factors are staffing and particularly the parents’ perceptions of whether their wishes are taken into consideration. When parents are asked about the maximum amount they would be willing to pay for daycare, the higher-earning parents are generally prepared to pay more for a place for their child than they have done to date.

The following discusses maternal labor supply in case the state did not subsidize childcare, based on results derived from several micro-simulations. The first one contains the situation that parents had to pay the complete costs of childcare.

Table 2-14: Effect of subsidizing public childcare on LFP of mothers assuming no subsidies

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Source: BMFSFJ (2014)

The results refer to the employment rates of mothers of children twelve years old and younger. In general, the employment rates of mothers would decrease by 2.2 percentage points if the subsidies for public childcare would not exist. This reflects a decrease in average working hours of 16 percent. In sum, the labor supply of mothers would decrease by 96,000 full-time equivalents. The effect is especially strong for mothers whose youngest child is between one and three years old. The differences among mothers in the former regions of East and West Germany are rather minor. Mothers in couples are affected more adversely than single mothers. Mothers who ← 44 | 45 → live in a household with an income from the lowest two income sections are affected most severely. Their employment participation rates would decrease by three percent points and their working hours/week by 30 percent. The higher the income level, the less the effect of the missing subsidies. This raises the question of how these circumstances would change if there was unlimited access to subsidized childcare.

Table 2-15: Effect of subsidizing public childcare on LFP of mothers assuming no restrictions

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Source: BMFSFJ (2014)

The table reveals that public childcare facilities without restrictions would increase the number of mothers working full time by 34,000. This shows the clearest effects on mothers with children between the ages of one and three years, as well as mothers with three children. Again, mothers within the two lowest income brackets are affected more than mothers within the upper two income brackets. That being said, obviously single parents compared to parents living in a relationship benefit more clearly from subsidized childcare systems. Even if all costs related to childcare would fall to the government, positive effects would be traceable. The abolishment of fees would increase the full-time equivalents of mothers by 14,000 (BMFSFJ, 2014).

2.3.3  The state of employer-supported childcare

2.3.3.1  Framework for family-friendly human resource management

From a historical perspective, employers do not serve as lead providers of childcare, but are outranked by the state, non-profit, and religious institutions, as well as by the family. Therefore, it could generally be questioned why employers provide ESCC and more generally, offer family-friendly HR policies at all. This topic will be approached by (1) classifying base conditions and processes, (2) their intentions, ← 45 | 46 → and (3) contents of employer-focused family policies (Gerlach, Schneider, & Juncke, 2012) using Rohe’s established systematic approach for a policy processes analysis (1994). He calls the (1) polity dimension the analysis of the political structure, base conditions, and framework. This dimension investigates the prevailing order and orients itself on commonly applied norms. The (2) politics dimension explores actors and processes involved in reaching the intended goals. The (3) policy dimension refers to the actual content of the policies in place and their intended goals.

Starting with the polity dimension, the three cornerstones society, state, and union form the framework for family policies provided by an employer. The national society consists of the sum of individuals, the aggregating sub-systems of different groups, plus the inherent interactions. Companies can follow societal developments through their employees (Luhmann, 2005). Historically, a reconciliation of family and work is a relatively new phenomenon. During the preindustrial agricultural society, a separation of family and working life was not known. Families often lived and worked together. Children were raised not solely by the parents, but also by the extended family of siblings, grandparents, aunts and uncles, and live-in workers such as farm hands. During the industrialization of the 19th century, two kinds of family models emerged. Bourgeois families maintained a strict division of roles within the family. The husband generally worked outside the household in a productive manner and provided financially, while the wife concentrated on reproductive work within the confines of the household. Women did work when financial necessity required it. Proletarian families were characterized by both partners working, as financial need was constant. While the proletarian model was more common in 19th century society, the bourgeois model was idealized. The post war era, often called an economic miracle in Germany and elsewhere, in the 1950s and 1960s, enabled a more prominent spread of bourgeois families, also referred to as the Golden Age of Marriage. Throughout the next decades, the increasing number of educated women and their LFP lead to changes in the male breadwinner models (Gerlach & Laß, 2012). Nowadays, according to a study in Unternehmensmonitor Familienfreundlichkeit, over 80 percent of companies regard the reconciliation of family and work as a main challenge for the future due to societal developments (BMFSFJ, 2013b). Ten years earlier, only 47 percent of the companies acknowledged such a need.

