# Presentation: 271240

## Child Care Subsidies and EmploymentElizabeth Davis, University of MinnesotaRoberta Weber, Oregon State UniversityDeanna Schexsnayder, University of Texas

- Welfare Research and Evaluation Conference
- Arlington, VA
- June 4, 2007

## Studies designed to inform child care policy

- Merge of child care subsidy data with relevant administrative data sets, e.g.:
- State client information
- UI wage
- TANF
- Food Stamps
- Policy changes
- Builds on welfare reform research methods of measuring spells
- Informs child care policy with data on program usage, association with participation in other programs, employment, and child care policies

## Three studies whose purposes were to increase understanding of child care subsidy use and employment

- Employment patterns of Minnesota parents receiving child care subsidies
- Why do they leave? Child care subsidy use in Oregon
- The relationship of child care subsidy policies to subsidy participation and parental employment outcomes in Texas

## Employment Patterns of Minnesota Parents Receiving Child Care Subsidies  

- Elizabeth Davis & Marcie Jefferys
- University of Minnesota
*Minnesota Child Care Policy Research Partnership*
- Funding provided by the Minnesota Department of Human Services and the Child Care Bureau, Administration for Children and Families
- 10th Annual ACF Welfare Research & Evaluation Conference, June 4-6, 2007

## Research objectives

-  Increase understanding of the labor force involvement of families receiving Child Care Assistance (CCAP).
- Analyze industry of employment, industry changes and wage growth over 3 years.
-  Did the industries in recipients work change?
-  Which industries had the highest earnings per job? Highest earnings growth?  Did earnings grow more for parents who switched industries or stayed in the same sector?
-  How did household earnings change over the three year period?

## Background: Studies of employment of welfare recipients

- Many studies of the employment of welfare recipients show initial job attainment is often followed by job loss or limited earnings growth.
- Studies also show continued reliance on work supports such as food stamps and Medicaid after leaving TANF.
- Studies of retention and advancement programs aimed at TANF recipients and low-wage workers show mostly disappointing results.

## Data & methods

-  Child care administrative records matched with Unemployment Insurance system wage data and industry classification (NAICS)
-  Four Minnesota counties (all parents receiving child care assistance in 1st qtr 2001)
-  Initial analysis based on 8,166 jobs (1st qtr 2001), data available for approx. 6,000 jobs through 4th qtr 2003
-  CCAP status unknown after initial study

## Findings: Employment of CCAP parents is highly concentrated in a few industries, esp. compared to the rest of the workforce

## Pattern generally replicated other “where they work” studies of child care subsidy recipients.

- Oregon: Okuyama & Weber (2001), Conway & Elliott (1997);
- Florida: Lee, Ohlandt and Witte (1996), Griesinger, Chipty and Witte, (1997);
- Alabama: Chipty and Witte (1997) & (1998);
- California: Child Care Resource & Referral Network (1998).

## Employment pattern differed for TANF and non-TANF related cases

| Industry Sector
(Percent of jobs) | Non-TANF | TANF |
| --- | --- | --- |
| Health Care | 22.9 | 24.7 |
| Retail Trade | 12.4 | 22.8 |
| Admin.& Support | 10.5 | 16.3 |
| Manufacturing | 7.9 | 3.3 |
| Accommodation & Food | 7.9 | 11.4 |
| Finance/Insurance | 7.7 | 3.3 |

## CCAP parents are over-represented in low-wage industries

| Industry | Avg. workforce earnings | Avg. CCAP earnings | Employmt ratio |
| --- | --- | --- | --- |
| Admin & Support | $536 | $166 | 2.7 |
| Accom. & Food | $286 | $168 | 1.3 |
| Retail Trade | $486 | $207 | 1.4 |
| Other Services: Repair, Laundry, etc. | $502 | $271 | 1.2 |
| Health & Soc. Svcs | $684 | $278 | 2.3 |
| Educ. Svcs. | $703 | $319 | 0.7 |

## CCAP parents are also under-represented in high wage industries

| Industry | Avg. workforce earnings | Avg. CCAP earnings | Employmt ratio |
| --- | --- | --- | --- |
| Finance & Ins. | $1,854 | $394 | 0.8 |
| Utilities | $1,738 | $265 | 0.4 |
| Prof., Techn. Svcs. | $1,196 | $305 | 0.3 |
| Information | $1,068 | $417 | 0.6 |
| Transportation | $979 | $298 | 0.4 |
| Construction | $970 | $326 | 0.2 |
| Manufacturing | $954 | $388 | 0.4 |

