BACKGROUND PAPER

Childcare and Preschool:

Options for Federal Support

September 1978

Congress of the United States

Congressional Budget Office

Washington, D.C.
CHILD CARE AND PRESCHOOL:

OPTIONS FOR FEDERAL SUPPORT

The Congress of the United States

Congressional Budget Office

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402

PREFACE

In this session of the 95th Congress and during the next

Congress, various pieces of legislation related to child care and

preschool education will be examined by the Congress—reauthorization of the Head Start and compensatory preschool programs,

legislation to increase social services grants to states, and new

initiatives in day care services. This paper, requested by the

Senate Committee on the Budget, examines child care arrangements

and federal programs that support day care and preschool activities.

The paper was prepared by Steven Chadima with the assistance of Alan Fein, John Shiels, and Paul Warren under the

supervision of Robert D. Reischauer and David S. Mundel.

Special thanks go to Ann Carruthers, Toni Wright, and Martha Anne

Mclntosh for their production assistance. The author also wishes

to thank those who reviewed early drafts, particularly Sonia

Conley, Madeline Dowling, Pat Hawkins, G. William Hoagland, David

A. Longanecker, Margaret Malone, Dick Roupp, Darla Schecter, and

Allen Smith. The manuscript was edited by Robert L. Faherty.

In accordance with the Congressional Budget Office's mandate

to provide objective and impartial analyses of budget issues, the

paper contains no recommendations.

Alice M. Rivlin

Director

September 1978

iii

CONTENTS

Page

PREFACE ill

SUMMARY ix

CHAPTER I. INTRODUCTION 1

CHAPTER II. WHAT ARE THE CHILD CARE CHOICES THAT

FAMILIES FACE, AND HOW DO THEY SELECT

FROM AMONG THEM? 5

What Are the Choices That Parents Face? ... 6

How Do Parents Select Child Care

Arrangements? 7

What Are the Results of the Selection

Process? 8

CHAPTER III. HOW DOES THE FEDERAL GOVERNMENT CURRENTLY

SUPPORT CHILD CARE AND PRESCHOOL

EDUCATION? 23

CHAPTER IV. WHAT IS KNOWN OF THE DEVELOPMENTAL

EFFECTS OF CHILD CARE? 33

Major Studies 33

The Effects of Federal Efforts to

Improve Quality 37

CHAPTER V. DO DAY CARE OPPORTUNITIES HAVE A

MEASUREABLE IMPACT ON LABOR FORCE

PARTICIPATION? 43

Demographic Trends ... 43

Day Care and Labor Force Participation ... 45

CHAPTER VI. WHAT ARE SOME ALTERNATIVES TO

CURRENT POLICY? 53

v
CONTENTS (Continued)

Modifications of Current Prqgrams and

Funding Levels 54

New Initiatives 59

Effects of the Administration's

Welfare Reform Proposal 62

vi
TABLES

TABLE 1.

TABLE 2.

METHODS OF CARE FOR CHILDREN UNDER 14 YEARS

OLD UTILIZED BY FAMILIES USING MORE THAN 10

HOURS OF NONPARENTAL CARE A WEEK AND BY ALL

FAMILIES, 1975: PERCENT DISTRIBUTION . . .

MAIN METHOD OF CARE OF CHILDREN UNDER 14 BY

RACE AND ETHNICITY, 1975: PERCENT DISTRIBUTION 11

TABLE 3. CHILD CARE ARRANGEMENTS OF WORKING MOTHERS

WHOSE YOUNGEST CHILD, IS LESS THAN 6 YEARS

OLD BY RACE AND NUMBER OF CHILDREN UNDER

14 YEARS OLD IN THE HOUSEHOLD, 1971:

PERCENT DISTRIBUTION 13

TABLE 4.

TABLE 5.

TABLE 6.

TABLE 7.

TABLE 8.

TABLE 9.

CHILD CARE ARRANGEMENTS OF WORKING MOTHERS

WHOSE YOUNGEST CHILD IS LESS THAN 6 YEARS

OLD BY RACE AND PRESENCE OF A CHILD 14 TO 17

YEARS OLD IN THE HOUSEHOLD, 1971: PERCENT

DISTRIBUTION

MAIN METHOD OF CHILD CARE FOR HOUSEHOLDS WITH

CHILDREN LESS THAN SIX YEARS OLD BY MARITAL

AND EMPLOYMENT STATUS OF PARENTS, 1975:

PERCENT DISTRIBUTION '. .

14

MAIN METHOD OF CHILD CARE FOR HOUSEHOLDS BY

POVERTY STATUS, 1975: PERCENT DISTRIBUTION

CHILD CARE ARRANGEMENTS FOR CHILDREN LESS

THAN SIX YEARS OLD BY HOURS OF CARE PER

WEEK, 1975: PERCENT DISTRIBUTION

AVERAGE HOURS OF CARE A WEEK FOR CHILDREN

USING AT LEAST ONE HOUR, BY METHOD OF CARE .

