(sublinhados meus)
Why Is Sweden Paying Grandparents to Babysit?
I am not sure the policy is a good idea, but it is worth trying to think through its logic, as I attempt in my latest Bloomberg column. After outlining the case against the change, here is the argument for it:
If you look at Sweden’s policy closely, it adheres pretty well to some basic economic principles: namely, the notion of Pareto improvements, which benefit all parties involved.
Start with the fact that Swedish parents currently receive extensive paid leave upon the birth of a child, and so it can be said they are already paid to look after their children. Whether or not you agree with that policy, it is longstanding and well-established. Take it as a given.
Now imagine that you are an ambitious Swedish doctor or lawyer, climbing the career ladder, and are self-aware enough to realize you do not always have entirely the right degree of natural patience necessary for parenting. In that case, you might prefer to go back to work following the birth of your child. Under the status quo ex ante, you could not work and draw your normal salary and still get the full child-care benefit, even though some child benefits are paid automatically.
There is thus a potential inefficiency in the system. You may stay at home just to get the money, even when an alternate arrangement might be better for everyone.
Now add grandparents to this equation. If the grandparents can be paid to take care of your child, all of a sudden the extended family as a whole doesn’t lose the money by having the parent go back to work. Instead, that money is transferred to the grandparents, so the work disincentive is diminished.
And economists will tell you that the parents and grandparents can do their own settling up. If the grandparents are well-to-do, for instance, and eager to spend time with their grandkids, they might funnel some of that money back to the parents or the child, either directly or indirectly. In some cases, on net, the grandparents may not end up getting paid anything at all.
In essence, you can think of this policy as a model designed to maximize gains from trade.
One side effect is that, to the extent the parent who returns to work is a high earner, government tax revenue will increase. That will help pay for the policy, partially if not entirely.
The logic for this policy may hold all the more for single parents.
Worth a ponder. When it comes to issues of transferability of benefits, there are few a priori answers.
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