## Three years later, the overall employment pattern was similar

|  | 1st Qtr 2001 | 4th Qtr 2003 |
| --- | --- | --- |
| Health Care | 22.6% | 26.7% |
| Admin & Support | 16.0% | 11.8% |
| Retail Trade | 11.7% | 12.8% |
| Accommod. & Food | 8.4% | 8.0% |
| Manufacturing | 6.3% | 5.5% |

## Many of the parents changed industries, especially those in low-wage industries.

| Starting Industry | Stayed  | Changed | No job info |
| --- | --- | --- | --- |
| Heath Care & Social Assistance | 54.3 | 19.4 | 26.3 |
| Administrative & Support Services | 17.9 | 45.6 | 36.5 |
| Retail Trade | 30.7 | 37.8 | 31.5 |
| Accommodation & Food Services | 31.6 | 37.8 | 30.6 |
| Manufacturing | 45.9 | 31.8 | 22.3 |

## Substantial variation in earnings growth by industry

|  | No. of Jobs 
(4th qtr) | Quarterly earnings (4th qtr) | % Change in earnings/job |
| --- | --- | --- | --- |
| Construction | 92 | $6,653 | 54% |
| Transportation | 177 | $4,833 | 35% |
| Prof. ,Scien. & Technical | 174 | $5,493 | 34% |
| Health Care | 1531 | $4,807 | 33% |
| Manufacturing | 424 | $6,234 | 30% |
| Admin & Support | 701 | $2,440 | 19% |
| Accommod. & Food | 476 | $2,332 | 18% |
| Retail Trade | 756 | $2,868 | 14% |

## Parents staying in health care or manufacturing sectors had the highest average quarterly earnings by 2003.

|  | Ending Industry |  |
| --- | --- | --- |
| Starting Industry | Same Industry | Different Industry |
| Health Care | $6,163 | $3,253 |
| Retail Trade | $4,648 | $3,275 |
| Accommod/Food | $3,392 | $3,344 |
| Admin. Support | $4,011 | $4,592 |
| Manufacturing | $6,909 | $5,066 |

## Parents moving into health care or manufacturing had the highest average quarterly earnings growth.

| 
Ending Industry | Median Change in Qtrly Earnings | Median Earnings Change (%) |
| --- | --- | --- |
| Health care | $1,558 | 47.2% |
| Admin & Support | -$686 | -27.4% |
| Retail Trade | $40 | 2.2% |
| Accommod. & Food | -$87 | -4.5% |
| Manufacturing | $2,546 | 52.2% |

## Household earnings increased overall but still low

- Across all four counties for families reporting earnings: Mean annual earnings adjusted for inflation increased from $17,102 (2001) to $18,572 (2003).
- Federal Poverty Level (FPL) for a family of four in 2003 was $18,400.
- Nine percent of the households reported no earnings in 2003.

## Summary of findings

- Earnings for CCAP parents increased over the three year study period.
-  For those who remained employed (91%), earnings increased faster than inflation.
-  Earnings were still low relative to the rest of the workforce.
-  Child care would still be costly for most of these families without assistance.

## Low-wage and high-wage industries

- CCAP parents working in upper-tier industries (e.g., construction, transportation, professional services) had the highest average earnings, even though they still had lower earnings than the average for their industry.
- Among the industries hiring the most CCAP parents, those who started out in health care or manufacturing or switched into these industries over the study period, saw the biggest earnings growth and/or had the highest earnings at the end of the study period.

## Other research supports the importance of the industry in which people work to their future economic well-being

-  Studies by Bartik (2001) and Andersson, Holzer & Lane (2005) demonstrate that the industry of employment (not just worker characteristics) is a major determinant of wages and earnings growth.
- Advancement rates are higher among those in certain  industries
- Temp agencies can be a gateway to upper tier industries.
- Portland NEWWS site impact: Short-term training plus placement in higher wage/upper tier industries led to higher earnings than other work first programs.

## Industries differ in the career ladders and opportunities they provide employees

- Mitnik, Zeidenberg & Dresser (2002) identified three obstacles to upward mobility in lower tier industries:
- Bottom heavy personnel structure
- Low turnover in upper level jobs and/or little promotion from within
- High educational requirements for upper level jobs
- Growing proportion of low wage careers in US labor market (Bernhardt, Morris, Handcock & Scott, 2001)

## Parent earnings per dollar of child care subsidy paid by government

- “Payback ratio” = parent earnings divided by CCAP provider payments
- Substantial differences across industries in the extent to which a dollar invested in child care results in earnings.
- Child care payments approximately the same across industries
- Earnings vary greatly across industries

## Earnings and CCAP provider payments

## Child care subsidies, economic development and low-wage work

- Industries in which CCAP jobs are concentrated are also those most in industries in need of more workers.
- Industries in which CCAP jobs are concentrated are also often related to local economic needs.
- Limited success of retention and advancement programs for TANF and low-wage workers suggests a role for sector-based strategies.