ESTIMATES OF FUNDING FOR FEDERAL CHILD CARE

PROGRAMS, FISCAL YEAR 1977

16

17

19

20

24

vii
TABLES (Continued)

Page

TABLE 10. PERCENTAGE DISTRIBUTION OF BENEFITS

FROM DIRECT SPENDING PROGRAMS AND TAX

EXPENDITURES FOR CHILD CARE BY ANNUAL

INCOME, 1977 27

TABLE 11. CHILD CARE CENTER STAFFING REQUIREMENTS

UNDER LAW AND REGULATION 38

TABLE 12. LABOR FORCE PARTICIPATION RATES OF MOTHERS,

SELECTED YEARS: IN PERCENT 45

TABLE 13. MOTHERS IN THE LABOR FORCE BY MARITAL STATUS

AND AGE OF CHILDREN, MARCH 1970 AND 1978 .... 46

TABLE 14. REASONS FOR WOMEN NOT PARTICIPATING IN LABOR

FORCE, 1975: PERCENT DISTRIBUTION 48

TABLE 15. FAMILY INCOMES OF WOMEN NOT LOOKING FOR

WORK BECAUSE THEY CANNOT ARRANGE CHILD

CARE, 1975: PERCENT DISTRIBUTION 49

TABLE 16. COSTS AND IMPACTS OF ALTERNATIVES TO

CURRENT FEDERAL CHILD CARE POLICIES 55

TABLE 17. HYPOTHETICAL EXAMPLES OF THE EFFECTS

OF CHILD CARE EXPENSE ALLOWANCES ON

WELFARE BENEFITS OF A SINGLE MOTHER

UNDER THE ADMINISTRATION'S WELFARE

REFORM PROPOSAL: IN DOLLARS 64

viii
SUMMARY

The Congress faces a number of decisions concerning whether

the federal role in the provision of day care and preschool

services should be expanded. At present, the federal government

provides more than $2.2 billion a year for child care services

through a variety of direct and indirect mechanisms (see Summary

Table 1). Though these programs are not coordinated in their

efforts to provide services, direct spending programs are aimed

largely at low- and moderate-income families, while tax expenditures are used largely by middle- and upper-income groups.

The largest amount of federal support is through social

services grants to states (Title XX of the Social Security

Act). Care is provided to about 800,000 children from low- and

moderate-income families in day care centers and family-based

arrangements subject to federal regulations. Another 350,000

low-income children are enrolled in Head Start, a comprehensive

community-based preschool program that includes medical, nutritional, and social services for recipients. Approximately 2.7

million families also received tax credits for work-related child

care expenses.

IMPACT OF CURRENT CHILD CARE PROGRAMS

The impact of various child care programs is far from

certain. Among the unresolved questions that have bearing on

federal policy are the following:

Does Day Care Facilitate Child Development?

Well-planned, comprehensive services can result in increased

test scores of low-income children in the short run, and in fewer

placements in remedial classes and a reduced need to repeat

grades once the children are in school. Of the current federal

programs, Head Start programs are those most likely to achieve

these results. For middle-income children, high-quality day

care programs appear to cause short-term test score gains for

ix
SUMMARY TABLE 1. FEDERAL FUNDS FOR CHILD CARE, FISCAL YEAR 1977: OBLIGATIONS

IN MILLIONS OF DOLLARS

Program (Agency)

Number of

Children

Served

(thousands)

Estimated

Obligations

for Child Care

or Preschool

Title XX Social Services Grants to States—

portion used for child care for lowand moderate-income families (HEW)

Head Start—comprehensive preschool

for low-income children (HEW)

ESEA Title I—compensatory preschool and

kindergarten for disadvantaged

children (HEW) a/

Child Care Food Service Program

(Agriculture)

AFDC—welfare benefit increases

to subsidize work-related

child care costs (HEW) b_/

AFDC/WIN—child care services for welfare

recipients participating in WIN (HEW) cj

Other Direct Programs

Child Care Tax Credit—20 percent of

work-related expenses; limit of

$400 for one child and $800 for

two or more children (Treasury)

TOTAL

799

349

367

580

145

85

466

4,000

809

448

136

120

84

57

99

500

2,252

NOTE: Components do not add to total because of rounding.

SOURCE: Department of Health, Education, and Welfare (HEW) and Congressional

Budget Office estimates.

a_/ ESEA = Elementary and Secondary Education Act.

b/ AFDC = Aid to Families with Dependent Children.

cj WIN = Work Incentive program.

X
participants ever nonenrolling children, but these gains soon

disappear.

Does Day Care Facilitate the Labor Force Participation of Women?

While many women undoubtedly find it easier to seek employment when day care is available, evidence that lack of day

care opportunities inhibits a substantial number of women from

seeking employment is weak at best. According to the 1975 Survey

of Income and Education, conducted by the Census Bureau, most

married women and female family heads who are not in the labor

force do not want a job. Of the women who have children under

six years old and are not in the labor force, only 3 percent of

the wives and 11 percent of the female family heads are not

looking for work because they cannot arrange adequate child care.

The vast majority (82 percent) of the female family heads who

feel constrained from seeking employment because of a lack of

child care are from families with incomes under $5,000, though

they represent only 5 percent of all female family heads with

incomes under $5,000.

Does Subsidizing Child Care Reduce Welfare Dependency?

Subsidizing the child care costs of potential welfare recipients can reduce dependency if it either facilitates the labor

force participation of these women or increases their disposable

income net of child care costs. Researchers in several incomemaintenance experiments have found that simply subsidizing child

care is not sufficient to produce substantial increases in labor

force participation. In addition, all recipients of Aid to

Families with Dependent Children (AFDC) are currently eligible

for free day care or full reimbursement of work-related day care

expenses, though other characteristics of the welfare system may

provide disincentives to work. In general, however, it is the

lack of job opportunities and not child care that inhibits labor

force participation. When the individual wants to work and a job

is available, child care needs are taken care of. Some of the

current programs do, however, increase disposable income. The

Title XX and Head Start programs require little or no financial

participation by the mother. This arrangement will automatically

increase disposable income by the amount that would have been

paid in child care expenses. The AFDC work-expense allowance

xi
also increases income by reimbursing a recipient's child care

expenses.

Can Federal Subsidies and Their Accompanying Regulations Improve

the General Quality of Child Care?

At present, federal regulations apply only to subsidized,

licensed forms of care (largely family day care homes and day

care centers), but the majority of children are not involved in

this type of care. For those children enrolled in centers

receiving federal subsidies, federal standards have resulted in

more comprehensive services and higher-quality care.

