Home care allowance and labor market participation of immigrant and native-born mothers

Abstract

Most countries still have a significant gender gap in labor force participation, and this gap is especially large for immigrants. Despite this gap, Germany introduced various forms of home care allowances in the last decade. Parallel to the extension of early child care and the inclusion of a legal claim for it, from 2013 to 2015, a nationwide home care allowance existed for parents who did not use public child care for children aged one or two years. After 2015, home care allowances continued to exist in several German federal states. Some politicians strongly criticized this transfer for allegedly decreasing work incentives, particularly for mothers with lower labor market integration, such as immigrant mothers. Using federal state differentiated data obtained from the German Socio-Economic Panel, we investigate the impact of a home care allowance on the labor market participation of mothers. For both native-born and especially immigrant mothers, the effects are significantly negative. We conclude that a home care allowance has negative effects on the labor force participation of mothers of young children, irrespective of the legal claim for and the extension of public child care.