Legally speaking, the state has the responsibility for family politics in Germany implying that it is responsible for the implementation of these policies. Furthermore, the rights cannot be executed by other legal entities, but must be pursued by the state. Other actors like trade unions, churches, charity organizations, and companies may, however, act in connection with the subsidiary according to the constitution. Legal statements regarding the voluntary provision of family-friendly policies by employers is rather abstract. It makes allowances to the distinct employer and employee specific needs and acknowledge the autonomy of decision-making processes by the employer (Gerlach, 2003). Corresponding norms can be found for instance in the law for part-time work and restricted work contracts, or in the laws on parents’ money and parental leave benefits. The state holds several key roles: it is able to act in a legislative manner by mandating the introduction of an equal opportunity ← 46 | 47 → commissioner; in case that the state is not acting legislative, it may adopt the role of arbiter, moderator, coordinator, or even offer certain incentives (Gerlach, 2007). The state can help to implement certain regulations which are marked by a challenging implementation process. The state inhabits a moderating role if it informs and formulates common goals with other actors and connects them to networks. In this context, it might be relevant to raise the awareness of labor relations and union representatives for family-friendly HRM. The state acts as a coordinator if it is working with other actors on networks to establish local collaborations for certain challenges. It can provide incentives in form of affirmative actions which might include that certain assignments are dependent on the family consciousness. Well-known associations are for instance the Bundesvereinigung der Deutschen Arbeitgeberverbände or the Deutscher Gewerkschaftsbund, whose members promote family-friendly workplace conditions and negotiate for certain frameworks to be present in their labor agreements. Thereby, they can focus on working conditions, like flexibility, parental leave, or a leave of absence to care for relatives. Flüter-Hoffmann (2005) argues that the importance of topics like the reconciliation of work life and private life increased significantly over the time. However, the focus of labor agreements from 2006 to 2012 was not on family friendliness, thus much of the possible potential in negotiations has not been fulfilled (Klenner, Brehmer, Plegge, & Bohulskyy, 2013).

The second dimension is called politics, in which family awareness of actor behavior within companies is the focus. Who initiates family-friendly HRM? To approach this question properly, a short historical classification of the company as a social policy actor is helpful. The involvement of the company in its employees’ family matters became standard procedure during the 19th century. During this time, it was known as Fabrikwohlfahrtspflege or Industriewohlfahrtsarbeit, both terms translating loosely to industry-related welfare. Companies were predominantly interested in increasing their competitive edge through motivating their employees and maintaining and reinforcing patriarchic-humanistic norms. Employees were educated, one could argue, in certain ethical, religious, and even legal standards. The reasoning followed a belief that employees who were well educated, even though more expensive, acted more economically and thus were more profitable for the company (Schäffle, 1958). This kind of management was institutionalized in the Concordia, an association of 80 companies founded in 1879. The organization focused on the promotion of the education of their workers, the provision of books, the establishment of affordable living quarters, and the foundation of work disability, orphans, and widow funds. At the turn of the 20th century, social policies of the Concordia companies started to follow the state’s social policy. During the 1950s, critique towards the social policy of companies arose. It was highlighted that the families became dependent on the employer and were restricted in their self-determination. It was often regarded as a life rather than a work relationship. In addition, the stated goal of ethical-acting and educated employees was often subordinate to an efficiency-oriented focus. However, despite the critique, the social policy of the welfare state benefited from company policies. For instance, companies financed child benefits in full until 1964, via the family compensation fund. In 1959, family-friendly HRM were mentioned in the annual report of the Spitzenverband der ← 47 | 48 → Deutschen Wirtschaft. In 2001, the Bundesvereinigung der Fachverbände des Deutschen Handwerks, a typically male dominated association, published a position paper on family and women politics. In 2002, Ver.di, a large German trade union with 2.2 million members, started a campaign to promote the reconciliation of family and work life. Generally, several initiators are involved when family-friendly HRM are introduced, today. These policies focus especially on employees with special functions for the company, like equal-opportunity roles. The introduction is mostly top-down, meaning that the management initiates the policies. Thereby, it does not matter whether private, public, or non-profit organizations are analyzed. In public-sector companies, political guidelines are important for the initiation.