The current federal day care requirements (particularly

child-staff ratios)—however "appropriate" they may be from the

federal government's point of view—are perceived by some states

as onerous. In some cases, states are "buying out" of the

federal regulations by setting up their own child care programs

with less stringent requirements and using Title XX funds for

other social services currently being provided by state monies.

In other cases, states are forcing AFDC recipients to utilize the

work-expense allowance to purchase care on their own, rather than

providing these women with services directly through Title XX, in

order to avoid enforcement of standards.

ALTERNATIVES TO CURRENT POLICY

Additional child care services could be provided either by

expanding current programs or by enacting new legislation (see

Summary Table 2).

Expansion of Head Start to All Eligible Children. In 1978

Head Start services will reach about 24 percent of the eligible,

low-income children. At current per-child spending levels, an

additional $2 billion would be needed to serve the remaining 1.2

million children who qualify for services.

Expansion of Title XX. Expanding social services grants to

states under Title XX could result in additional spending on

child care. At present, however, only about 24 percent of Title

XX matching funds are spent on child care. Though there is no

assurance that these patterns will continue, if this same proportion of new funds were allocated to child care, an additional $1

xii
SUMMARY TABLE 2. COSTS AND IMPACTS OF SELECTED ALTERNATIVES TO CURRENT

FEDERAL CHILD CARE POLICIES

Option

Incremental

Federal

Cost

(billions

of dollars)

Change in

Number of

Children

Served

(millions)

Recipient

Population

Targeted

Mode of

Care

Possible

Developmental

Effects

Expand Head Start 2.0

to All Eligibles

1.2 Low- Compre- Positive if

income hensive well planned

preschool

Expand Title XX 1.0

Expand Tax Credit 0.7

Categorical Day 4-9

Care/Preschool

Initiative (3-

and 4-year olds)

Before- and After- 3-6.5

School Care

0 . 2 Low- and

moderateincome

Uncertain All except

higherincome

2-4 All income

groups a/

7-19 All income

groups a/

Licensed

care

At discretion of

recipient

Licensed

care or

preschool

Schools

Modest

Low

Greatest

effect among

low- income

children

None

intended

a/ These programs could be targeted on low- and middle-income families by

adjusting fees according to the ability of parents to pay for services.

Instituting such a fee schedule would reduce costs.

billion in federal monies, matched by $333 million in state

funds, would provide licensed care meeting federal standards for

an additional 240,000 children. Other social services would, of

course, be expanded as well.

Expansion of Tax Expenditures. If the current tax credit of

20 percent of work-related child care expenses were expanded to

50 percent and benefits phased out for families with annual

incomes between $30,000 and $50,000 (and eliminated entirely

thereafter), substantial assistance could be targeted on moderate- and middle-income families. Additional assistance for

families with the lowest incomes could be provided by making the

credit refundable. If these actions were taken, the costs of the

xiii
credit would more than double, from about $500 million under

current policy to about $1.2 billion, but they would do little to

encourage either work or the purchase of higher-quality day

care.

Categorical Child Care Initiative. A system of federally

supported child care centers could be established. If such

a program were geared to the needs of mothers working full time,

medium-priced care could be provided for about $4 billion a

year. If the program were available to all three- and four-yearolds through the public school system and were widely used, at

least $9 billion would be required. Alternatively, a voucher

scheme could be introduced, giving parents a greater choice among

caregivers who meet governmental standards. Many parents would

likely select less expensive family arrangements and thereby

hold down the cost of the program. The same goals could be

accomplished more simply, however, by expanding the tax credit

and making it refundable, though one would likely forego governmental supervision of quality. Except in the case of low-income

children, few long-lasting developmental benefits could be

anticipated.

Before- and After-School Care. About one third of the 44

million school-age children in the United States have a mother

who works full time. Only a small portion of these children

participate in programs of supervised recreation or study before

and after school hours during the school year. If such programs

were directly funded by the federal government and were available

only to 6- to 13-year-old children of mothers working full time,

care for about 8 million children could be provided through

expenditures of about $3 billion. If this program were more

widely available to 6- to 13-year-olds, costs could run as high

as $6.5 billion.

xiv
CHAPTER I. INTRODUCTION

Child care, and especially the role of the federal government in the provision of child care services, is an issue of

continuing concern to the Congress. Several factors are acting

simultaneously to focus attention on this issue. Mothers continue to enter the labor force in increasing numbers, and some

are pressing for assistance in meeting their child care needs.

In particular, poor women, who most often face the least lucrative employment opportunities, are limited in their choice of day

care arrangements to those that cost them little or nothing. In

addition, many states report that improvements in services

necessary to meet federal standards would be costly, and the

Congress has mandated a comprehensive study of the appropriateness of these guidelines.

The issue of the nature and extent of federal support for

child care has been brought into the limelight once again by

the President's welfare reform proposal. In acting on that

legislation and related issues, the Congress will be deciding

whether mothers of preschool- and school-aged children should

be expected to work or to take care of their children, and if

and how the government will subsidize their child care expenses

if they volunteer to work when they are not expected to. The

resolution of these issues will directly affect the shape of

other child-related legislation.

The Focus of the Federal Debate

The child care and preschool debate over the last 15 years—

and the legislation that has resulted from it--has centered

around two major issues, the labor force participation of mothers

and child development. Although these focal points are not

mutually exclusive, the importance placed on one relative to the

other has a substantial effect on the kinds of child care supported through budgetary and legislative decisions. Both issues are

the subject of considerable research by social scientists,

though current efforts provide only imperfect and approximate

answers.
Labor Force Participation of Mothers. One goal of the

proponents of widespread federal support for child care has been

to facilitate the labor force participation of mothers. A major

concern is whether there is a significant amount of work-related

"unmet demand" for child care. That is, if more day care

were available, even at current prices and in a variety of

modes, would more mothers enter the labor force or expand their

current hours of work? Further, if day care were more widely

subsidized, would a significant number of mothers take advantage

of. it?

