gained wide media attention because of its innovative approach in supporting families with PLN 500 per month for their chosen form of private care, which includes nannies, nurseries, and daycare centers (Kowalewska 2015; Wójcik 2015).

A salient question is to what extent families could be subsidized to make market childcare prices more affordable and restore the incentive to work among second earners. This would have the immediate advantage of restoring choice between caretaking or working among recent mothers, and from a societal point of view, it would be a way to reduce the scarring effects of long-term inactivity on future labor market outcomes.

The optimal design for subsidy, at a given cost of childcare, is assumed to be the one that restores the incentives to work. Therefore, the question is, “how high does the subsidy for care (for example, in the form of vouchers) have to be, until the disincentives to enter employment, created by the 500+ program as shown in the previous sections, are nullified?”

- **b. Simulating a Childcare Subsidy and Its Impact on the Affordability of Working**

The following section models the effect of introducing a subsidy to cover the cost of private childcare on the net income from formal work for mothers with young children. The results are based on the outputs provided by the updated TBM for Poland, yet they provide more realistic childcare cost figures. The basis upon which childcare costs for children below 3 years were calculated is shown in Box 1. Different levels of subsidies are introduced to examine how high the subsidy would have to be to restore the incentives to work for parents. Based on existing smallscale voucher programs, we have chosen to increase the voucher amounts in increments of 25 percent of the total costs of care.

# **_Single Parents_**

Figure 10 shows the net income for a single parent when moving from inactivity into MW employment, accounting for childcare cost, with varying amounts of care subsidies. When no subsidy is provided (Net+500+childcare cost), single parents with 2 children have a lower income compared to inactivity until they earn 87 percent of the AW. To make it worthwhile, including transportation and other costs that may occur when moving into employment and childcare, the net gain for single parents with 2 children compared to not working occurs much later: even working at AW levels, the added income for single parents is only PLN 3,355 more compared to inactivity. Note that this estimation assumes that the parent only has to pay for one child in private care, while the other can already take advantage of spots in public daycare centers for children above the age of 3, which are highly subsidized and more readily available compared to the provision for children ages 0–3. A loss of net income can still be observed with the 25 percent subsidy, where the same income in inactivity is only achieved when reaching income above 55 percent of the AW. Only with a subsidy of half of the childcare costs there is a net income gain, though only PLN 865 annually, from moving into MW employment. Subsidies that are at 75 percent and 100 percent of childcare costs offset the disincentives to enter the labor force by PLN 3,865 and PLN 6,865 per year, respectively, encouraging labor force entry.

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