There is a legal duty for work councils in their constitution that they shall facilitate the reconciliation of family and work. However, Döge and Behnke (2006) highlight that work councils are not known as initiators for family-friendly HRM since they do not regard it as a cross-sectional oriented operative policy field but as a down-streamed policy field. Factory agreements (Betriebsvereinbarungen) do not reveal to be a way to explicitly promote the reconciliation of family and work since they mostly focus on working time and home office regulations (Gerlach, 2012). Management regards family-friendly HRM as a tool to increase employee satisfaction, and in turn productivity. Economic reasons thus are one explanation for the involvement of first line management (Busch, 2004; Kelly et al., 2008), also known as the business case of childcare (Dickens, 1994). It builds on the assumption that the introduction of company-level social policies is a consequence of rational economic actors. According to this argument, companies can be expected to provide family-friendly measures if the benefits exceed the costs of the measures. It is often assumed that for companies operating in tight labor markets, i.e. in markets where certain skills are in short supply, the provision of company-level family policies can prove especially cost-effective. That being said, several authors (Dobbin & Sutton, 1998; Kelly, 2003; Kossek, 1994) observe that there are also institutional reasons leading to the spread of family-friendly HRM. Managers feel obliged to conform to coercive and normative pressures in society.

Policy refers to the content and goals of family-friendly HRM. Employers offer a wide range of possible measures to improve the reconciliation of family and work. These measures can be categorized either according to their content or in a systematic manner (Dilger, Gerlach, & Schneider, 2007). One example for a content-related order of family-friendly HRM is given by the audit berufundfamilie. The audit is initiated by the Gemeinnützigen Hertie-Stiftung and is an instrument for the management of a company. It was developed to promote family-friendly HRM meant to support the employer in the introduction of policies. Founded in 1999, more than 1509 employers with about 2.6 million employees have been certificated by them. The audit is explicitly supported by national government (berufundfamilie Service GmbH, 2016). According to them, there are eight fields of operations: Working time, working organization, working place, information and communication, leadership, HR development, pecuniary constituents, monetary benefits, and services for families. The Unternehmensmonitor Familienfreundlichkeit by the BMFSFJ (2013b) identifies four main policy groups: flexible working arrangements (time and location), parental leave/promotion of working parents, aid ← 48 | 49 → for child and elderly care, and finally, family services. Thereby, it is highlighted that the working culture within the company operates as a forceful institution.

The systematic approach builds on the meaning of time as the central challenge for the reconciliation of family and work (Spitzley, 2012). Spitzley argues that there is a competition between employer and employee over the resource of time. Hence, family-friendly HRM should aim at the reduction of conflicts due to missing time. All other challenges will be addressed in dependence on it. The BMFSFJ (2013b) reveals that flexible working arrangements belong, with at least 75 percent, to the options offered most often in the years 2003 to 2012. Mohe, Dorniok and Kaiser (2010) propose another classification. Primary measures focus directly on the employees and their work. These measures concern working time, working location, working process, content of work and work organization, such as job sharing and a transition to flexible working arrangements. Secondary measures aim at the financial and social support of the employees. They do not directly aim at the work itself, but rather affect the individual perception of employees, for instance health programs, childcare facilities, child bonus allowances or household/concierge services. Measures in the third category accompany the primary and secondary measures, including an employer’s information and communication policy or the company’s philosophy.