Child Development. The other major focus of the child care

debate is the children themselves. The primary question is

whether there are certain types of day care that can enhance

the cognitive, emotional, and social development of participating

children. If so, what are the most influential factors and

which children are most likely to benefit? Federal policy

is often predicated on a belief that child care which is oriented

toward development can overcome the disadvantages of a home

life that inadequately provides early educational experiences.

To what degree is this true?

The current set of federal programs reflect varying degrees

of emphasis on these two concerns. While each program has its

own set of goals and few attempts are made to coordinate their

services, they seem to be aimed at one or more of the following

purposes:

o To increase the supply of child care;

o To improve the quality of care through the establishment

of health, safety, and staffing standards;

o To improve the school performance of disadvantaged,

low-income children through early exposure of both parent

and child to educational experiences;

o To ease the burden for parents of financing child care;

o To facilitate the labor force participation of women,

especially insofar as such participation promotes reduction in dependency on welfare.
This paper discusses current trends in formal and informal

child care and the factors that affect families' use of these

arrangements.

A Historical Perspective

Day care began in the United States in the 1830s with the

establishment of day nurseries. These institutions were often

aimed at immigrant children whose mothers needed to work. In

addition to providing a more humane alternative to placing these

children in orphanages or leaving them unattended during the long

working day, the day nurseries provided a socializing experience

for the children. Most of these institutions were philanthropic

in nature, though some were also supported by parent fees.

If governments became involved, they did so to reduce public

expenses associated with institutionalizing these children.

The nursery school movement began just before World War I.

These schools were privately financed, largely by middle-class

parents who had an interest in providing early educational

opportunities for their children. These institutions have grown

in number since 1915, but their base of support and their goals

remain largely the same.

During the 1930s, the first federal funding of day care

centers was provided through the Works Progress Administration

(WPA). WPA centers were initiated for two basic purposes: to

provide employment opportunities for those on relief; and to

provide child care for disadvantaged children.

Federal involvement expanded during World War II with the

support of work-related day care centers. Centers were established to ease the participation of women in defense industries,

and care was provided under this program to a total of approximately 600,000 children during the mid-1940s. When the war

ended, however, the Congress reemphasized the principle that the

primary role of mothers was caring for their children at home,

and federal support for centers was withdrawn. In a few instances (most notably those of the State of California and

the City of New York), state or local funds continued to support

preschool and day care activities; by and large, however, centers

simply closed for lack of support.
The governmental support that exists today largely began

in the 1960s and was aimed primarily at the low-income population. Amendments to the Social Security Act in 1962 and 1967

provided funds for child care for past, present, and potential

welfare recipients. And, in 1964, the Economic Opportunity Act

created Project Headstart, a comprehensive preschool program

largely for children from disadvantaged backgrounds.

Plan of the Paper

This paper is designed to provide enough general information so that one can make an informed choice among a variety of

budgetary and legislative choices related to federal support of

child care and preschool education.

Chapter II describes current child care arrangements made

by families and examines the major factors that affect those

choices. The third chapter describes the current federal programs that support child care and preschool. Chapter IV focuses

on child development issues, including an examination of the

developmental impacts of current federal programs. The fifth

chapter focuses on the labor force participation of mothers,

including current trends in participation and the impact of

child care on employment decisions. Finally, Chapter VI describes the costs and possible effects of a variety of changes to

current federal child care policy. Included in this chapter is

an analysis of the impact on child care services of the Administration's welfare reform proposal.
CHAPTER II. WHAT ARE THE CHILD CARE CHOICES THAT FAMILIES FACE,

AND HOW DO THEY SELECT FROM AMONG THEM?

The public debate over the appropriateness of federal involvement in child care services has centered largely around the

two issues of the development of children and the labor force

participation of the mothers. Resulting legislation has been

aimed at influencing these factors in a variety of ways. The

"debate" at the family level—that is, the factors that most

often enter into a family's decision about which type of child

care to secure—often focuses on very different issues, many of

which are well out of the reach of the federal government.

This chapter reviews the choices that families face in child

care; the factors that studies have revealed are the most important to families in their choice among the various modes of care;

and the results of the selection process and how they vary

according to race, income, and other family characteristics. •_!/

JL/ The trends and patterns reported here are derived from

a. number of studies examining child care arrangements over

the last 12 years. In order to simplify the presentation

of data, individual studies were selected based on their

concise presentation of the information, their representativeness of the literature as a whole, and the recentness of

the data to highlight particular trends. The most recent

and comprehensive studies are: Unco, Inc., National Childcare

Consumer Study; 1975, prepared for Department of Health,

Education, and Welfare, Office of Child Development (1975);

Abt Associates, National Day Care Study; Preliminary Findings and Their Implications, prepared for Department of

Health, Education, and Welfare, Administration for Children,

Youth, and Families, Day Care Division (January 31, 1978);

and Richard L. Shortlidge, Jr., and Patricia Brito, "How

Women Arrange for the Care of Their Children While They Work:

A Study of Child Care Arrangements, Costs, and Preferences in

1971," The Ohio State University, Center for Human Resource

Research (January, 1977). See also, Seth Low and Pearl G.

Spindler, Child Care Arrangements of Working Mothers in the

(continued)
WHAT ARE THE CHOICES THAT PARENTS FACE?

The first and most obvious choice that parents face in

deciding on child care is whether to care for their children

by themselves or to involve other individuals or institutions

on more than a casual basis. Parents, in fact, still primarily

care for their own children in their own homes, at least until

the time their children are of preschool age. For the most

part, this means the mother stays home to take care of the children while the father works.

