Welfare Reform Depends on Good Child Care

When the 1996 welfare-reform bill was passed, one of its many controversial provisions was the imposition of work requirements on single mothers applying for welfare assistance, even if they had very young children. In part, these requirements simply reflected the overall thrust of the legislation, which aimed to make work the fulcrum of the U.S. welfare system. But the inclusion of a single-mothers provision also signaled an acknowledgment of the sea change in American society and family structure that had occurred over recent decades, as large numbers of women with children have entered the labor force.

In spelling out a mother's obligation to work, most states' have accepted as a corollary the government's obligation to provide work supports. The most important of these has been child care. The change in this area has been rapid and substantial, for families both in and outside the welfare system: In the United States today, more than 60 percent of children under four years old, and around half of children two years old or younger, are in regularly scheduled child care outside their homes.

The existence of more good, state-subsidized child care is a salutary, and indeed essential, development. But as the budget surpluses of the last few years evaporate, there will inevitably be strong pressure from ideological right-wingers and fiscal conservatives in statehouses across the country to arrest spending growth in this area or even to cut back on existing programs. This would be a grave mistake. It would be potentially devastating to low-income working families, who would be forced either to pay for high-priced child care they cannot afford or to forgo jobs and income in order to stay home with their children, (or to leave their children untended). Moreover, high-quality child care has been well demonstrated to improve the life prospects for disadvantaged young children. Denying children such care not only hurts them and their families in the short run but does a disservice to the larger society in the long run, as children who might otherwise have grown up to be economic contributors are less likely to reach their full capacities and become drains on the common weal.

The Value of Child Care

In the year 2000, U.S. states spent $8 billion on child care. In seven midwestern states, spending on child care constituted nearly 40 percent of state welfare budgets, about double what was spent in 1995. More than $6 billion of the child-care spending came from the federal government, including $5.1 billion from the Child Care and Development Fund and $1 billion in direct spending under Temporary Assistance for Needy Families (TANF). These substantial increases in public expenditure have taken place in a rather ad hoc and piecemeal fashion, as both federal and state governments have scrambled to adjust to the newly restructured world of social assistance without coherent child-care policies to guide them.

Spending 40 percent of a state welfare budget on child care may sound like a lot, but the conventional approach to measuring government costs -- typically calculated as the sum of all federal, state, and local money directed toward subsidizing this service -- is inadequate. This is because child-care subsidies, unlike many other social services, are directly related to employment. By enabling many more people to go to work, or to work more productively, child-care subsidies generate additional tax income for the government -- income that actually offsets expenditures for child care.

A report by three North Carolina organizations, for example, found that in 1993, a family in that state earning around $15,000 per year and receiving a monthly child-care subsidy of $212 and an Earned Income Tax Credit of $92 generated $351 per month in federal, state, and local tax revenue. That's a "profit" to the state of $47 per month. Such evidence suggests that increasing the amount available for child-care subsidies is likely to result in a net gain for taxpayers.

The most important benefits of subsidizing high-quality child care, of course, are not primarily financial. Small, experimental programs, such as the Perry Preschool Project and the Carolina Abecedarian Project, have demonstrated that intensive child-care programs for low-income, "high-risk" preschool students have potentially powerful and long-lasting effects. Moreover, children who participated in the Chicago Child-Parent Centers, a public project involving thousands of children in the city's poorest neighborhoods, have year after year scored better in math and reading than those who didn't participate. By age 20, these children were more likely to have completed high school and to have lower rates of juvenile criminal activity than children not in the program. Cost-benefit analyses show that the Chicago preschool program alone offered a net return to society -- more than $7 for each dollar invested -- by increasing economic well-being (and hence tax revenues) and by reducing public expenditures for remedial education and crime.

Research over the past 20 years has found that in child-care centers where activities were developmentally appropriate and caregivers were emotionally responsive, the children appeared happier and performed better on cognitive and language tests. Children in classrooms with lower child-adult ratios were better conversationalists, had better general knowledge, and were more cooperative and less likely to argue or fight than in classrooms where there were more children to each adult. These effects were demonstrably greater for the children of less-educated mothers.

As documented in From Neurons to Neighborhoods, a recent volume published by the National Academy of Sciences, the period between birth and age five is important because children are rapidly developing the foundations on which subsequent development and capabilities build. And a large body of research literature shows that early differences in linguistic, cognitive, social, and emotional skills predict children's later functioning in many domains -- academic, emotional, and behavioral. It stands to reason, then, that the quality of care that young children receive can have a significant effect on their development. Indeed, the National Institute of Child Health and Human Development (NICHD) Research Network sought to evaluate the impact of child-care quality (measured by observing how and when caregivers interacted with study children) on child functioning. It found that the quality of children's experiences with child-care staff was an important influence on language, pre-academic, and social competence. (The family, though, was still the most important determinant of young children's development.)

Quality Matters

The evidence that the nation as a whole may pay a high price for a low-quality child-care system is quite convincing. The U.S. armed forces are the largest oasis of high-quality child care in America. [For an account of how the military revolutionized the quality and affordability of child care, see Joan Fitzgerald, "Caring for Children as a Career"]

The negative effects of poor-quality care among the civilian labor force are also evident: Nearly a third of teenage mothers participating in the Teenage Parent Demonstration reported that unsatisfactory quality of child care had led them to stop working or to change hours and activities. Other evidence indicates that high-quality care increases the likelihood, extent, and stability of employment. For example, mothers participating in the Infant Health and Development Program, an intervention program providing center-based care for low-birth-weight infants, were significantly more likely to be working than mothers in the control group. The effect, again, was greater for less-educated than for bettereducated women.