Focusing on the goals, Schneider, Gerlach, Juncke and Krieger (2012) structure the goals of the family-friendly HRM on a specific target group. Firstly, the immediate effects on the employees aim at an increase in work satisfaction, motivation, and the employee’s loyalty. Secondly, there are indirect effects on current employees, like the reduction of absenteeism due to illness, highlighting that a reduction in stress positively influences productivity. Keeping employees in the company also effects customer retention since a high degree of fluctuation might cause consumer dissatisfaction. The third category focuses on the immediate effects on potential employees. The authors argue that businesses with socially responsible actions may develop a more positive image, which in turn may attract a higher quality of workers.

2.3.3.2  Outlook on employer-supported childcare in Germany

Background information: Limited international comparability on effects of family-friendly HR policies

Comparing the effects of labor market and family policies between two countries is difficult since there are large differences in the specific framework. For instance, in liberal regimes like the USA, the labor market is deregulated. This implies that there are fewer economic sector or regional working agreements but rather specific ones valid for one company. The vocational education is marked by on the job training. Coordinated economies like Germany are marked by a strong institutionalized relationship between employer and employees, which is inter alia promoted by labor agreements (Brewster et al., 2010). Next to the differences in the economies at large, family politics are dependent on different factors. The provision of childcare is dependent on the cultural attitude of the welfare state, the childcare coverage and supply, maternal employment and parental leave schemes. Hence, concrete instruments like ESCC might be introduced in countries with the same intention, but their effects vary substantially between the nations (van Lancker & Ghysels, 2013). ← 49 | 50 →

On a larger level, ESCC first spread in the USA, during the US civil war from 1861 to 1865, when several employers provided temporary childcare centers to enable women to support the manufacture of gunpowder or serve as nurses. At the beginning of the twentieth century, industrial day care nurseries were provided, since “factories needed cheap labor” (Friedman, 1984, p. 167). During the Great War and WWII, temporary childcare centers were again opened by employers to meet worker shortages, supported by the government. In post-war times, employers’ interest in childcare decreased considerably, and many women returned home. The increasing LFP during the 1960s and 1970s then again increased the demand of childcare. Therefore, the federal government passed a law on tax amortization of constructed buildings used to serve employee’s children. Employers regarded childcare as a potentially profitable investment, but this did not happen. In fact, 15 out of 18 on-site childcare centers opened between 1964 and 1972, but closed soon after their establishment. In the early 1980s, merely employers in industries with skilled-labor shortages and large female employment rates provided ESCC, for example hospitals. In 1981, the Employer Recovery Tax Act had the intention to stimulate the creation of childcare centers by employers, but “childcare centers remained rare” (Kelly, 2003, p. 608). However, the tax breaks represented the most expansive childcare policy in general. The federal government spent less money in funding public childcare facilities than it lost through these tax breaks. By 1997, the revenue loss was over $7.3 billion due to various tax breaks for employers supporting childcare. Instead of building childcare centers, many employers adopted dependent care expense accounts. The amount of expense accounts increased from 1965 to 1995 by 50 percent. (Kelly, 2003). The amount of childcare centers increased by ten percent over the same time. In 1965, just 2.500 of six million employers offered them (Diktaban, 1991), probably due to benefit consultants creatively linking these accounts to others programs, which they were trying to market. These programs (for instance cafeterias) were presented as a cheap way to attract employees. Kelly (2003) argues that these tax breaks did not promote female employment, although they were promoted as such. Primarily, the tax breaks for childcare centers were not tied to civils rights law (for example. an extension to gender equality acts), and tax laws “do not require employer action, but instead create an incentive for childcare programs” (Kelly, 2003, p. 622). However, it is not clearly stated how the companies were to make use of these incentives. Kelly states that the success of expense accounts for childcare centers depends on certain factors, such as marketing, expenses to maintain childcare, and the offered incentives’ relevance to the company. Nevertheless, benefits consultants advised companies to adopt the least expensive policy that still showed family-friendliness. While the whole development did not reach its initial potential, it led the way in creating family-friendly programs in order to attract a strong work force (Diktaban, 1991).