## Industries in which CCAP jobs are concentrated are also those most in industries in need of more workers

## Industries in which CCAP jobs are concentrated are also often related to local economic needs.

## Next steps

- Explore ways to increase number of CCAP parents working in health care industry.
- Explore links between child care subsidies and economic development and ways to increase CCAP parents employment in upper tier industries such as construction and finance, i.e., “sectoral employment intervention.”
- Increase local business community involvement/interest to address projected labor shortages in particular areas and industries.
- Conduct longitudinal research controlling for worker characteristics and industry to better assess impacts of industry on employment retention and advancement.

## Links to reports

- The reports from the two studies are available electronically on my website _[http://www.apec.umn.edu/faculty/edavis/research.html](http://www.apec.umn.edu/faculty/edavis/research.html)_
- Working in Minnesota: Parents’ Employment and Earnings in the Child Care Assistance Program (Jefferys & Davis, 2004)
- Still Working in Minnesota? Follow-Up Study on Parents’ Employment and Earnings in the Child Care Assistance Program (Davis & Jefferys, 2005)

## Selected references

- Andersson, F., H. Holzer and J. Lane. *Moving Up or Moving On: Who Advances in the Low-Wage Labor Market?* New York: Russell Sage Foundation, 2005.\
- Bartik, T. *Jobs for the Poor: Can Labor Demand Policies Help?* New York, NY: Russell Sage Foundation, 2001.
- Bernhardt, A., M. Morris, M. Handcock, M. Scott. *Divergent Paths: Economic Mobility in the New American Labor Market.* New York: Russell Sage Foundation, 2001.
- Okuyama, K. and R. Weber. “Parents Receiving Child Care Subsidies: Where Do They Work?” Oregon Child Care Research Partnership. 2001. Available at _[http://www.hhs.oregonstate.edu/familypolicy/occrp/publications/2001-Parents-Receiving-ChildCare-Subsidies.pdf](http://www.hhs.oregonstate.edu/familypolicy/occrp/publications/2001-Parents-Receiving-ChildCare-Subsidies.pdf)_
-  Mitnik, P. M. Zeidenberg, and L. Dresser. “Can Career Ladders Really be a Way Out of Dead-End Jobs?” University of Wisconsin-Madison. Presented at Annual Research Confernce, Association of Public Policy Analysis and Management, Dallas, TX, November 2002.

## Why do they leave? Child care subsidy use in Oregon

- Roberta B. Weber & Deana Grobe
- Oregon State University
- Elizabeth E. Davis
- University of Minnesota
*Funding provided by the Child Care Bureau, U.S. Department of Health and Human Services*

## Research Study

- Conducted by Oregon Child Care Research Partnership, Oregon State University
- Funded by the Child Care Bureau, U.S. Dept. of Health and Human Services
- Authors: Deana Grobe, Bobbie Weber & Elizabeth Davis
- Final Report: *Why Do They Leave? Child Care Subsidy Use in Oregon* (March 2006)
- http://www.hhs.oregonstate.edu/familypolicy/occrp/publications.html

## Findings from Earlier Study of Child Care Subsidy Use

- Child care subsidy spells are short – median spell length of child care subsidy receipt ranged from 3 months in Oregon to 7 months in Texas in five states studied.
- While as many as half of families returned for another spell, it was typically for another short spell.
- 		(Meyers et al. 2002) http://www.nccp.org/pub_dcc02.html
- -

## Why Might Short Spell Lengths be a Problem?

- Children’s subsidized child care arrangements, on average, are shorter than their subsidy spells
- Half of subsidized arrangement spells ended within 3 months for children in Oregon observed up to 3 years.
- 							- Weber, 2005
- Multiple changes in arrangements may result in negative impacts to a child’s development.
- More stable child care use is associated with more stable employment (Blau & Robbins, 1998, Hofferth & Collins, 2000)

## Other Studies Report Barriers to Subsidy Use

- Low take-up rates among eligible families (Bong et. Al, 2004)
- Some families may not need help paying for child care. Lack of information about subsidies and eligibility commonly reported.
- “Subsides can be complex to get and retain” (Adams et al. 2002).

