More mothers would engage in paid work if childcare costs were lower, according to new research by the Economic and Social Research Institute.
It says that low-income families are particularly affected, with the cost of minding one child amounting to one-fifth of disposable income.
Until now, there has been little hard data on how the high cost of childcare affects the employment of mothers.
The issue is particularly important at a time of emerging labour shortages and their potential impact on competitiveness.
ESRI research, based on long-term tracking data, shows a link between an increase in childcare costs and a decrease in the amount of paid work mothers undertake.
It also found that cutting the cost of childcare leads to an increase in paid working hours.
The authors say that would have benefits in terms of women's career earnings, and would increase the State's tax take, making social welfare more sustainable.
It would also have an impact on reducing poverty, especially child poverty.
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Speaking on RTÉ's Morning Ireland, Professor Helen Russell of the ESRI said that from a policy point of view, targeting lower-income families in particular made sense as the disincentives are greater for those earning less.
Ms Russell said every 10% increase in childcare cost was associated with a 30-minute decrease in women's paid working hours.
She said the disincentivising effect of childcare costs was larger for low-income families.
Ms Russell added that the costs became more complicated when children start school and that children starting school did not equate with women returning to work.