Garnered from the developments in the US, one may arrive at the conclusion that ESCC was an instrument to promote female LFP in support of country and economy. State intervention through tax policies then offered an increase in profits, ← 50 | 51 → whereby the benefits for the employees with childcare obligations could almost be regarded as a side effect rather than the originating purpose. Supporting research shows that the exact kind of support is rather secondary for parents. Connelly, Degraff and Willis (2002) note that it is unclear whether parents would opt for on-site childcare or stick to public childcare facilities when given the chance to choose. The survey conducted in the US revealed that a substantial number of parents would decide for on-site childcare, however, it was offered also as the cheapest option. The three main aspects when deciding between the options are location, convenience, and reliability. The study showed that parents who use on-site childcare use emergency care/family support less often than mothers who bring their child to a public kindergarten.

Nevertheless, it needs to be highlighted that different kinds of ESCC are available and have different advantages and disadvantages. BMFSFJ has published several publications on this topic since the “Förderprogramm Betriebliche Kinderbetreuung” by the German government subsidies on-site childcare spots with 400 Euro per newly established spot (2006, 2013a).4 The “Förderprogramm Betriebliche Kinderbetreuung” has two goals. Firstly, the introduction of ESCC shall serve as a policy to improve the reconciliation of work and family for parents. Secondly, the policy shall serve as a way for employers to position themselves as a family-friendly employer. The program was extended after a two-year pilot program. Compared to the subsidies by the US, the German state considered ESCC rather late.

ESCC can be divided into two broad categories: regular care and punctual care. Regular care provides support throughout the year as the main caretaker of the child. This is, for instance, on-site childcare provided by the employer, kindergartens or licensed child minders. Punctual care serves as substitute care, meaning that the parents do not rely on it in daily life. It is utilized in emergency cases predominantly. For example, if public kindergartens are closed due to strikes or holidays, punctual childcare comes into play, but is not supported by the “Förderprogramm Betriebliche Kinderbetreuung”. The need determines the kind of care families seek. Thereby, companies need to analyze the amount of employees’ children possibly entering childcare, the age of these children, the preferred kind of care, the preferred place of care, and the preferred opening times. The needs assessment depends mainly on the company make-up. The following table shows the advantages and disadvantages of different kinds of regular childcare from both the employers’ and the employees’ perspective. ← 51 | 52 →

Table 2-16: Costs and benefits of different kinds of childcare assistance

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Source: BMFSFJ (2006, 2013a) ← 52 | 53 →

Depending on the needs assessment, a company may choose to create and take on the responsibility for a childcare facility, offering proximity to the company and business specific flexibility. This model is especially interesting for companies whose employees are working at one main location. The facility needs to fulfill all legal and policy requirements for state child institutions. These requirements affect the choice in caretakers, the equipment, and the buildings. The company is then responsible for the incurred costs. Since company kindergartens often offer business-appropriate (possibly longer, year-round, and flexible) opening times, personnel costs tend to run higher than they do at a public kindergarten. However, the company can decide about the conditions of admission and the tuition share paid by the parents.

In case that demand may not warrant opening a single employer kindergarten, one possibility deals with the cooperation of several companies. These kinds of corporate childcare facilities can mostly be found in industrial parks. This permits both, for several companies to split the costs to create the infrastructure necessary, and to overcome fluctuations of demand down the line. However, cooperation requires a lot of coordination, possibly compromise, and long-term liabilities, which should be carefully considered.

Renting or financing kindergarten spots in local public kindergartens is another option. Companies may contract with a kindergarten, which includes that they have the right to use a defined amount of kindergarten spots for a defined time. In this way, the companies are able to offer reliable and individual arrangements for their employees. The BMFSFJ (2013a) states that this kind of support is useful when employees already use the kindergarten and the employees receive an assurance that the spot is secure or they can be guaranteed a spot for their second child. This is interesting for companies with several locations and allows company officials to solely rely on the expertise of the kindergarten staff, but keeps the business dependent on the capacities of the kindergarten and seldom offers a right of co-determination. Needs assessment still plays a role though in whether the company chooses to contract with a certain kindergarten or not. This model holds a financial interest for the kindergartens, too, as the reservation fee is added to the facility’s profits.

