City University of New York



TO: Congressman John Kline (Chair, House Education and the Workforce Committee); Senator Lamar Alexander (Chair, Senate Committee on Health, Education, Labor, and Pensions)FROM: Sarah OlleRE: Affordable Daycare in the U.S.DATE: 3/10/15Policy Options BriefAffordable daycare is an increasingly important and urgent issue not only for poor families but for society as a whole. As more women have increasingly entered the workforce over the past several decades, they are increasingly reliant on daycare. Today approximately 11 million children younger than age five are in some form of childcare in the United States (Child Care of Aware of America 6). Daycare is very expensive in the United States, and a full 76 percent of parents rate affordable childcare as the most or one of the most important issues facing working families (MacGillvary 12).High Cost of DaycareThe cost of daycare varies from state to state and is correlated with the cost of living, According to a 2013 report, “the average annual price of full-time care for an infant in a child care center ranges from $4,600 in Mississippi (about 30 percent of annual full-time minimum-wage earnings) to $15,000 in Massachusetts (roughly equal to annual full-time minimum-wage earnings” (Minton 7). However compared to other public programs, it is outrageously expensive across all the United States.The average annual cost to place an infant in a daycare center was higher than a year’s tuition and fees at a four-year public college in 31 states and the District of Columbia (Child Care Aware of America 23).The cost of putting two kids in full-time center care is more than annual median rent in every state (Covert).Among the 50 states, the annual cost of center-based infant care averaged over 40 percent of the state median income for a single parent (Child Care Aware of America 25).Current Government Daycare Subsidies InsufficientThe multiple sources of government funding for childcare in the United States are fractured and uncoordinated, and parents continue to pay a high percentage of the cost. The federal government allocates several different forms of funding to states to provide childcare subsidies to poor families. Approximately 2.6 million children receive subsidies (Child Care Aware of America 26). The federal law allows states to assist families in paying for child care if their income falls below 85 percent of state median income, and if they need child care to support employment and/or education and training (Collins 2). As a family’s income increases, the family is expected to pay more of the total price of daycare. Accordingly “state copayment systems vary widely on a number of factors, including minimum and maximum copayments, how copayments increase as family income rises, and the amount paid by families whose income is approaching the subsidy income limit” (Minton). For example a single parent earning approximately $30,000 a year with two children would pay a monthly copayment of approximately $69 in Wyoming, where the cost of living is very low, to $945 in Hawaii, where the cost of living is much higher (Minton 4). Many poor families continue to bear an enormous cost burden of childcare. About sixty percent of funding for childcare in the United States comes directly from parents. In comparison, families only pay about 23 percent of the cost of a public college education, while the rest is covered by state and federal funds (Child Care Aware of America 27).The current federal funding for daycare and resulting slots available do not meet the needs of poor families. Unfortunately comprehensive national figures on childcare needs have not been tabulated and are not publicly available. However these examples help to illustrate that the demand for affordable daycare far outpaces the current availability:The U.S. Department of Health and Human Services estimated in 2009 that childcare assistance reached less than 18 percent of potentially eligible children. Since 2009, federal funding has not kept pace with inflation or demand (Child Care Aware of America 34).The number of children receiving child care assistance in 2012 was 1.51 million, a decrease from 1.81 million in 2001, even though there were a greater number of children living in low-income families in 2012 than in 2001 (Schulman 17).As of 2014, 18 states either had waiting lists for child care assistance or, even worse, had frozen their intake and do not keep a waiting list, meaning parents are turned away with no timeline for when a spot may open (Schulman 10).Among the 10 states with waiting lists that reported data for 2012, average length of time families spent on the waiting list ranged from 67 days in one state to 36 months in another state (Schulman 10).In 2011 the state of California subsidized child care for approximately 300,000 children while nearly 200,000 children remained on waiting lists (MacGillvary 8).A 2002 study of fourteen states showed only seven states provided subsidies to more than 30 percent of children who were eligible. The remaining states provided subsidies to less than 30 percent of eligible children (Collins 6). Lack of Affordable Daycare a Barrier to Employment for Poor MothersAvailability of affordable, reliable childcare is a significant barrier to employment for women, especially poor mothers. Often women’s jobs are disrupted because of problems with childcare that is unreliable, unaffordable, or unavailable. Unstable employment and high rates of job turnover, which are common in jobs held by poor women, are exacerbated by childcare problems and ultimately prevent poor women from working.A 2002 study found that two factors primarily determine whether or not a woman trying to move from welfare to work will be able to sustain employment -- job quality and availability of childcare (MacGillvary 12).A 1997 survey reported 41% of poor nonworking mothers with infants did not work because of