Why The Market Can’t Provide An Adequate Child Care Supply And How States Can Help Fill The Gap

The new Child Care and Development Block Grant (CCDBG) funding represents an enormous opportunity to improve access to and quality of child care for infants, toddlers, their families, and the teachers and programs that work with them. With funding from the Pritzker Children’s Initiative, a project of the JB and MK Pritzker Family Foundation, the BUILD Initiative is organizing a series of webinars and blogs in partnership with ZERO TO THREE and the Center for Law and Social Policy for state policy leaders, decision makers and advocates.  

By Steven Jessen-Howard and Simon Workman, Center for American Progress

Almost four million babies are born in the United States every year. These infants require diapers, blankets, baby food, and countless other products, creating a large and profitable market for companies meeting this demand. However, the law of supply and demand fails to hold true for perhaps the most essential good for children, high-quality child care. Why does the child care supply fall so short and how can states close the gap and support families?

The Lack of Quality Infant and Toddler Care  

Nearly two-thirds of children have all available parents in the labor force, making child care a necessity for most families. Yet, finding quality care is far more difficult than picking out a cute onesie. According to an analysis of 22 states conducted by the Center for American Progress, over 50 percent of neighborhoods are child care deserts, meaning there are more than three children for every one licensed child care slot. Inadequate supply is an even bigger issue for infants and toddlers, who require lower staff ratios and group sizes.

The Challenge of Being a Child Care Provider

Despite the burdensome costs to families, running a child care center is not typically a lucrative operation. Providers are often struggling parents themselves. The average child care teacher makes just over $10 per hour and over half of this workforce relies on some form of public income support. Making matters worse, teachers working with infants and toddlers face a ‘wage penalty,’ earning up to $4 less per hour than those working with older children. Tight margins and inadequate reimbursement rates limit the number of child care assistance-eligible children providers can accept, in turn making it more difficult for low-income families to access affordable care. Finding high-quality care is even more challenging. Even when states increase reimbursement rates for high-quality programs or provide quality bonuses, they rarely cover the cost of quality improvements. Working families are already stretched thin by child care costs and cannot afford to pay more. A significant increase in public investment is necessary to support the market and close the child care supply gap.

Build the Child Care Supply by Making Informed Investments

In order to make targeted, effective investments to build the infant toddler child care supply, it is essential to gather detailed information about supply gaps. The level of data currently available varies significantly between states. Four states do not provide publicly accessible online databases of licensed child care providers, and a further fourteen states provide some information about providers but are missing essential elements such as provider location, capacity, or ages served. While the remaining states post data with at least these three elements, the level of detail and accessibility of the data varies widely, with only four states listing capacity information by age group. Thus, even when it is possible to compare the number of total licensed spots to the number of children in the area, it is difficult to examine the more complicated child care landscape in individual communities and to zoom in on the needs by children’s age. For example, while we know that care for infants and toddlers is more expensive, and less likely to be accessible for families who most need it, the lack of data makes it difficult to identify deserts specific to infant and toddler care. Better data is also needed to gain a more complete understanding of an area’s distinctive child care needs, such as the availability of care during non-traditional hours or for dual language learners. With this information at their fingertips, researchers, administrators, and legislators could more effectively target policy solutions to address the unique supply gaps of specific areas.

Encourage Programs to Serve Infants and Toddlers

While better data is crucial to developing future supply-building strategies, there are steps that can be taken now to incentivize programs to serve infants and toddlers. States such as Ohio have begun tackling the problem by completing cost of care studies and using the results to set tiered subsidy rate increases that accurately reflect the cost of providing quality infant-and-toddler care. Adequately reimbursing providers for quality improvements can allow for better staff ratios, improved classroom materials, more comprehensive services, and increased teacher pay, without passing costs onto overburdened families. In Georgia, providers can enter into contracts with the state to serve subsidy-eligible infants and toddlers in high-quality programs, guaranteeing revenue during the period of the contract, improving teacher pay, and enabling providers to make investments in quality. States can also look to provide tax credits to develop new infant-toddler care facilities in specific communities, support informal care providers to become licensed, and invest in the early childhood workforce through programs such as T.E.A.C.H. early childhood scholarships, so that directors can support highly-skilled educators in their programs. States have more creative work ahead of them with regard to addressing the woeful compensation of infant and toddler teachers, but these types of incentives can be an effective first step..

Investments Must be Equitable

Research tells us that areas with higher African-American, Hispanic, and American Indian populations are more likely to face child care shortages, as are low-income and rural areas. Additionally, providers in these areas often must contend with external challenges such as lead contamination, or racism’s detrimental impact on maternal and infant health. Public investment should prioritize the areas with the highest need and work with local stakeholders to ensure solutions are focused to navigate the unique challenges of each community and leverage each one’s potential. Georgia’s contract strategy, as noted above, is one way to focus on equitable investment.

Moving Forward

At the federal level, the Child Care for Working Families Act, introduced by Senator Patty Murray and Representative Bobby Scott in 2017, would provide the type of large scale public investment needed to correct the market failure. The proposed bill would increase teacher compensation, ensure providers receive adequate revenue to operate a high-quality program, and limit child care costs to no more than seven percent of family income.

In the absence of such a federal investment, it is imperative that states do all they can to address the critical need for infant and toddler child care, supporting working families and our youngest learners. In addition to collecting and using data to target services to those most in need, it is beyond time states prioritized funding for infants and toddlers and the programs that serve them. The four million babies born each year deserve no less.