Another model concerns the company support for parents’ initiatives. Parents’ initiatives are a rather new way of establishing a childcare institution.5 Sometimes, there is no childcare available covering the needs of the parents, or the parents are not satisfied with the supply of childcare in their region. In this situation, parents can coordinate the childcare by themselves and establish their own kindergarten. There are various ways in which the company can support parents – either financially, materially, providing legal support, or by releasing them from their work tasks in some situations. The effort of the company is rather low here.

The two following models belong to the category in which companies support, foster, and extend the local infrastructure of childcare. It is known as “social ← 53 | 54 → sponsoring” and aims at an improvement of childcare provision in qualitative and quantitative terms (Busch, 2004). One example deals with the commissioning of family support services, whereby companies support information centers that offer parents moral and social support. Another example concerns the support of child-minders. Child-minders need to fulfill many requirements to be able to legally care for children. Companies can support them financially or materially (for example, providing rooms or tools), enabling caretakers to offer more spots to children.

The table reveals that the employees receive support by the employer through all kinds of regular childcare assistance. Support can be structured in several ways: aid in locating appropriate childcare, providing a greater degree of flexibility, and offering additional information. Next to this quantifiable support, employees may feel supported by the employer is the same recognizes and respects their existing childcare obligations.

The following focuses on the spread and nature of family-friendly HRM, and on the ESCC especially. Thereby, the focus is on the years 2009 to 2012 since this time span is covered in the empirical analysis as well. In 2003, about 20 percent of all companies in Germany did not implement family-friendly HRM. This amount decreased substantially to just one percent in 2012. In other words, in 2012, 15 percent of German businesses offered one to three different kinds of family-friendly policies. 33 percent of companies offered between four and six policies. Eight percent offered more than 13 family-friendly policies. It thus may be concluded that the importance of a family-friendly work environment increased significantly over the years. Thereby, the work environment is defined as the physical geographical location as well as the immediate surroundings of the workplace like the construction of the office building, the relation to the colleagues or working atmosphere (BMFSFJ, 2013b). The most spread policy can be found in the field of flexible working arrangements. In 2012, over 96 percent of the companies offered it. 86 percent of the companies offered measures in the field of parental leave or explicit promotions of working parents and 54 percent offered at least one policy on caring children and elderly in 2003. For the latter one, it can be observed that the supply of it first rose from 42 percent in 2003 to 61 percent in 2009, but then fell off. A similar trend can be observed for the field of family services, as it grew from 20 percent in 2003 to 39 percent in 2006, but decreased afterwards to 16 percent in 2003 (BMFSFJ, 2013b). Several policies have been abolished in the years in between, which seems surprising considering the aforementioned rise in family-friendly policy adoption in general (BMFSFJ, 2013b).

Data on ESCC are collected by several data sources, but reveal different results (Seils & Kaschowitz, 2015). In the following, the results of the Statistischen Bundesamt, the BMFSFJ, and the Deutsche Industrie und Handelskammertag will be presented and discussed. The following table contains the development of on-site childcare facilities and the share of on-site childcare compared to public childcare facilities as collected by the Statistischem Bundesamt. Their data collection process is a complete inventory account and includes duty of participation by the childcare provider, meaning that they need to register. ← 54 | 55 →

Table 2-17: Absolute amount and proportion of on-site childcare facilities from 2006 to 2015

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Source: Grieß (2016); proportion for 2015 not known.

