Childcare subsidies, childcare costs and benefit erosion : simulations for Ireland

This research estimates by how much the NCS reduces childcare costs for families who use formal childcare in Ireland. The cost 'coverage' of the subsidy, measured by the ratio of the subsidy to the total cost of care, is estimated using the microsimulation model, SWITCH, linked to 2022 data from the Survey of Income and Living Conditions. While the universal component of the NCS has increased over time, most of the parameters of the means-tested component have remained fixed in nominal terms. We carry out a counterfactual simulation, in which the thresholds for the income assessed subsidy had evolved in line with wage inflation since 2019. Our results show the scale of benefit erosion that has occurred due to the nominal freeze to these parameters.