Natalia Bezzina Matseva
When Malta introduced its Free Childcare Scheme in 2014, it marked a decisive shift in family and labour market policy. At the time, female employment rates were among the lowest in Europe, formal childcare provision was limited, and care for young children was still largely seen as the responsibility of the mother. The reform was ambitious: full-time childcare, provided entirely free of charge, conditional on both parents being in work or education.
By providing free childcare only to parents who are employed or in education, the policy does more than reduce childcare costs: it creates a direct incentive to work. Increasing female employment was the primary objective of the scheme from the outset. In this sense, the scheme operates through two complementary channels. It enables employment by lowering the opportunity cost of work and freeing up mothers’ time, while simultaneously encouraging labour market participation through its conditional eligibility. The Free Childcare Scheme therefore represents a hybrid between family support and an active labour market policy, making female employment the natural outcome on which to assess its effectiveness.
More than a decade later, the Free Childcare Scheme remains a central pillar of Malta’s labour market strategy. But how much did it actually change the female employment rate?
In my study, I use population-wide administrative microdata from Malta’s System for the Administration of Social Benefits (SABS) and adopt a difference-in-difference (DD) framework to compare the employment outcomes of mothers eligible for the scheme with a carefully chosen control group of mothers whose children were never eligible for free childcare. The identification strategy exploits the timing of the reform, controls for a rich set of observable characteristics, and tests the common trends assumption.
The results suggest that the impact, while not dramatic, was meaningful. Access to free childcare likely increased the probability of female employment by around 1.3 to 2.4 percentage points on average, with the effects becoming stronger over time. By 2016, the female employment probability likely increased between 1.7 and 3.2 percentage points, indicating that mothers’ responses to the policy were gradual rather than immediate.
The relatively modest size of the overall employment effects should be interpreted in light of Malta’s strong informal care networks. Grandparents and other relatives have long played a central role in childcare, especially given Malta’s small size and close-knit society. When the scheme was introduced, employment rates among older women were very low, making informal care widely available. As a result, reducing the cost of formal childcare did not necessarily translate into a large increase in total childcare use for all families but rather a substitution effect from informal care to formal care.
Furthermore, additional analyses in the study highlight that the aggregate employment gains were concentrated among single mothers and mothers with multiple children. These subgroups of mothers have historically faced greater structural barriers to employment. Notably, the reform likely helped reduce pre-existing employment gaps by up to 26% for single mothers, 39.3% for two-child mothers and 14.1% for mothers with three or more children.
The Free Childcare Scheme also helped narrow inequalities in access to work. This equity-enhancing dimension is especially relevant in the Maltese context. Universal access avoided the stigma and administrative complexity often associated with means-tested programmes, while the work requirement ensured that the scheme functioned as an activation tool rather than a passive transfer. For mothers who wanted to work but were constrained by childcare costs, the reform lowered a key barrier.
At the same time, the study highlights important limitations. The employment effects were largely confined to the period during which mothers were eligible for free childcare. In other words, once children aged out of the scheme, there was little evidence of lasting increases in employment. In practice, this means that the policy helped mothers enter work but did less to keep them there in the longer term. The evidence suggests that free childcare, on its own, may not be sufficient to deliver these longer-term gains especially if jobs are incompatible with family responsibilities once childcare support ends.
However, one must also realise that this context is changing. Female employment among younger cohorts has risen sharply over the past decade, reducing the availability of informal care. At the same time, enrolment in the Free Childcare Scheme has continued to grow steadily, reflecting both increased uptake and the rising participation of foreign workers with young families. These trends suggest that the scheme’s importance, and potentially its impact, may increase over time.
For a country facing persistent labour shortages and an ageing population, these lessons are highly relevant. The Free Childcare Scheme has played a role in expanding Malta’s labour force, but its full potential will only be realised if it is embedded within a wider strategy that supports parents throughout their working lives. Seen in this light, free childcare is not merely a social benefit, but an economic investment whose returns depend on the broader environment in which families and employers operate.
Natalia Bezzina Matseva is an economist
