**Box 1: Childcare costs for children between ages 0 and 3 years in Poland**

The OECD Tax-Benefit methodology indicates that “Childcare benefits for parents with children in externally provided childcare and the costs of that care have been introduced into the models but are not implemented for standard outputs.” (OECD 2015). This means that the calculated net income of families does not account for the fact that when all adults in the household move into employment, additional care responsibility will most likely be assumed by private institutions. To find out the real cost of care in Poland for children under the age of 3, we conducted interviews with local childcare researchers in Poland. During these interviews and subsequent research, we discovered that public spots in nurseries are hard to reach for most families because of an undersupply. The cost of private nurseries, which have been on the rise in Poland, varies between PLN 1,000 and PLN 1,500, depending on the region. A detailed report on the supply and cost of care can be found in _Raport podsumowujący wyniki badań ogólnopolskich_ . For the analysis of childcare costs in this paper, we will assume the lower bound of PLN 1,000 per month, which we term ‘conservative estimate’.

# **b. Single Parent with 2 Children**

Figure 5 shows the case of a single parent with 2 children. The income boost of the 500+ program in this case is very significant: the family receives a net income of PLN 28,416 per year compared to PLN 16,416 if the 500+ program did not exist. This case illustrates what Goraus and Inchauste (2016) have found in their estimation on the effect of the 500+ program: extreme poverty for families with young children in Poland will nearly disappear. However, the additional income with 500+ when the single parent is out of the labor force nearly equals what the family would receive if the single parent worked full time at MW (PLN 28,416 at inactivity with 500+; PLN 29,280 at MW before 500+). After the introduction of 500+, the additional income gain from working at MW is only about 31 percent of MW. The reason is that the additional income from work causes the withdrawal of the means-tested part of the benefit.

Figure 5 shows that the ‘poverty trap’ spans from 42 percent to 84 percent of AW, meaning that any additional earnings beyond PLN 39,751 per year will leave the single parent with less net income until he/she can enter a job at around the AW.<sup>13</sup> When accounting for childcare costs (Figure 6), only about a quarter of MW is gained when moving into a full-time MW job for a single parent with 2 children.<sup>14</sup> The computations assume that only 1 child is in a public childcare facility, while the older child is either in a subsidized spot that exists for children over 3 or already in school. However, in some cases where this is not possible, the actual gains would recede to 11.7 percent of MW.

> 13 These results do not take into account childcare costs yet. Considering that transportation costs and childcare costs need to be added, the disincentives become even stronger.

> 14 All charts (including pre-accounting for child care) can be found in the appendix.

12