Child Care: Social Infrastructure for Economic Development Mildred E. Warner, Ph.D., Cornell University Community Supports for Working Parents Community Development Institute Ithaca, NY July 14, F unding provided by the USDA National Institute for Food and Agriculture

2 The Economic Importance of Early Care and Education Children - Human development Parents – Labor mobilization, career ladders Regions– Critical social infrastructure for economic development

Public Investment: Elders vs. Children 3

4 US Investment Not Competitive Public Expenditure Enrollment in publicly funded ECE »Ages 1-2: U.S. 6%, Europe: 3-74% »Ages 3-5: U.S. 53%, Europe: 66-99% Expenditure: US < 0.5% of GDP on ECE, Europe 2-6% of GDP Work Place Policy Full time work: U.S. 40 hrs/week, Europe hrs/week Required vacation: U.S. 0 days, Europe days/year. Maternity leave: U.S. 0 weeks, Europe: 12 – 42 weeks This undermines our global economic competitiveness Sources: Kimmerman 2001, Gornick and Myers 2003

5 Why Do We Under-invest in Early Education and Care? »Private Frame - Early care and education is the private responsibility of parents - Failures are moral, not structural. »Welfare Frame focuses on poor children only – Head Start, subsidies. »Education Frame – Public responsibility for education begins at age 5 »Economic Development Frame focuses on businesses and physical infrastructure Child Care as Social Infrastructure. Stimulus. Competitiveness

6 Employers Recognize the Challenge and Benefits Comprehensive child care and early education »Promotes labor mobilization of parents as workers »Improves their productivity 30% report child care breakdowns, on average 5-9 days missed/yr »Reduces turnover Turnover costs % of annual wage. Costs business billions »Enhances choice and career ladders, especially for women. Earnings differential is a Mommy Gap more than a gender gap - it is largest between women who have children and those who don’t. Sources: APA 2004, Carillo 2004, Shellenback 2004, Gornick and Meyers 2003

7 Child Care Has Become an Economic Development Priority More than 90 state and local teams have conducted economic impact reports »See child care as an economic sector »Recognize size (employees, establishments, children) »Think about child care markets (supply, demand, price) »Regional impact (multipliers, parents served)

How Big is Child Care in NYS? 2004, NYS CCCC and Cornell »22,000 small businesses providing child care »119,000 workers are employed in ECE »The sector generates $4.7 billion in gross receipts »Over 622,000 children receive care and education »Over 750,000 working parents served 2010 America’s Edge Report »Multiplier effects ($1.86 for every dollar, 1.28 jobs for every job). » Call for $3.6 Billion investment to serve 480,000 more children and generate 80,000 jobs 8

Comparing ECE to Other Sectors in NY Employment similar to hotels and lodging, private elementary and secondary schools, larger than dairy sector Multipliers similar to other public infrastructure sectors: transit, education, universities, hospitals 80% of economic developers see lack of affordable quality child care as a barrier to economic development (NYS survey 2006). 9

What’s wrong with the child care market? Parents lack effective demand – need subsidies Low profitability yields insufficient supply of affordable, quality care Hard to differentiate quality for providers and parents Fragile businesses – few economies of scale Recession reduced formal supply 10

What can be done? Communities – Economic development and planning tools: business assistance – shared services, employer/community partnerships, coordinated planning, public entrepreneurship Employers – Flexible Spending Accounts, On site Child Care, Parental Leave, Flexible Work Arrangements, Direct Taxation State and National Government – Subsidies, Tax Credits, Quality Rating Systems with Tiered Reimbursement, Preschool, Workplace Policy 11

12 The ECE Sector in New York: Prices, Wages and Subsidies Average price of care $9,500 – $13,600/yr »Costs are too high for parents, but too low for quality »Median Family Income Married with children - $87,000 16% income for center infant care Single with children - $26,000 53% income for center infant care »This forces parents out of the formal child care market. Average wage in child care $24,000 »Wages are too low to promote professionalization of the sector Subsidies – patchwork across counties in the state. »Income eligibility - Some counties (Oneida) as low as 100% of poverty »Parent Co-Pay - Some counties as high as 35% of costs (Schenectady) NACCRA, 2011 data.

13 Economic Development Strategies Providers: Need collective management strategies to create economies of scale (in purchasing, fee collection, staffing) Need Facility and Operating Finance Workers: »Need career ladders and improved employment conditions Parents: »Need subsidies and better information on quality (QRIS) Communities: »Include ECE in land use, transportation and economic development planning »Include in new industrial and housing development

Subsidies Demand Side Focus US restricts subsidies to the poor, reimburses at lower rates, and gets a more limited market response than Australia or the Netherlands Recommendation -Don’t limit to the poor -Use tiered reimbursement to promote quality -Involve employers in advertising and supporting the program 14

Warner and Gradus, 2011

Involve Employers Netherlands has employers pay (0.34% of payroll) as a tax to support their share of the subsidy program Employers can be advocates for increased public support for subsidies Human Resource Managers can advertize program benefits to eligible workers 16

EMPLOYERS Flexible Spending Accounts Most commonly offered employer support – easy to administer, inexpensive for employers Low take up among parents due to restrictive program design (once a year sign up, reimbursement basis, use it or lose it, limited to $5000) Recommendation – Raise limit to cover cost of care, Allow more flexible enrollment 17

Innovative Employer Programs Cornell University Child Care Grant »Deposit into employee’s FSA account »Avr. award $1370, range $87-$5000, allocated $1.6 million to 882 families in 2009 »Reached lower & middle-income families ($12,000-$150,000) Most Likely to Participate: Female, single-parent, hourly employees Employees with greater child care needs Employees who learned about program from personal interaction (Morrissey and Warner 2009) Least Likely to Participate – Those with infants - Due to federal design restrictions

Other Policies Tax Credits Increase the level, make refundable, link to quality. Preschool Fund all children – not just those in NYC! Integrate with child care. Use preschool as a stable supply side subsidy to improve quality of child care Worker Subsidies Expand worker tax and education credits to promote quality Providers Subsidies to improve quality. Reduce barriers to joining the licensed system (NYS has 15,000 licensed providers but an additional 35,000 providers report to IRS) 19

20 A Comprehensive Solution Institutional Support for ECE Programs to ensure quality. Financial Aid for Families to ensure access to quality ECE. Work Place Policies (e.g. paid parental leave, flexible work schedules with full benefits) to ensure parents can pursue careers and have time to nurture their children. Publicly Funded Infrastructure to ensure ECE professional development, program monitoring, consumer education, data collection and employer education. Source: Stoney, Mitchell and Warner “Smarter Reform: Moving Beyond Single Program Solutions to an Early Care and Education System”