The role of childcare in competitive markets

The recent COVID-19 crisis has bought to the fore an often unrecognised, but crucial aspect of how business and society functions – childcare.??When schools, nurseries and other care providers were forced to shut, businesses across the world learnt the hard way how critical childcare is to staff and, therefore, the ability for a business to operate.??Early research indicates that this resulted in “a likely increase in pre-existing disparities between the childcare contributions of mothers and fathers.”[1] ??A UK survey of 19,950 mothers and pregnant women revealed that 15% either had been, or expected to be made redundant, with 46% of those saying that a lack of childcare provision played a role in their redundancy.[2] ??With UK working mothers being considered as ‘sacrificial lambs’[3] ?in the coronavirus childcare crisis, the potential effect on gender equality is stark.????

Data from the UK Office for National Statistics (ONS) shows that in 2019, 75.1% of mothers with dependent children were in work in the UK, compared with 92.6% of fathers with dependent children.[4] ???A 2018 report[5] ?from the Council for A Strong America found that during a typical year, employers lose about $13 billion in potential earnings, productivity and revenue due to inadequate child-care resources.??Yet, despite the essential nature of childcare to any business that has staff with children, the role of childcare in competitive markets is not well understood.??

In addition the costs of childcare (particularly in the the UK) have been rising exponentially. A landmark survey of 27,000 parents carried out by Pregnant then Screwed this month confirm that almost two thirds of families are paying more, or the same, for their childcare as they do their rent or mortgage, and 1 in 4 parents have had to cut down on heat, food and clothing to pay for childcare. (https://pregnantthenscrewed.com/one-in-four-parents-say-that-they-have-had-to-cut-down-on-heat-food-clothing-to-pay-for-childcare/)

As a competition lawyer, with two children needing full time childcare this is a subject very close to my heart. So where could we start? Below I have tried to consider some of the potential economic, social and regulatory implications of childcare - by no means exhaustive, but designed to identify where research on these issues could be focused.

Potential economic implications related to childcare?

• Women leaving the (paid) workforce to look after children (unpaid)
• Companies needing to recruit/replace women leaving due to childcare obligations
• Lost revenue from ad hoc absences due to childcare requirements
• Initiatives to improve childcare provision within the workplace (e.g. onsite nurseries, emergency childcare provision, childcare voucher/tax free childcare schemes)
• Reduced ‘spending power’ due to payment of childcare fees
• Sectors most affected by childcare provision e.g. those involving significant female employment, rigid or inflexible hours, requiring significant travel etc.?
• How competition is working in the market for the provision of childcare?

Potential social and regulatory implications related to childcare?

• Lack of women in senior positions affecting compliance (including potentially competition law compliance)
• Lack of senior men involved in full time childcare discouraging junior men to join childcare profession and/or look after their own children full time
• ?Lack of clarity around employee obligations regarding childcare/parental rights?

Research focused on these topics could enable a far better understanding of how childcare contributes to companies, the economy, and ultimately consumer welfare.??Does the provision, or lack, of childcare effect the competitiveness or behaviour of a company???What links can be drawn between competitive markets that work well, and the provision of childcare???Would stimulating competition within the childcare market have pro-competitive knock on effects for businesses or consumers?

There is some existing evidence relating to childcare and competitive markets which could be used as a starting point.?

• The Japanese FTC carried out a market study on the childcare sector in 2014, looking to identify the reasons for the lack of supply.[6]
• The European Platform for Investing in Children (EPIC)[7] ?has a series of policy memos and briefs, including a report on how childcare, parental leave and flexible working arrangements interact in Europe.[8] ??
• The UK CMA issued an open letter to early years providers as a result of alleged unfair practices following disruptions caused by COVID-19.[9]
• In Illinois, a child-care provider was investigated for including a non-compete for all of its employees.[10]

How could a competition authority act in response to the findings??

Research is one aspect - but we also need to consider how competition authorities could play a role by acting in response to any findings, particularly where it is clear the childcare market is not competitive or not working well for consumers. For example by:

• Opening a market study/investigation into the market for provision of childcare
• Targeted enforcement action against childcare providers breaching competition law
• Considering efficiencies in mergers either in the childcare sector or between companies that could improve their childcare offering if they merged
• Considering the role of consumer law when tackling cases relating to childcare
• Considering reductions in penalties for competition law infringements for clear evidence of improvements in ethical behaviour of the company, which could include steps to improve childcare provision for employees.?

It is a simple fact that people are going to continue having children, and will continue to need to work in order to pay for childcare. And unless some proactive action is taken, the costs of that childcare is going to continue to rise. So isn't it about time this issue moved further up the competition policy agenda?

Sarah Long is a partner at?Euclid Law , a boutique competition law firm.??Views are her own and do not constitute legal advice.??You can follow Sarah on twitter @sarahklong.

[1] ?https://cep.lse.ac.uk/pubs/download/cepcovid-19-002.pdf

[2] ?https://pregnantthenscrewed.com/childcare-covid-and-career/

[3] ?https://www.theguardian.com/money/2020/jul/24/uk-working-mothers-are-sacrifical-lambs-in-coronavirus-childcare-crisis

[4] ?Data from April to June 2019 - https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/articles/familiesandthelabourmarketengland/2019

[5] ?https://strongnation.s3.amazonaws.com/documents/602/83bb2275-ce07-4d74-bcee-ff6178daf6bd.pdf?1547054862&inline;%20filename=%22Want%20to%20Grow%20the%20Economy?%20Fix%20the%20Child%20Care%20Crisis.pdf%22

[6] ?https://www.jftc.go.jp/en/pressreleases/yearly-2014/June/140625.html

[7] ?https://ec.europa.eu/social/main.jsp?catId=1246&langId=en

[8] ?https://www.rand.org/pubs/research_reports/RR554.html

[9] ?https://www.gov.uk/government/publications/cma-open-letter-to-the-early-years-sector

[10] ?https://lwp.law.harvard.edu/files/lwp/files/webpage_materials_papers_madigan_flanagan_june_13_2018.pdf ?and Speech by FTC Commissioner Rebecca Kelly Slaughter: https://www.ftc.gov/system/files/documents/public_statements/1561475/slaughter_-_noncompete_clauses_workshop_remarks_1-9-20.pdf