Are Child Care Options Expanding?

An old idea in economics, boosting purchasing power has become the novel device to expand working parents’ ability to buy child care. Rather than simply building more child-care facilities, policymakers have vastly expanded the availability of portable child-care vouchers.

There’s no ambiguity over government’s interest in expanding early education and child-care programs. Since President Bush approved the first federal child-care program in 1990, outside of Head Start, federal funding has grown at a rapid clip, totaling $11 billion annually.

In California, preschool and child- care funding has more than tripled since 1996, rising from $800 million to $2.4 billion in 1999.1 The fastest growing share is for child-care vouchers, designed to benefit families participating in the California Work Opportunities and Responsibility to Kids (CalWORKs) program, California’s welfare-to-work initiative, and working families earning less than 75% of the state median income.

The question remains whether this new faith in raising families’ purchasing power is effectively widening their choices. When working parents do plug into the voucher system, what kind of care are they buying and how good is it? How does the old policy strategy of building new centers and subsidizing licensed child-care homes intersect with this newfound trust in vouchers?

Data show that parents in poor communities still have fewer choices and are limited by both the cost and the supply of care that meets their needs. In addition, changes to the nation’s welfare system in recent years have increased demand for child care. Yet an examination of subsidy use by families enrolled in CalWORKs shows that even when child-care assistance is available, greater numbers of parents aren’t necessarily using it.

Research conducted by PACE and CDSS reveals a wide range of subsidy take-up rates in California. In Los Angeles County, for example, administrative data revealed that just 21 percent of families in a welfare-to-work activity in June 1999 were using a CalWORKs child-care subsidy. Including other forms of assistance, such as state preschool and Head Start, might lift this utilization rate. Maternal interviews in San Francisco demonstrated that 50 percent of CalWORKs mothers were using some sort of subsidized care. Counties may also see increases in subsidy utilization as CalWORKs implementation unfolds and as welfare-to-work plans are refined.

Low subsidy use is not an issue only for California. New York State this year doubled the amount of money budgeted for child care subsidies, but the money is not getting into the hands of parents, according to a report last fall. The clog is largely due to a low supply of child-care providers and no systematic way to distribute the money. In Minnesota, where the state has taken steps to boost spending on child care and increase the number of child-care facilities, one study showed that 60 percent of families eligible for assistance were not using it.

When parents don’t receive subsidies, for whatever reason, they often end up paying for child care with their own money.

For example, a family of three, with a household income of $15,000, spends between 24 percent and 45 percent of their income on child care, according to the report released last fall by HHS, “Access to Child Care for Low-Income Working Families.” If that same family received a subsidy, their out-of-pocket spending on child care would drop to between 1 and 7 percent of their income.

This out-of-pocket spending on child care also varies significantly across the country, according to the PACE Growing Up in Poverty project—a three-state study of 948 mothers in welfare programs and their child-care choices. Relatively few mothers in the study are paying out-of-pocket for child care. But on average, mothers in California and Connecticut who are eligible for but not using subsidies are paying close to $300 a month.

A survey of 300 parents on child- care waiting lists in Santa Clara County, conducted in 1998 by researchers at PACE, illustrates the tough choices that low-income working mothers make while waiting for child-care assistance.7 Many of the mothers said they were working more hours in order to afford the type of care they had chosen, since they had no hope of receiving a subsidy any time soon. Many of these parents also relied on more than one provider, most of them informal, to cover the hours they needed care. This resulted in several transitions for children throughout the week and even during the day, which experts suggest is not good for young children.