This traditional model of childrearing is becoming increasingly less common, and parents who secure child care in order

to work or to provide their children with an enriched early

learning experience face a variety of choices. Many choose to

leave their children in the care of relatives, either in their

own homes or in the homes of their relatives, while others

secure the services of nonrelatives in or out of the home.

Three more formal methods of child care are available to

parents, though they are used far less frequently than the

informal arrangements mentioned above. The most common, family

day care homes, are homes in which an adult cares for usually

six or less children. In many cases, the caretaker is a mother

who takes care of her own children and two or three others.

There are more than 100,000 family day care homes in the United

States licensed by state agencies, and experts estimate that

the number operating without a license is many times that amount. The licensed homes serve about 300,000 children. _2/

United States, prepared for Department of Health, Education,

and Welfare, Children's Bureau, and Department of Labor,

Women's Bureau (1965); Westinghouse Learning Corp. and Westat

Research, Inc., Day Care Survey—1970, prepared for the

Office of Economic Opportunity (1970); and Greg J. Duncan and

James N. Morgan, eds., Five Thousand American Families—Patterns of Economic Progress, vol. Ill, University of Michigan,

Institute for Social Research, Survey Research Center, Income

Dynamics Panel Study (1975). Additional studies on day care

centers and family day care homes have been funded by the

Department of Health, Education, and Welfare, but they had

not been completed when this report was written.

_2./ Unpublished data from Abt Associates, Cambridge, Massachusetts, 1977 survey.

6
Arrangements are relatively low-cost and the homes are conveniently located, but the service can be interrupted by illness or

change of plans of the operator.

Day care centers are much larger operations and are almost

always licensed by state authorities who attempt to enforce minimum safety and health standards. There are approximately 18,300

day care centers in the United States, largely concentrated in

urban and suburban areas; these centers serve about 900,000

children. Centers generally care for at least 12 children, some

of whom attend for a full working day; they operate at least nine

months of the year and often year-round. Most day care centers

have an educational component to their daily schedule, though

this may not be their primary focus. Preschools, on the other

hand, are primarily aimed at improving school readiness. Children are generally enrolled on a part-day or part-week basis,

though some do attend full-time. The number of preschools in the

United States is not accurately known. Day care centers and preschools are relatively more expensive than other arrangements,

but they provide regular, convenient hours and usually the assurance that adults will be there to provide care each working day.

HOW DO PARENTS SELECT CHILD CARE ARRANGEMENTS?

The concensus of a number of studies and considerable indirect evidence is that three factors are most important to

parents in selecting child care arrangements: cost, location,

and convenience of hours. Simply put, if the service is not

within their price range, located near home or work, and open

when they need it, parents do not seem interested.

Cost. In most families, there exists a threshold in child

care costs beyond which it is more cost-effective for (generally)

the mother to remain at home than to work. While most studies

have found a direct relationship between income and spending on

child care, the most convincing evidence has been provided

by Shortlidge and Brito. In their recent analysis of 1971 data

on working mothers, they reported that:

. . . working mothers with children under six on average spent between one-sixth and one-fifth of their

hourly earnings for the care of their children. This

relative expenditure remained remarkably stable regardless of earnings, implying a direct relationship
between earnings and the absolute expenditures for

child care. ... [A] significant direct relationship

between earnings and expenditures on child care was

found for white women whose youngest child was under

six and for black women whose youngest child was six to

thirteen. _3/

Location. In the National Childcare Consumer Study, Unco

found that about two-thirds of the parents who travel to a child

care provider reported trips of less than 10 minutes. Only 6

percent reported traveling 30 minutes or more. Of the various

arrangements, care in a nonrelative's home required the least

amount of travel. Day care centers, on the other hand, were less

likely to be located in the family's neighborhood; only half of

center users reported trips of less than 10 minutes.

Other Factors. Secondary factors affecting parental choice

include whether the caregiver will take children on days the

children are sick, the caregiver's personal background, and the

extent of educational program. In addition, some studies have

suggested that a lack of information on available opportunities

constrains parental choice, though this issue has not been well

studied. The National Childcare Consumer Study did find, however, that parents expressed strong support for directing government funds toward information and referral services.

WHAT ARE THE RESULTS OF THE SELECTION PROCESS?

The interface of parents' preferences and the current supply

of child care arrangements result in a distinct pattern of

child care use in this country. In the end, daytime care in

the United States is provided primarily by the parents of children in their own homes (see Table 1). When other arrangements

are necessary, families most often seek the aid of relatives

(either in the family's home or in that of the relative).

Informal care, such as babysitting by nonrelatives or care in a

family day care home, are used next most frequently. Finally,

nursery schools, day care centers, and other formal means are the

methods of care utilized least often.

_3/ Shortlidge and Brito, "How Women Arrange for the Care of

Their Children While They Work," p. 19.

8
TABLE 1. METHODS OF CARE FOR CHILDREN UNDER 14 YEARS OLD UTILIZED BY FAMILIES USING MORE THAN 10 HOURS OF NONPARENTAL CARE A WEEK AND BY ALL FAMILIES, 1975:

PERCENT DISTRIBUTION

Method of Care

Care in Own Home by:

Relative

Nonrelative

Care in Other Home by:

Relative

Nonrelative

Other Arrangements :

Nursery school

Day care center

Other

Households

Using

External Care

22.5

20.9

27.2

16.6

5.8

3.6

3.4

All

Households

14.0

13.0

17.0

10.3

3.6

2.3

2.2

Subtotal

No External Arrangements

over 10 Hours a Week

Total

100.0 62.4

100.0

NOTE: Components may not add to totals because of rounding.

