Researchers know that child care isn’t just about children. It also has a huge impact on parents and on the economy.
A recent report — “Child Care in State Economics” — says that the strategic use of child care could could help local economies grow.
“Child care can allow parents to participate in the labor force or pursue education or training,” the report’s executive summary says; and “the organized child care industry itself is an integral part of state economies.”
“By providing regular care for 10.7 million children, the organized child care sector continues to serve its traditional role of helping working parents enter and remain in the workforce. Paid care allows one third of U.S. families with a working mother to participate in the labor force.
“However, the use of organized care is not evenly distributed across U.S. households. Organized care is used most heavily by mothers with higher education and income levels, and those who are experiencing better workforce outcomes.”
Produced by RegionTrack, Inc., an economic research firm, the report was commissioned by the Committee for Economic Development. Funding came from the Alliance for Early Success.
Child Care Economics
The report makes four key points about the current child care environment:
- Organized child care continues to enable parents to enter and remain in the workforce
However, “The percentage of U.S. families with working mothers that use organized child care has been declining.” Two factors have fueled this decline:
“First, the recent national recession worked to accelerate the trend toward increased relative care. Primary care provided by fathers who were either unemployed or working part-time increased beginning in 2009, particularly among those caring for preschoolers. The overall share of fathers providing child care for children under 15 with employed mothers increased by 5 percent following the recession to roughly 31 percent.”
“A second factor… is an ongoing decline in financial assistance to help pay for child care provided to families by government, employers, and other sources. The share of households receiving assistance from any source declined in the two most recent SIPP surveys, falling from 7.3 percent in 2005 to 6.4 percent in 2011.”
- “Female labor force participation is highly correlated with use of organized child care.”
But as parents in Massachusetts know, “The cost of organized child care remains a significant financial hurdle, particularly for low-income and low-skilled workers. The cost of care varies widely across the states and is highly dependent upon the age of the child, the type of provider chosen, licensing requirements, and the overall cost of living. Paid child care can also consume a significant fraction of household income and is as costly as college for families in many states.”
- “The U.S. child care industry consists of a large number of mostly very small businesses.”
However, these small businesses have a big economic impact. “The $41.5 billion in direct economic output of the child care industry in turn produces spillover (spending) that essentially doubles the market-based economic activity related to the industry.”
“Comparable service-providing sectors include outpatient medical care facilities ($47.1 billion), waste collection ($41.3 billion), scientific research and development services ($39.4 billion), and advertising agencies ($38.3 billion).”
- “Child care contributes to regional economic growth by helping to employ a region’s existing labor resources more efficiently. Many parents, especially single parents and low-skilled workers, may opt to remain out of the labor force if they lack access to affordable child care.”
As the report explains, parents who work are less likely to be poor. So states seeking to lower their poverty rates could enable more parents to work by offering more child care.
Are child care subsidies worth it? Do they generate more money than they cost? Or is subsidizing child care mostly a matter of providing low-income parents with more equal access to the workplace — with no net financial gain?
The answer: It depends on the type of subsidy.
“The most advantageous case, from an individual state’s perspective, is if the funding is provided from outside the region (e.g., federal child care subsidies). In that instance, subsidized child care produces substantial net economic gains to the state. State output increases by roughly 3.8 dollars per dollar of additional spending on child care subsidies. There would, of course, be offsetting losses at the federal level.”
Similarly, “subsidies for low-skilled workers would produce a similar sized increase in state economic output. This suggests that subsidization of low-skilled parents to enter the labor force could produce more net economic activity, on average, than many alternative uses of state and local government spending.”
“However, when new taxes are levied on either income or capital to pay for the subsidies, the negative effects of the tax slightly more than offset the overall increase in economic activity from the subsidy.”
Turning Research into Advocacy
To help get the word out, the website of the Committee for Economic Development features the full report and the executive summary as well as an infographic. There are also fact sheets and talking points for each state. The fact sheet for Massachusetts is here. And the talking points are here.
So please spread the word. As the report concludes: “Understanding the various economic roles played by child care and the forces shaping the size and structure of the child care industry are vital to forming effective child care policy in the current environment.”