The table reveals that the absolute number of on-site childcare facilities increased by 42 percent in a consistent manner from 307 in 2006 to 726 in 2015. The share of on-site childcare facilities with 0.6 percent on all childcare facilities is rather low, but it increased nevertheless to 1.2 percent in 2015. The second data source is published by the BMFSFJ (2013b) and established in cooperation with the Institut der deutschen Wirtschaft and presents a voluntary cross-sectional survey for 1556 companies. The results were forecast to be representative for the whole population. Here, the kind of support was irrelevant, only ESCC measures in general were taken into consideration. According to them, two percent offered ESCC in 2003, four percent offered it in 2006, two percent in 2009, and three percent in 2012. The third data source refers to the Unternehmensbarometer der IHK (DIHK, 2014). Here, an online questionnaire was conducted by 1625 companies. The survey revealed that 16 percent of surveyed companies offered childcare. Nine percent of the companies offering ESCC in 2012 mention that they would like to expand their supply in the following years.

Seils and Kaschowitz (2015) compare the results of the different sources. They conclude that the results of the DIHK over-represent the large companies, and the BMFSFJ also neglects companies with less than five employees. Both results decrease to one percent when adjusting them with weights to the general economy. The authors present the following reasons for the low amount of on-site childcare centers: a lack of continuous demand (89 percent of all companies state that they have less than 20 employees and just one percent of the companies have more than 200 employees who are subject to social insurance contributions); and a high degree of administrative and fixed costs. ← 55 | 56 →

The last paragraph has revealed that some companies might be more interested than others to support family-friendly policies. As already mentioned, the availability of family-friendly HR measures increases with the size of the company as they tend to have a greater and more consistent demand for it. In addition, a larger percentage of female employees goes along with a higher probability of part-time workers, who make childcare support lucrative for the company in certain situations. There is no way to verify, at this point, whether this applies to women in leading positions and if they command a stronger family-friendly measures awareness within their company (Seeleib-Kaiser, 2011). The accessible data reveal that companies with a greater proportion of employees under the age of 40 offer significantly more part-time options and related services. Furthermore, there are significant differences between companies in former East and West Germany since family-friendly services are far more often provided in former West Germany. Also, companies with a large proportion of highly qualified employees often offer a more flexible schedule (BMFSFJ, 2013b).

2.3.3.3  Economic effects for a firm

To evaluate comprehensively the effects of ESCC on maternal employment, it needs to be highlighted that the company is not the primarily provider of ESCC. Consequentially, it cannot be assumed that companies will provide ESCC in the long run since it is costly for them and they expect any kind of return. Therefore, this section will shortly address the (monetary) effects of ESCC for the provider. As already previously mentioned, it can be differentiated between studies using public datasets and published in independent series or mission-oriented research, often conducted by companies.

With regard to the first one, Lehmann (2011) investigates whether there is a two-way relationship between corporate childcare and business success with the employer dataset of the IAB. He finds that business success is conducive for supply of ESCC but not vice versa. Especially medium-sized companies with unexpected monetary success want to provide benefits for their employees with childcare obligations. While a statistically significant reverse relationship cannot be found, the author argues that the possibility of a lagged relationship cannot be excluded. While the introduction costs are quite high for ESCC, the return might be quantifiable later. Bloom et al (2011) argue that there is a positive correlation between productivity and family-friendly HRM more general than explicitly ESCC, as long as it is not controlled for good management practices in form of operations of improving the work process, monitoring of employee performance and work incentives. While it can be rebutted that the policies have a negative impact on profit, they at least pay for themselves. Another study is published by the BMFSFJ (2003) and conducted by Prognos AG. The study quantifies the potential savings which can be achieved due to family-friendly HR policies. Here, hypothetical values are assumed, which are derived from empirical imposed data in form of controlling data from ten companies. The dataset is furthermore extended by qualitative amendments like interviews ← 56 | 57 → with HR manager. Then, three different scenarios are derived: Firstly, the basic scenario refers to a company without any family-friendly HRM. Secondly, the real scenario reflects saving for a company due to actual policies based on the empirical gathered data. Thirdly, the optimal scenario shows the maximal saving due to HR policies. For instance, the return-to-job duration is assumed to be twelve instead of 25 months long. For example, the model company saves money due to reduced fluctuation costs, reduced absenteeism or decreased reintegration costs. Thereby, the study bundles the effects of various policies like holding contact to parents in parental leave, childcare facilities or home office. Altogether, insufficient reconciliation of family and work could save between 55 percent in the real scenario and 78 percent in the optimal scenario compared to the basic scenario. The company’s return would be eight percent or 25 percent, respectively. Mohe et al. (2010) evaluate this simulation highlighting that the distinct effects of individual policies should be distinguished to be able to comprehend the total sum.

