That works sort-of when the majority of the population is relatively well-off, though still inefficient. Not so well now with the immigration crisis and change in demographics.
The choice to sacrifice wages for more time with your kids is a luxury good, even if people choose to spend some of that time doing housework.
This is the crux: my point is that 1.5x the bacon is often still worth 2x the labour. Seriously, despite all the moaning about materialism and consumerism, the economy as a whole has suffered from a severe lack of bacon ever since the first monkey exchanged some bacon for a back rub, and this is definitely part of the solution.
1. the economy is bigger and produces more goods.
2. much of those goods are distributed to the two-worker families.
3. a few bored minimum wage workers can look after a very large number of kids.
The quality of childcare is on average a function of how much you pay. The boutique ones have professionally trained staff that get more than minimal wage.
But what about the families that can't afford any but the most rundown centers, I hear you ask? Won't they be better off under the old system? You know, the one where the economy was 30% smaller due to halving the labour supply?
Perhaps they would be living poor but honest lives, perfectly happy in their squalid conditions and lack of medical care.
you're missing the part where more demand creates more supply.
Sure, sometimes the market is distorted due to zoning, like in SF, and also land is finite, but generally speaking the market responds to the added demand by creating more housing, possibly denser housing. Same with other goods. Those are not empty dollars that got added into the system by fiat - they represent additional productive work done, and the goods / services they create is added to the economy.
As with almost all optimization problems, applying twice the resources (in this case, work hours) won't bring you back twice the (net) bacon, due to diminishing returns.
However, I think on net it is still more economically productive, at least in a large portion of cases.
It's unlikely that housework and childcare would optimally take up a full 50% of our entire reservoir of workable-hours, especially in the age of household appliances and childcare centres.