SOURCE: Unco, Inc., National Childcare Consumer Study; 1975.

prepared for Department of Health, Education, and

Welfare, Office of Child Development (1975), vol. II,

Table IV-2, p. 4-3.
Although that pattern of child care arrangements is characteristic of users in general, individual families depart considerably from the pattern for different reasons. The major factors

affecting individual family arrangements that several researchers

have noted are:

o Race and ethnicity of the family;

o Number of children in the family;

o Marital and employment status of the mother;

o Family income;

o Number of hours of care used; and

o Federal and state subsidies of particular modes of care.

Other factors, such as urban or rural residence and region of

residence, have a much smaller effect; in combination with one of

the above, however, they may influence the selection of type of

care.

These data are simple observations by researchers; no

analysis has been completed to date that combines these factors

for both working and nonworking mothers and that attempts to

assess the relative effects of each. For example, it has been

noted that the race of the family seems to play a part in selecting care, as does family income. Race and income, however, are

strongly correlated. If this relationship were accounted for in

analyzing data, researchers might have found income to account

for far more of the variation in care than race (or vice versa).

Consequently, further research may find some of the factors to be

less important than they appear.

Race and Ethnicity

Patterns of child care differ substantially among racial and

ethnic groups. While care by relatives is the predominant mode

among all groups, minority families—particularly Hispanics—

are even more likely to use such arrangements (see Table 2).

In 1975, 69 percent of Hispanic families indicated that their

main method of care was using relatives (combining care in the

10
TABLE 2. MAIN METHOD OF CARE OF CHILDREN UNDER 14 BY RACE AND

ETHNICITY, 1975: PERCENT DISTRIBUTION

Non-Hispanic

Method of Can

Care in Own tome by:

Relative

Nonrelitlve

Subtotal

Care in Other Home by:

Relat.vt

Nonreta:ive

Suttotal

Other Ar-argements:

Nursr'/preschool

Day ca'e center

Coojerative program

Befire/after school

projram

Hed >tart

Otter

,u1total

.'otal

NOTE: fomponents may

SOUR'E: Unco, Inc.,

Total

24.7

20.3

45.0

26.5

16.1

42.6

5.6

3.5

0.9

2.0

0.4

0.1

12.5

100.0

not add

National

White

23.9

23.6

47.5

25.7

15.9

41.6

5.0

2.6

0.9

2.0

0.3

—

10.8

100.0

Black

24.5

6.0

30.5

31.6

17.5

49.1

9.5

6.7

0.3

2.2

1.3

0.5

20.5

100.0

Hispanic

30.5

8.4

38.9

38.4

10.9

49.3

4.0

4.9

0.3

2.1

0.7

—

12.0

100.0

to totals because of

Other

33.9

10.9

44.8

12.7

20.8

33.5

6.0

10.7

3.2

1.1

0.6

—

21.6

100.0

rounding .

Childcare Consumer Study: 1975,

vol. I, Table IV-24.

11

3-030 C'8 - 4
I

child's home and in that of the relative), as conpared with 50

percent of non-Hispanic whites.

The use of nonrelative care varies considerably among racial

and ethnic groups. Whites are two to four times more likely than

minority families to use care in their own home bj nonrelatives

as their main method. Nearly one-fourth of white families use

such care for their children under 14, as compare! with 6 percent of black families and 8 percent of Hispanic families.

In contrast, minority families are more likely than whites to use

institutional arrangements (day care centers and nurseiy schools)

as their main method of care, most likely because of the correlation between race, income, and governmental subsidy.

Number of Children in the Family

Different sized families select different types of care

(see Table 3). As might be expected, lower-priced forms of care

are more often chosen by families with more than ore child.

In a 1971 survey, among white working mothers whose youngest

child was under 6 years old, 29 percent of those wi:h anly one

child chose in-home care, while 56 percent of those 7iti two or

more children under 14 chose in-home care. The prop«rt.ons for

black working mothers were 39 percent for one child and 48

percent for two or more children. Among both raciil groups,

combinations of family members, relatives, and nonrelativjs were

an increasingly important source of care as the numbei o children increased.

The presence of a child between 14 and 17 years old significantly alters child care patterns (see Table 4). In th same

1971 survey, Shortlidge and Brito found that, when theie 'as no

child in the family between 14 and 17, working mothers whose

youngest child was less than 6 years old most often cbse care

outside the home (59 percent of the time for whites, 62 pecent

for blacks). But when the family included a child betweei 1. and

17, use of care outside the home dropped to 30 percent fo- wlites

and 33 percent for blacks. Older siblings became the mai scjrce

of care used by 13 percent of white working mothers am 11

percent of black working mothers. Combinations of familymemers

(including older siblings), relatives, and nonrelatives became

the single most frequently used mode of care for these families

with older children (24 percent of the time for whites, 17 prcent for blacks). Only 13 percent of the white mothers nd 20

12
TABLE 3. CHILD CARE ARRANGEMENTS OF WORKING MOTHERS WHOSE

YOUNGEST CHILD IS LESS THAN 6 YEARS OLD BY RACE AND

NUMBER OF CHILDREN UNDER 14 YEARS OLD IN THE HOUSEHOLD,

1971: PERCENT DISTRIBUTION

Method of Care

White

One

child

Two or more

children

under 14

Black

One

child

Two or more

children

under 14

Care in Own Home by:

Parents or self 10 18

Older sibling 1 5

Other relative 10 8

Nonrelative 6 9

Combination aj 2 16

Subtotal 29 56

Care in Other Home by:

Relative 19 13

Nonrelative 34 16

Subtotal 53 29

7

2

21

3

_6

39

35

52

9

5

15

3

II

48

21

.1

30

Other Arrangements:

Day care center

Mother at work

Other

Subtotal

Total

13

3

_2

18

100

5

3

_£

16

100

7

2

_i

10

100

19

2

_!

23

100

NOTE: Components may not add to totals because of rounding.