## Study Objectives: Why Do They Leave?

- Investigate possible reasons for exits from Oregon child care subsidy program, including changes in employment, loss of eligibility, and policy factors.
- Analyze stability of employment of parents receiving child care subsidies both during and after receipt of subsidy.

## Linked Administrative Data from Oregon

- Family Case Study

**Observation Period:** October ’98 – September ’01
- (three years of linked administrative data)

## Research Methods and Sample

- _Sample_
- All single parents in Oregon who began a spell of subsidy between October 1998 and September 2001. N=27,628 families.
- Matched subsidy data with UI wage records, TANF,  medical assistance data, and Food Stamps.
- _Descriptive analyses_
- Employment stability patterns
- Eligibility status after subsidy exit
- _Probability of exit model_
- Proportional hazard (Cox) model with time-varying covariates

## Participation Dynamics

|  | Length of first spell (median) | Cumulative months (mean over 3 years) | Number of spells (mean over 3 years) |
| --- | --- | --- | --- |
| Child care subsidy | 4.2 
months | 11.8 
months | 2.0 |
| TANF | 5.5
months | 5.9
months | 0.8 |
| Food Stamps | 9.9 
months | 20.1
months | 1.7 |
| Employment | 18.8 
months | 22.9 
months | 1.5 |

## Why Do They Leave?

- Hypotheses:
- Instability in employment or family mobility.
- No longer eligible to receive subsidy.
- Tradeoff between the hassle factor and value of the subsidy to the family.

## Four Employment Stability Categories

- 1. _Little or no employment_:
- 	Parents employed fewer than 5 quarters (out of 12)
- 2. _Limited employment_:
- 	Parents employed between 5 and 8 quarters
- 3. _Stable employment & unstable jobs_:
- 	Parents employed more than 8 quarters with more than 2 job changes
- 4. _Stable employment & stable jobs_:
- 	Parents employed more than 8 quarters with no more than 2 job changes

## Slide 42

| 
Percent of families in each group | Little or no employ-ment 

(23.4%) | Limited employ-ment 

(27.5%) | Stable employment unstable jobs 

(21.4%) | Stable employment stable jobs 

(27.7%) |
| --- | --- | --- | --- | --- |
| Employment
-- Percent of employment months covered by subsidy

-- Mean quarterly earnings | 
116%

$1,355 | 
54%

$2,126 | 
42%

$2,608 | 
46%

$3,444 |
| Family  Mobility

-- Mean number of zipcode changes | 

1.3 | 

1.3 | 

1.4 | 

0.7 |

## Cumulative Months of Subsidy Use (over 3 years)

**Cumulative Months of Subsidy Use (over 3 years)**

## Employment Stability Compared to TANF Leavers

- Those receiving child care subsidies in Oregon had more stable employment compared to average TANF leavers.
- The chart shows the percentage of each group that work in the first quarter and who work in all four quarters after program exit.
- 	TANF data from *Acs & Loprest, 2004.*
*	**Subsidy data from Grobe, Weber & Davis, 2006*

## Employment Stability and Subsidy Use

- Some families experience short and intermittent employment spells, and this instability likely explains their short subsidy spells.
- But about half the families are working more than 2 of the 3 years and less than half of their months of employment are covered by subsidy. Many of these families have steady employers and continue as DHS clients – _why do they leave subsidy?_

## Eligibility Status After Exit

- Immediately After Exit

**62%**

**13%**

**22%**

## Employment and Subsidy Use One Year After Exit

**Employment and Subsidy Use One Year After Exit**

**27%**

**20%**

**37%**

**17%**

**42%**

**19%**

**14%**

**24%**

## Are They Still Eligible? Parents Who Are Employed And Not on Subsidy

|  | 1st Quarter After Exit | 2nd Quarter After Exit | 3rd Quarter After Exit |
| --- | --- | --- | --- |
| Change in earnings after exit (mean) | 
$ -99.69 | 
$135.76 | 
$383.05 |
| Percent with earnings 150% above poverty | 
10.2% | 
10.7% | 
10.2% |
| Percent with earnings 185% above poverty | 
4.2% | 
4.5% | 
4.7% |

**Are They Still Eligible? Parents Who Are Employed And Not on Subsidy**

## Parents Who Exit the Oregon Child Care Subsidy Program

- Many of the parents are stably employed.
- Few of the parents have earnings over the eligibility limit.
- Many of the families remain DHS clients (typically with Food Stamps and medical assistance).
- Average amount of child care subsidy is $288 per month.