child care problems, compared to 11% of their non-poor peers (Kisker).A 1997 survey reported 33% of poor mothers not in the labor force reported that they are not working because of child care problems, compared with only 18% of non-poor mothers not in the labor force (Kisker).Affordable daycare is especially vital for mothers who are looking for a job but not currently working. If a parent does not have reliable affordable daycare, they may be unable to make interview times and ultimately get a job.Sufficient childcare subsidies are especially important in ensuring poor mothers can remain in the labor force. A 2002 study found former welfare recipients who received childcare subsidies were 60 percent more likely to be employed after two years than those who did not (MacGillvary 12). Simply put, if poor women cannot afford childcare, they cannot work and have no path out of poverty.Extensive Benefits for SocietyComprehensive affordable childcare also benefits the children who would participate in childcare, the labor market, and society as a whole.Repeated studies have demonstrated long-term education and social-emotional benefits for children who participate in high-quality daycare and preschool (MacGillvary 14).Studies have repeatedly found that a reliable daycare structure reduces employee absenteeism and turnover, and increases employee productivity (MacGillvary 18).A 2006 study calculated the return on investment for society, measured by increased earnings, lower crime rates, and lowered rates of public assistance, has been calculated at 17.1 to 1. $4.17 of this return belonged to the participants, mostly due to increased earnings, while $12.90 accumulated to the general public, mostly due to reduced crime (MacGillvary 16).A study of public employees in New York City who were provided with child care subsidies found that those in the subsidy group reported “leaving work less often, concentrating better at work…being more productive at work, and using fewer sick days to deal with child care issues” (MacGillvary 13).SolutionsThere are many ways the U.S. could institute policies to increase access to affordable daycare. I have developed three proposals for consideration.Policy Option 1: Create a Flat Fee Daycare SystemTo increase access to affordable childcare, the U.S. government could work with states to create flat-cost daycare systems in every state and expand the number of seats meet the demand. All parents within a state would pay the same affordable flat rate for daycare, regardless of income, thereby eliminating the complex formulas states use to evaluate the subsidy families are eligible for. The fee would likely differ from state to state, as it would be proportional to cost of living. However the federal government could make federal funding contingent on each state adopting an affordable flat fee for all parents. Similarly the federal government could demand that states create enough seats so that the longest any family is on a waitlist is 1 month and tie federal funding to this stipulation. Through this program, the U.S. could create a nation-wide daycare system.State and federal tax dollars could be used to subsidize the cost of daycare for all families and to create additional daycare seats. To pay for the additional costs, taxes can be increased on the wealthy or through closing corporate loopholes, or spending could be reduced on the military or other programs. Though the government would need to allocate spending to this project, the U.S. economy can also expect to realize substantial long-term savings due to reduced worker absenteeism and reduced incarceration and higher employment rates for children who grow up in poverty. More research would need to be conducted to understand the full cost of this initiative. Quebec has increased access to affordable daycare with their $7 (CDN) a day daycare system. Instituted in 1997, the system offers daycare for the cost of $7 a day ($5 a day until 2004), regardless of parent income (Anderssen and Mackarel). The government argued for a flat rate because higher income parents already paid substantially more in income tax – requiring higher income parents to pay more for daycare would be seen as asking them to pay twice (Anderssen and Mackarel). The program increased access significantly -- the number of children served tripled to 230,000, up from 77,000 before the system was introduced (Anderssen and Mackarel). However Quebec does not guarantee a seat to every child who requests one – it is not a universal system. It has struggled to meet the demand for seats. Quebec has had to expand home-based and other private daycare options, which are subject to lower quality standards, to meet family demand (Anderssen and Mackarel). Lower quality for-profit and unlicensed care centers continue to operate where waiting lists are long (Anderssen and Mackarel). The Quebec government pays $2.2 billion annually on this childcare program, a far higher per-child cost than any other province (Anderssen and Mackarel).Policy Option 2: Increase the Government Subsidy Available to Low-Income FamiliesTo ensure all low-income families can access affordable childcare, the U.S. federal government could increase the subsidy it provides to the states to allocate to help poor families cover the cost of childcare. The federal government could make this additional funding contingent upon the creation of a more affordable sliding-scale system, including a reasonable cap on the max any family would need to pay. Similarly the federal government could demand that states create enough seats so that the longest any family is on a waitlist is 1 month and tie federal funding to this stipulation. Through this initiative, the federal government can ensure all low income families can access daycare that they can afford.Additional federal tax dollars could be used to subsidize the cost of daycare for low-income, to create additional daycare