Would Economy Crumble With No Nannies?

June 3, 2008— -- Imagine a world without nannies.

Now think about the thousands of highly paid women — and, yes, they would still mostly be women — who would abandon their jobs to be with their kids.

The U.S. economy might not quite fall apart under such a scenario, but several experts said it could have far-reaching effects.

While it might be a farfetched idea here, look no further than Italy to see what could happen.

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The government of Prime Minister Silvio Berlusconi had taken a hard-line approach to immigration, cracking down on those in Italy illegally. And now the Italians have begun to see the results and are pleading for the government to exempt foreign cleaners and nannies from the crackdown.

In the United States, there is no nanny shortage now —and. of course, not all nannies are immigrants — but a major change in immigration laws, or an increased crackdown on those in this country illegally, could severely limit the pool of available nannies.

"I think that the evidence here is clear … if you take child care away, we'd have many fewer women in the work force," said Jonathan Gruber, an economics professor at MIT who studied child care issues in Canada. "Child care availability is the key determinant of female labor force participation."

As more women entered the working world in the past few decades, Gruber said, "It's not like the dads are filling in. It's just increasingly that children are being cared for in child care settings."

Let's say -- hypothetically -- that 10 percent of the 65.7 million women in the work force today decided to stay home. That would mean a sudden shortage of about 6.6 million workers. Productivity would plummet and millions of dollars would stop flowing through the economy.

The average American makes $31,333 a year. That means that if just 10 percent of the women working in the United States today decided to stay home, about $206 billion in wages would be lost. There would also be a dramatic impact on federal and state income taxes if such a mass of women fled the work force.

Liz Ryan, a workplace expect and author, said such a nanny shortage such as the one feared in Italy would be "catastrophic" here.