Lilliana Diaz has operated a child-care business in her Lowell, Massachusetts, home for more than four years. Often rising before dawn and putting in 10-hour days, she guides eight toddlers through a busy schedule of reading, playtime, meals, and more. To get to this point, Diaz completed a 63-hour training course, then earned a Childhood Development Associate (CDA) credential, and is now working toward an associate's degree. But because Massachusetts, like 32 other states, does not reimburse family child-care providers based on their education level, she makes the same as a provider who has just 15 hours of course work -- the bare minimum required by the state. The same is true for workers in most child-care centers; there is little pay differentiation even for workers with college degrees. In both family day-care settings (a small number of children in the provider's home) and child-care centers (more formal and larger), the quality of care is more custodial than developmental. Only...