Commerzbank AG has an on-site childcare facility for its employees in Frankfurt am Main (Commerzbank, 2009). Using personnel data and qualitative interviews, the authors investigate the monetary effects of the facility for the time period 2005 to 2007. The total costs were about 571.000 Euro, but these were significantly smaller compared to the benefits of 702.000 Euro. This results in a return on investment of 23 percent. Especially, the reduction of family-related missing workdays by 4.5 days lead to the positive effect. Furthermore, the authors highlight several non-quantifiable results like increased motivation. Another study was pursued for BASF (Then et al., 2014). After the introduction in 2006, Then et al. analyze the economic effects of an on-site childcare facility until the year 2011. The company acquired Euro 764.000 per year due to a reduction in long-term absenteeism and 115.500 Euro per year due to a reduction in short-term absenteeism. Furthermore, the company saved Euro 13.000 per year of reclassification costs. The users of the childcare facility had an additional income of Euro 355.000 per year since they could increase their working time. Lastly, the state acquired Euro 157.000 of tax income, Euro 226.000 per year on social security disposals and saved Euro 35.000 of parents’ money per year. Hence, both studies conclude that there is financially a clear support of ESCC for the employer.

2.4  Concluding remarks

There are substantial differences between the employment rates of men and women, explained by work interruptions due to childbirth and rearing. As seen above, firstly, there is a vertical segregation implying that women are typically employed in certain occupations. Secondly, horizontal segregation prohibits many women from climbing to higher positions, albeit there are trends making upward mobility more of a prospect for women. Third, the working volume differs substantially for men and women. While the participation rate of females increased considerably during the last years approaching the one of men, the working volume decreased. Generally, it can be concluded that the smaller a company is, the higher the female ← 57 | 58 → participation rate. A high participation rate goes along with a higher proportion of women in leading positions. Including the vertical segregation aforementioned, it is no surprise that certain economic sectors have a generally higher female participation rate and accordingly, employ more women in higher positions. This chapter also addressed that employment rates differ between mothers and women without childcare obligations, but that this gap narrows as the child ages, though a difference remains for the remainder of the woman’s LFP. Several women would like to extend their working hours to up to 30 hours per week. It has been proven that full-time employed mothers reveal a higher life satisfaction compared to those working less. The extension of working hours is hampered, however, due to a variety of factors including missing childcare facilities.

The chapter reviewed social policy as a legally stated responsibility of governmental institutions, open to external actors, for instance companies, supplementing the system. Throughout history, companies have been found to offer support to their employees in terms of family issues in order to motivate them, making economic self-interest the companies’ lead reason to function as a social policy actor. ESCC, partly resulting from this, is an instrument targeting one specific target group of employees. While it can be expected that non-users regard ESCC as positive, only parents benefit directly. Mohe et al (2010) rank ESCC as a primary measure as it directly supports employees with childcare obligations. The specific shape that ESCC takes, on- or off-site, does not matter in this regard, but rather the supply of general support.


1 The percentage of employed or unemployed working age persons actively seeking a job in an economy (OECD, 2015). It is used interchangeably with the term employment rates.

2 The median is often regarded as a more robust measurement to investigate income differences due to the possible minimizing of extreme values at both ends, while the mean is sensitive to any single value being too high or too low compared to the rest of the sample (Khander et al, 2010).

3 For an extensive discussion on government intervention see Gruber (2004).

4 For more information see http://www.erfolgsfaktor-familie.de/default.asp?id=632.

5 See for more information: http://bage.de/menue/elterninitiativen/was-sind-elterninitiativen/.