Childcare, COVID-19 and female firm exit

Woman runs a makeshift grocery on the streets of Bè-Ablogamé, a dilapidated neighborhood in the port district of Lomé, Togo.
Photo: © Stephan Gladieu / World Bank

Globally, a lack of affordable quality childcare services is often associated with lower rates of female labor force participation. In studying the historical pattern of female labor force participation in the US – the rise in married women’s employment in the 1940s is often credited with a shift in social norms around gender roles after women had to take on work outside the home during World War II. . It was in 1941 that the US federal government instituted a policy to provide funding for high-quality state-run childcare centers so that women could work during the war effort. The war helped redefine women’s role in the labor market with quality childcare provision recognized as an important contributing factor to their participation.

Unequal gender norms around domestic and caring responsibilities still exist today and are often used to explain persistent gender gaps in employment and earnings. In her 2021 book Career and Family, Claudia Goldin emphasizes the contemporary relevance of this persistence, writing “this was the first major economic downturn during which the care sector will determine the fate of the economic sector.”

During the ongoing COVID-19 pandemic, there have been frequent media reports in the US that a greater proportion of women are leaving the workforce than men due to competing demands on their time due to increased domestic and caregiving work due to school closures and childcare facilities used to contain the virus. In a new paper, we draw attention to this specific issue by examining the impact of national COVID-19-related school closure policies in 2020 and 2021 on firms. We show that closing schools, a key part of the care infrastructure, led to higher business closures among female entrepreneurs with children than male entrepreneurs with children.

Using high-frequency monthly enterprise data collected on Facebook from more than 150,000 business owners in 50 countries throughout 2020 and 2021, we show that women entrepreneurs were more likely to close their business and experienced greater revenue declines during the COVID-19 Pandemic as Male Entrepreneurs. Globally, women-led firms were on average 4 percentage points more likely to close their business than male-led firms in 2020 (male firms closed at an average rate of 17% in 2020 and 12% in 2021). The gender gap in firm closings continued into 2021.

Linking the enterprise data with national COVID-19-related school closure policies, we show that school closures are associated with higher business closures, and women were more likely to close their businesses than men. Part of what drives a significant amount of this excessive female closure is care work. The data reveals that women entrepreneurs spent more time on care and chores when schools closed and they did not get help from their spouses. Male entrepreneurs, on the other hand, did not increase the hours they spent on caregiving, and received help from their spouses.

To show that excess female incarceration is due to childcare, we separately examine patterns for women with children in the home and those without. This pattern of higher closure rates associated with school closure and increased care is significant and economically significant for women with children, it is not significant for women without children. Furthermore, this impact is much more pronounced for women entrepreneurs in societies with conservative norms about equal opportunities for men and women, relative to more gender-liberal societies.

Gender gap in global business closure rates in 2020 and 2021

Gender gap in global business closure rates in 2020 and 2021

Gender gap in average time spent on care and household responsibilities in a day

Gender gap in average time spent on care and household responsibilities in a day

While the pandemic provides a unique lens to examine the effect of childcare provision, it helps reinforce the need for effective childcare policies to help improve female labor market outcomes beyond the pandemic. The COVID-19 crisis has raised the question of whether we can expect gender norms around caregiving and household chores to be permanently shifted as a result of the pandemic and has led to greater advocacy for public policy initiatives that support families. Governments can play an active role in promoting social dialogue that challenges norms about traditional male breadwinner and female caretaker roles and workplace flexibility. Programs may include measuring and appreciating the gender gap, supporting childcare services and early childhood programs, providing time- and labor-saving household appliances, advocating for care-related policies, addressing social norms around care, and involving men in caregiving duties. The policy choices made today can have important consequences for women’s economic empowerment and gender equality for decades to come.

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