## Policy Lever: Eligibility Redetermination

- In Oregon the median length of recertification period increased from 3 to 4 months between 1998 and 2001.
- 58% of the families complete at least one eligibility period.
- Subsidy spell ends when the eligibility spell ends for about half of the families.

## Value of Family  Subsidy

|  | 25th | Median | 75th |
| --- | --- | --- | --- |
| Subsidy Value | $113 | $223.00
(Mean=$288) | $393.00 |

| 
Quartiles of 
Subsidy Value | Subsidy Spell Length
(Median) |
| --- | --- |
| <= $113 | 2.9 |
| $114 - $223 | 3.5 |
| $223 - $393 | 3.8 |
| > $393 | 4.5 |

## Probability of Exit Model

- Proportional hazards (Cox) model of probability of exiting subsidy, conditional on receiving subsidy in the prior month.
- First observed non-left censored spell of subsidy receipt for family.
- Covariates include
- Family characteristics (number of children, age of youngest, age of oldest, mother’s education, type of care, job change, earnings)
- Community characteristics (employment growth rate, rural/urban county, child care supply)
- Policy variables: Redetermination month, subsidy value, copay amount

## Proportional Hazard Model: Selected Results

| Estimated Hazard Ratios | All Families
(N=25,124) | ERDC Families
(N=14,705) |
| --- | --- | --- |
| Redetermination month | 2.64* | 3.29* |
| Subsidy value | 0.99* | 0.99* |
| Family copay amount | 1.00   | 1.001* |
| Regulated provider | 0.90* | 0.88* |

## Significant Factors Associated With Exiting the Subsidy Program in Oregon

- Who were in the last month of their eligibility period (over 3 times more likely)
- With a higher copay amount
- Living in county where employment growth rate was higher
- With higher quarterly earnings
- With higher subsidy value
- Whose primary provider was regulated

- Exit from subsidy program was _more_ likely for those:

- Exit from subsidy program was _less_ likely for those:

## Policy Context: Child Care Subsidy Policy in Oregon

- Process of redetermining eligibility:
- Families on employment-related child care subsidy (ERDC) in Oregon are required to recertify their eligibility at frequent intervals.
- Caseworkers set redetermination period for ERDC parents between three and six months.
- Parents receive and can return paperwork by mail.
- The median length of eligibility period increased from 3 to 4 months between 1998 and 2001.
- Subsidy spell ends when the eligibility spell ends for about half of the families.
- No waiting list for child care subsidies in Oregon.
- Budget managed primarily by high copayment levels and low payment rates for providers.

## Conclusions

- _Key Findings_
- Families who use the subsidy program are more stable than expected and most appear to remain eligible for child care subsidy after exit from the program.
- Eligibility period and spell-length are closely related. Being in redetermination month is a significant factor associated with leaving the subsidy program.
- _Future research_
- Further analysis is needed to determine whether redetermination requirements are an important exit factor in other states.
- More study of the relationship between subsidy use and employment

## References

- Adams, G., Synder, K., & Sandfort, J.R. (2002, March). *Getting and retaining child care assistance: How policy and practice influence parents’ experiences (*Series A, No A-50). *.* Washington, DC: Urban Institute.
- Blau, D.M., & Robbisn, P.K. (1998). A dynamic analysis of turnover in employment and child care.  *Demography, 35(1), 83-96.*
- Bong, J.L., Goerge, R., Reidy, M., Kreader, J.L., Georges, A., Wagmiller, R.L., Staveley, J., Stevens, D. & Witte, A.D. (2004, September). *Child care subsidy use and employment outcomes of TANF mothers during the early years of welfare reform: A three-state study. *Chicago: Chapin Hall Center for Children at the University of Chicago.
- Grobe, D., Weber, R.B., & Davis, E.E. (2006, March). *Why do they leave? Child care subsidy use in Oregon. *Corvallis, OR: Oregon State University, Oregon Child Care Research Partnership
- Meyers, M.K., Peck, L.R., Davis, E.E., Collins, A., Kreader, J.L., Georges,R., Weber, R., Schexnayder, D.T., Schroeder, D.G., & Olson, J.A. (2002). *The dynamics of child care subsidy use: A collaborative study of five states. *NY: National Center for Children in Poverty.
- Shlay, A., Weinraub, M., Harmon, M., & Tran, H. (2004). Barriers to subsidies: Why low-income families do not use child care subsidies*. Social Science Research,* 33: 134-157.
- Weber, R.B. (2005). *Measurement of child care arrangement stability: A review and case study using Oregon child care subsidy data. *(Doctoral Dissertation, Oregon State University, 2005).  *Dissertation Abstracts International.*