seats, and to incentivize states to modify their subsidy formulas. To pay for the additional costs, taxes can be increased on the wealthy or through closing corporate loopholes, or spending could be reduced on the military or other programs. Though the government would need to allocate spending to this project, the U.S. economy can also expect to realize substantial long-term savings due to reduced worker absenteeism and reduced incarceration and higher employment rates for children who grow up in poverty. More research would need to be conducted to understand the full cost of this initiative. Sweden has been able to provide universal childcare through a similar system. In Sweden, municipalities provide preschool for children from the age of 1 onward (Nordfors). Daycare fees are directly proportional to the parents’ income and decrease for every additional child a family has. The fee can be up to 3 percent of a family’s monthly income, but can never exceed 1,260 Swedish krona (about $200 USD) per month (Nordfors). All children 3 years and older receive at least 525 hours per year free of charge (Nordfors). If a child’s parents are unemployed or on a leave of absence, the child is entitled to at least 3 hours per day or 15 hours every week of day care at no cost to the family (Nordfors). The national government rewards municipalities with extra funding if they set maximums on how much parents would pay (Anderssen). There are still some wait lists, but municipalities are required by law to find a space within three months (Anderssen). Most daycare centers are public, though some for-profit centers still operate to meet parent demand (Anderssen). Sweden has made additional investments to provide daycare service during nights, weekends, and holidays to support parents who work during these times (Nordfors). Sweden funds universal daycare through tax revenue as part of its robust social safety net (Anderssen).Policy Option 3: Work with Businesses to Drive More Affordable ChildcareTo ensure the availability of daycare seats and subsidies for low-income families, the federal government can work with state governments to create economic incentives for businesses to provide daycare for their employees. This would help free up seats in subsidized public daycare programs and thereby increase access to affordable daycare for low-income families. Moreover currently businesses lose $3 billion annually due to employee absenteeism as a result of child care problems – there is a clear incentive for businesses to provide daycare to their employees (Chlid Care Aware of America 9). The federal government’s cost obligation would likely be much lower for this type of program, as it would only need to fund the tax credits and other economic incentive programs that businesses took advantage of. However this type of program is also much less expansive than the first two options and may not have as wide-reaching effects.Some state governments have already begun similar initiatives. For example, Georgia makes employers eligible for a tax credit of up to 75 percent of the costs to the employer of providing or sponsoring childcare for their employees (Child Care Ware of America 32). In Louisiana, businesses can be eligible for tax credits for supporting child care centers, with higher credits for higher rated centers, and receive a credit of up to $5,000 for donating to child care resource and referral agencies (Child Care Aware of America 32).State governments could create social impact bonds with investors. In this form of public-private partnership, “the government contracts with an intermediary organization to provide the program and sets target outcomes to measure success. Private investors provide the upfront capital to the intermediary and investors earn back a return on this investment only if an independent evaluator determines that target outcomes set by the government are met. The government then pays the private investors” (Child Care Aware of America 33). States could pursue funding for day cares from private investors, with the return on investment being contingent on the students’ long-term life outcomes.ConclusionThe U.S. must consider new approaches to our daycare system. By framing daycare as a family responsibility, we have let an inadequate system fester for far too long. As a result, poor mothers are kept out of the workforce, workers across America miss work due to childcare problems, and children who cannot access quality daycare have worse life chances. As a society that believes in equal access to opportunity, we must develop a set of policies to ensure all families have access to affordable daycare.Work CitedAnderssen, Erin. “What the world can teach Canada about building better daycare”. The Globe and Mail, 10/23/13. , Erin and Mackarel, Kim. “Better daycare for $7/day: One province's solution for Canada”. The Globe and Mail, 10/18/13. Care Aware of America. “Parents and the High Cost of Child Care.” Child Care Aware of America, 2014.Collins, Ann, Jean I. Layzer, and J. Lee Kreader. “National Study of Child Care for Low-Income Families.” U.S. Department of Health and Human Services, September 2007. , Bryce. “The Affordable Childcare System That Used To Exist In The U.S.” Think Progress, 1/21/2015. , Ellen E. and Christine M. Ross. “Arranging Child Care”. Welfare to Work, Spring 1997. MacGillvary, Jenifer and Laurel Lucia. “Economic Impacts of Early Care and Education in California”. UC Berkeley, August 2011. , Sarah. “Low-Income Families and the Cost of Child Care.” The Urban Institute, December 2013. , Cecilia Elana and Christine M. Barrow. “U.S. Elementary and Secondary Schools: Equalizing Opportunity or Replicating the Status Quo?” Opportunity in America, Fall 2006. , Karen and Helen Blank. “Turning the Corner: State Child Care Assistance Policies 2014. National Women’s Law Center, 2014. ................
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