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Child Care. Readings for this topic in Kimmel/Hoffman book: 1) Ch. 1 Blau; 2) Ch 2 Bergmann; Child care topics 1) Why economists study this topic? 2) Affordability 3) Quality 4) Quantity 5) Child care workers. 6) Welfare reform. Child Care: Intro.

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Presentation Transcript
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Child Care

  • Readings for this topic in Kimmel/Hoffman book:

    • 1) Ch. 1 Blau;

    • 2) Ch 2 Bergmann;

  • Child care topics

    • 1) Why economists study this topic?

    • 2) Affordability

    • 3) Quality

    • 4) Quantity

    • 5) Child care workers.

    • 6) Welfare reform


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Child Care: Intro

  • Why economists study this topic?

    • 1) Potential market failure: market fails to work properly, resulting in inefficient outcomes.

      • Imperfect information

      • Externalities

    • 2) Equity

      • Current living standards: child care as a barrier to economic independence for low-income families

      • Children’s future well-being.

  • Affordability details:

    • Very poor face dilemma: must work to support family but cannot afford the childcare.

    • Poor to middle income: Still often cannot afford stable quality care.


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Affordability Concerns

  • Low income workers:

    • ) 1 out of 6 workers (who work at least PT) have Y at or below 2*poverty line.

    • 2) Nearly 70% of working poor families headed by married couple.

  • Lower income workers more likely to use unpaid child care which is less reliable and lower quality.

  • When paying for care:

    • Low Y pay $220/week: 16% of their budgets.

    • High Y pay $320/week: 6% of their budgets.

    • Minimum wage workers can’t afford the low income average payment.


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Involvement of Federal Govt in Child Care

  • 1) Government-subsidized employer-provided child care (affects about 4% of workers)

  • 2) Flexible spending accounts:

    • Pre-tax $$ held aside to reimburse child care expenses (up to $5,000 per year)

  • 3) DCTC:

    • Dependent Care Tax Credit: credit for $2400 per kid up to 2 kids.

  • 4)CCDF:

    • Child care and development fund: block grants to states

  • 5) Head Start: never fully funded.

  • States involved in regulation.


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Child Care Subsidies

  • Total federal and state spending:

    • Approximately 10.1 billion dollars.

  • Percent of this money to low income families: about 2/3 of total.

  • Key drawback to DCTC and flexible spending plans: dollars are not refundable so do not benefit lower income workers who incur no tax liability (so fails to affect their ability to purchase quality care).

  • Studies show that subsidizing child care for low Y families has big effect on their employment behavior.


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Child Care Availability

  • As demand  from  female employment: market did respond with  # providers.

  • Persistent shortages:

    • Low-income neighborhoods

    • Centers willing to accept subsidies (due to reimbursement delays)

    • Infant care (less than 2 years)

    • Off hours care (low income workers more likely to work off-hours).


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Child Care Quality

  • Factors affecting quality include

    • Child:staff ratio.

    • Staff training and turnover.

    • Child:staff interactions.

    • Physical environment

  • Many studies of child care quality persistently find mediocre to poor quality care and shortages of quality care.

  • Parents do not seem to be able to recognize quality care.

    • Even when informed, often weight factors in wrong way.


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Blau versus Bergmann(in Kimmel book)

  • Blau:

    • Child subsidy to replace child care subsidies;

    • Focus on quality and individual choice.

  • Bergmann:

    • Substantial increases in child care subsidies;

    • Direct government involvement in provision of quality of care;

    • Focus on equity (redistributional aspect).


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Child Care Workers

  • An issue for this class because:

    • 1) nearly 100% of providers are female;

    • 2) provider quality is most important determinant of quality of care.

  • Child care workers:

    • Low paid even when college-educated.

    • Some studies show high turnover (and turnover BIG determinant of quality).

    • Concern: child care not valued by society – viewed as women’s work.

  • Elder care: a growing concern.


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Child Care and Welfare Reform

  • Child care $$ is big % of budget for welfare-to-work population.

  • Subsidies play major role in success of welfare-to-work transition.

  • Subsidies have grown under PRWORA.

  • Currently, subsidies being cut due to federal state budget problems and shifting priorities.


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