SOURCE: Richard L. Shortlidge, Jr., and Patricia Brito, "How

Women Arrange for the Care of Their Children While They

Work: A Study of Child Care Arrangements, Costs, and

Preferences in 1971," The Ohio State University, Center

for Human Resource Research (January 1977), Tables

2-12.

&J Includes combinations of family members and of relatives and

nonrelatives.

13
.1

TABLE 4. CHILD CARE ARRANGEMENTS OF WORKING MOTHERS WHOSE

YOUNGEST CHILD IS LESS THAN 6 YEARS OLD BY RACE AND

PRESENCE OF A CHILD 14 TO 17 YEARS OLD IN THE HOUSEHOLD, 1971: PERCENT DISTRIBUTION

White

Method of Care

Care in Own Home by:

Parent or self

Older sibling

Other relative

Nonrelative

Combination j./

Subtotal

Care in Other Home by:

Relative

Nonrelative

Subtotal

Other Arrangements :

Day care center

Mother at work

Other

Subtotal

Total

Proportion of Sample Within

Racial Group

No child

14-17

13

1

10

8

_£

41

17

26.

43

9

3

_A

16

100

87

Child

14-17

21

13

5

8

24.

71

2

1_

9

8

3

1°.

21

100

13

Black

No child

14-17

7

1

18

3

_9

38

32

11

45

14

2

_!_

17

100

80

Child

14-17

13

11

13

3

27.

67

6

_8

14

15

0

__4

19

100

20

NOTE: Components may not add to totals because of rounding.

SOURCE: Shortlidge and Brito, "How Women Arrange for the Care of

Their Children While They Work," Tables 2-12.

aj Includes combinations of family members and of relatives

and nonrelatives.

14
percent of the black mothers in this sample, however, had both a

child under 6 years old and another between 14 and 17 years old.

Marital and Employment Status of Mother

The marital and employment status of the mother appear to

affect the type of care chosen by the family (see Table 5).

Single employed mothers are nearly twice as likely to use day

care centers and nursery schools or preschools as are employed

wives (29 percent as compared with 15 percent). On the other

hand, employed wives are more likely to use home-based care than

are employed single mothers. In both cases, care by the parent (s) becomes the predominant mode when no one in the family is

employed.

Family Income

As family income rises, higher-priced care is more frequently used (see Table 6). The 1975 National Childcare Consumer Study found that the proportion of families using in-home

care as their primary arrangement changed very little with

increases in income, though the proportions provided by relatives

and nonrelatives shifted dramatically. Among families with

incomes below poverty, only about 10 percent used in-home care by

a nonrelative, as compared with almost one-fourth of those with

incomes at twice the poverty level or higher. Conversely,

in-home care by relatives accounted for nearly one-third of the

care in families living in poverty but for only about one-fifth

of the care in families whose incomes were above twice the

poverty level.

Similar trends occurred in the use of day care centers and

nursery schools. Families below the poverty level and families

with incomes above twice the poverty level were about twice

as likely to use these modes of care as were "moderate" income

families. Among families with incomes below the poverty level,

however, day care centers were used about twice as often as

nursery schools, whereas the reverse was true among families

with incomes above twice the poverty level. These differences

may be attributable to two factors: governmental subsidies

are targeted on the poor and often restrict their choices to

licensed arrangements such as day care centers; and wealthier

families are more likely to label a given institution a "nursery

15

TT~
1

TABLE 5. MAIN METHOD OF CHILD CARE FOR HOUSEHOLDS WITH CHILDREN

LESS THAN SIX YEARS OLD BY MARITAL AND EMPLOYMENT

STATUS OF PARENTS, 1975: PERCENT DISTRIBUTION a./

Single-Parent

Households

Method of Care

Care in

Own Home by:

Parent or self

Other relative

Nonrelative

Subtotal

Care in

Other Home by:

Relative

Nonrelative

Subtotal

Other

Arrangements :

Nursery school

Day care center

Head Start

Before/after

school program

Cooperative

program

Subtotal

Total

NOTE: Components

Parent

employed

6.6

20.6

8.7

35.9

12.6

19.7

32.3

13.0

15.5

0.5

2.2

0.7

31.9

100.0

may not

Parent

unemployed

43.7

17.0

8.6

69.3

18.3

4.0

22.3

3.4

1.7

3.0

0.2

0.0

8.3

100.0

Two-Parent

Households

Both

employed

13.2

10.8

17.5

41.5

19.6

22.1

41.7

9.1

6.1

0.1

0.3

1.1

16.7

100.0

One

employed

28.6

18.2

19.5

66.3

21.0

6.0

27.0

4.5

0.5

0.3

0.5

1.1

6.9

100.0

add to totals because of

Both not

employed

56.5

9.5

4.9

70.9

19.4

1.0

20.4

4.5

2.3

0.4

0.0

1.4

8.6

100.0

rounding.

SOURCE: Unco, Inc., National Childcare Consumer Studyj 1975,

vol. II, Table X-l.

_a/ The household may also include children older than six.

16
TABLE 6. MAIN METHOD OF CHILD CARE FOR HOUSEHOLDS BY POVERTY

STATUS, 1975: PERCENT DISTRIBUTION

Below Poverty to Over 200%

Method of Care Poverty 200% Poverty Poverty

Care in Own Home by:

Relative

Nonrelative

Subtotal

Care in Other Home by:

Relative

Nonrelative

Subtotal

Other Arrangements :

Nursery or preschool

Day care center

Head Start

Before/after school program

Cooperative program

Other

Subtotal

32.5

9.7

42.2

27.5

13.3

40.8

3.8

7.6

2.7

2.7

0.1

16.9

30.0

15.1

45.1

33.6

13.5

47.1

2.6

2.8

0.6

1.3

0.5

7.8

21.4

23.6

45.0

24.1

17.1

41.2

6.7

3.3

2.2

1.3

0.2

13.7

NOTE: Components may not add to totals because of rounding.