Is high-quality care the norm or the exception in this country? The NICHD study, which conducted observations in more than 600 child-care settings of all kinds, estimated that, among settings for children younger than three, 8 percent were poor, 53 percent fair, 30 percent good, and 9 percent excellent. In other words, not terrible but not outstanding, and plenty of room for improvement.

Both state regulations and the inadequate training of many providers bear responsibility for these dispiriting figures. State recommendations for child-staff ratios for four-year-olds are as high as 20-to-1. Only three states mandate the 3-to-1 infant-to-adult ratio generally advocated by child-development professionals and eight permit an infant-to-adult ratio of 6-to-1. Moreover, the education and training is much lower among regulated, home-based child-care providers than it is among caregivers in centers. In 1990 nearly half of center caregivers had completed college and 90 percent had at least 10 hours of in-service training, and there is evidence that the qualifications of even center staff declined during the prosperous 1990s. As Yasmina S. Vinci, executive director of the National Association of Child Care Resource and Referral Agency, pointed out in April's House welfare-reform reauthorization hearings, "It is difficult รค to attract individuals into the responsible, demanding profession of caring and educating children (let alone to retain them) when the average salary is $16,350 with few benefits."

The Case for Greater Public Investment

If child care is left to the marketplace, the result is likely to be poorer quality child care, for several reasons. First, because the market is made up of many small providers, it is difficult for parents to compare quality, cost, and availability of care, and they are often unsure how to evaluate the information they do acquire. Working parents, especially those in low-wage work, need child care that is easy to get to. In general, therefore, they confine their search to relatively small geographic areas.

Market-based child care also tends to be less than optimal because of what economists call "externalities" -- effects that redound beyond the primary consumers. The benefits of high-quality care, in other words, accrue not only to parents and children but to society generally. They take the form of lower costs for elementary and later schooling (as children enter school better prepared), and of increased productivity and decreased need for social services (as working parents and their employers face fewer absences and disruptions occasioned by child-care problems).

Another argument for greater government involvement in child care is simply equity. If high-quality child care improves cognitive ability, school readiness, and social behavior, children in poor families should be given the same opportunity to benefit as children in well-off families. But low-income parents' choices of child care are constrained by the structure of the low-wage labor market, which fits very poorly with the availability of more formal child-care options. Many working poor parents have a rotating work schedule, typically working irregular hours. Yet only about 10 percent of centers and 6 percent of family day-care homes provide weekend care, let alone odd-hours care. These circumstances make it necessary for parents to patch together child care using multiple providers and unstable arrangements that may put their children's safety at risk, increase family stress, and reduce children's readiness for school. Moreover, even if they have physical access to high-quality care, parents with limited earnings cannot afford it without financial help. One solution, therefore, might be to make early child care like the public-school system: The public sector could provide or subsidize child care the way it does elementary and secondary schooling.

Universal Child Care

There are many ways that public-sector intervention can help improve the quality of child care. The government could, for example, provide more information about child-care options; it could impose stricter licensing requirements for day-care centers; it could conduct training programs for providers; and it could even directly provide care through public child-care centers. Most commonly, however, government intervention takes the form of subsidies or tax credits to parents and providers. Eligibility, access, and outreach vary among the states, as do take-up rates among eligible families. In 1999, the most recent year for which we have national data, only around 10 percent of eligible children were receiving child-care subsidies. For this reason, the form of the subsidy is important. It appears, for instance, that low-income parents are more likely to respond to subsidies if states pay providers directly, or if subsidies are paid in advance, rather than through later reimbursement.

We can envision a program of universal child care for preschool children of working parents that expands existing pre-kindergarten programs to a full day and includes after-school care. It would combine direct provision through school districts in some states with existing community programs in others (where low-income parents receive vouchers to assist paying for pre-K). For infants, the high cost of nonparental care suggests that a paid parental-leave program (such as are available in most other developed nations) deserves serious consideration. The cost of such improvements is one area where research and recent data are sorely needed, but several older studies provide a useful starting point. One four-state study from the mid-1990s found that increasing the quality of a center by about 25 percent, from mediocre to good, would result in a 10 percent increase in personnel and other variable costs.

But the quality of child care is rarely mentioned in recent discussions of TANF reauthorization. In some ways, this is hardly surprising. First, raising the level of expertise and reimbursement among providers would unquestionably raise the direct costs of care -- and hence the costs of a reauthorized TANF. Second, there is a belief that parents are not willing, on average, to spend more money for higher-quality child care. Third, there is a perception that many low-income parents are content to use relatives and other informal arrangements for care. (This perception is likely false in most cases. The limited available evidence, for example, suggests that low-income parents are more likely to choose high-quality, center-based care -- just like better-off parents -- if they have access to subsidies.) Finally, at a deeper level, there is perhaps a conflict between two traditional values: on the one hand, the work ethic that has impelled Congress to impose work requirements on poor parents with young children, and, on the other hand, the belief that young children are best raised at home with their parents. The strength of the latter view may reinforce an unwillingness to accept a big increase in publicly subsidized social arrangements for the care of children.

At root, the reluctance to raise the issue of quality may lie in the belief that providing higher-quality care would encourage greater demand for public subsidies and thus even greater public-sector costs. But this is a narrow view of costs and benefits. Accessible, affordable, high-quality child care is an essential element in the success of a work-oriented reform.