Child Care

1. Child Care • Readings for this topic in Kimmel/Hoffman book: • 1) Ch. 1 Blau; • 2) Ch 2 Bergmann; • Child care topics • 1) Why economists study this topic? • 2) Affordability • 3) Quality • 4) Quantity • 5) Child care workers. • 6) Welfare reform

2. Child Care: Intro • Why economists study this topic? • 1) Potential market failure: market fails to work properly, resulting in inefficient outcomes. • Imperfect information • Externalities • 2) Equity • Current living standards: child care as a barrier to economic independence for low-income families • Children’s future well-being. • Affordability details: • Very poor face dilemma: must work to support family but cannot afford the childcare. • Poor to middle income: Still often cannot afford stable quality care.

3. Affordability Concerns • Low income workers: • ) 1 out of 6 workers (who work at least PT) have Y at or below 2*poverty line. • 2) Nearly 70% of working poor families headed by married couple. • Lower income workers more likely to use unpaid child care which is less reliable and lower quality. • When paying for care: • Low Y pay $220/week: 16% of their budgets. • High Y pay $320/week: 6% of their budgets. • Minimum wage workers can’t afford the low income average payment.

4. Involvement of Federal Govt in Child Care • 1) Government-subsidized employer-provided child care (affects about 4% of workers) • 2) Flexible spending accounts: • Pre-tax $$ held aside to reimburse child care expenses (up to $5,000 per year) • 3) DCTC: • Dependent Care Tax Credit: credit for $2400 per kid up to 2 kids. • 4)CCDF: • Child care and development fund: block grants to states • 5) Head Start: never fully funded. • States involved in regulation.

5. Child Care Subsidies • Total federal and state spending: • Approximately 10.1 billion dollars. • Percent of this money to low income families: about 2/3 of total. • Key drawback to DCTC and flexible spending plans: dollars are not refundable so do not benefit lower income workers who incur no tax liability (so fails to affect their ability to purchase quality care). • Studies show that subsidizing child care for low Y families has big effect on their employment behavior.

6. Child Care Availability • As demand  from  female employment: market did respond with  # providers. • Persistent shortages: • Low-income neighborhoods • Centers willing to accept subsidies (due to reimbursement delays) • Infant care (less than 2 years) • Off hours care (low income workers more likely to work off-hours).

7. Child Care Quality • Factors affecting quality include • Child:staff ratio. • Staff training and turnover. • Child:staff interactions. • Physical environment • Many studies of child care quality persistently find mediocre to poor quality care and shortages of quality care. • Parents do not seem to be able to recognize quality care. • Even when informed, often weight factors in wrong way.

8. Blau versus Bergmann(in Kimmel book) • Blau: • Child subsidy to replace child care subsidies; • Focus on quality and individual choice. • Bergmann: • Substantial increases in child care subsidies; • Direct government involvement in provision of quality of care; • Focus on equity (redistributional aspect).

9. Child Care Workers • An issue for this class because: • 1) nearly 100% of providers are female; • 2) provider quality is most important determinant of quality of care. • Child care workers: • Low paid even when college-educated. • Some studies show high turnover (and turnover BIG determinant of quality). • Concern: child care not valued by society – viewed as women’s work. • Elder care: a growing concern.

10. Child Care and Welfare Reform • Child care $$ is big % of budget for welfare-to-work population. • Subsidies play major role in success of welfare-to-work transition. • Subsidies have grown under PRWORA. • Currently, subsidies being cut due to federal state budget problems and shifting priorities.