SOURCE: Unco, Inc., National Childcare Consumer Study; 1975,

vol. 1, Table IV-22.

17
.1

school" than a day care center, even though no substantial

difference between the two may exist.

Hours of Care

Differences in type of care have also been noted for substantial users when compared with more casual users (see Table

7). Children who receive 30 or more hours of care a week are

more likely to be cared for in a nursery school or day care

center or in the home of a nonrelative than are those who receive

less than 30 hours a week. These three methods of care accounted

for more than 55 percent of the arrangements made by heavy

users but for only 25 percent of those using just 10 or more

hours a week. Care is arranged in the child's own home far

less frequently when 30 or more hours of care are used.

As a result, the average number of hours a week spent in

each of the various forms of care differs substantially (see

Table 8). Those involved in home-based care (either in the

child's own home or in that of a relative or nonrelative) spend

an average of just over 9 hours a week in that setting. In

contrast, those enrolled in nursery schools or preschools spend

an average of 18 hours a week there, and those in day care

centers are there an average of 28 hours a week.

Federal and State Subsidies of Particular Modes of Care

Direct governmental subsidies of child care expenses are

channeled primarily toward the two major types of formal care:

day care centers and licensed family day care homes. As a

result, eligible families (largely low- and moderate-income)

are encouraged to use care that is more expensive than other

forms of care and that, in the absence of subsidies, they would

most likely not be able to afford.

The preferences of those administering the governmental

programs have often led to an emphasis on day care centers rather

than family-based care. About 55 percent of federally subsidized

children are enrolled in centers, while 25 percent are in family

or group day care homes (the remainder are provided care in

their own homes). In contrast, only about 9 percent of all

children who use some form of care for more than 10 hours a

18
TABLE 7. CHILD CARE ARRANGEMENTS FOR CHILDREN LESS THAN SIX

YEARS OLD BY HOURS OF CARE PER WEEK, 1975: PERCENT

DISTRIBUTION

10 or More 30 or More

Method of Care Hours a Week Hours a Week

Care in Own Home by:

Relative

Nonrelative

Subtotal

Care in Other Home by:

Relative

Nonrelative

Subtotal

Other Arrangements:

Nursery school

Day care center

Other

Subtotal

Total

NOTE: Components may

SOURCE: CBO analysis

23.0

22.8

45.8

26.4

13.0

39.4

8.1

3.9

2.8

14.8

100.0

not add to totals

14.4

9.0

23.4

21.3

25.5

46.8

16.6

13.3

a/

29.9

100.0

because of rounding.

of data from Unco, Inc., National Childcare

Consumer Study; 1975.

a/ Less than 1 percent.

19

33-030 O - 78 - 5
\1__._L

TABLE 8. AVERAGE HOURS OF CARE A WEEK FOR CHILDREN USING AT

LEAST ONE HOUR, BY METHOD OF CARE a./

Method of Care Average Hours

Care in Own Home by:

Relative 8.6

Nonrelative 7.5

Care in Other Home by:

Relative 9.7

Nonrelative 11.8

Other Arrangements:

Nursery or preschool 17.9

Day care center 28.3

Head Start 21.3

Before/after school program 5.7

Cooperative program 6.6

Average for All Methods 16.1

SOURCE: Unco, Inc., National Child Care Consumer Study; 1975.

vol.1, Table IV-30.

.a/ Includes multiple answers.

week are enrolled in either a day care center or a nursery

school, while almost all of the remainder are cared for in a

family- or home-based setting.

As a result, the impact of federal subsidies on centers

is considerable. About 44 percent of the day care centers in

the United States enroll children through whom they receive

governmental subsidies (largely federal). These centers are

sometimes called "FFP centers" (federal financial participation).

FFP centers enroll about 75 percent of the low-income children

20
who use centers and about 60 percent of all black children in

center care. About 55 percent of the children in FFP centers

receive full or partial subsidies; these children represent about

one-fourth of all those enrolled in day care centers.

The impact of subsidies on family-based care is far less

substantial. Governmental regulations limit the choice of those

who receive subsidies to licensed forms of care, and the vast

majority of family day care (about 90 percent) is not licensed.

The number being cared for by their mother or father or another

relative at the same time that parent or relative was also caring

for other unrelated children (that is, operating a family day

care home) is not known, but it would surely send the total in

care not eligible for governmental subsidy much higher.

21

'ir
._:!! I
CHAPTER III. HOW DOES THE FEDERAL GOVERNMENT CURRENTLY

SUPPORT CHILD CARE AND PRESCHOOL EDUCATION?

The federal government currently supports child care through

a variety of direct and indirect expenditures. In fiscal year

1977 (the latest year for which data on all programs are available), about 2.8 million children were served in direct programs

costing the federal government approximately $1.8 billion, and

care for another 4 million children was subsidized through tax

expenditures of about $500 million (see Table 9).

Direct expenditures are geared largely toward increasing

the supply and quality of one particular mode of child care

(licensed day care or preschool), and they are aimed at one

particular segment of the population (the poor or near-poor).

Tax expenditures, on the other hand, are aimed primarily at

easing the burden of financing services, but the selection of

mode of care (and the inherent responsibility of monitoring

quality) is left to the consumer. Because of the nature of the

tax credit (it is nonrefundable) and the structure of the tax

system (on average, four-person families with incomes below

$7,500 in 1977 did not pay federal income taxes), the credit is

largely of use to middle- and upper-income families. These

patterns are illustrated in Table 10.

More than 90 percent of the direct federal support for child

care and preschool is provided through six programs: Title

XX of the Social Security Act; the Head Start program; the

Child Care Food Service Program; Title I of the Elementary and

Secondary Education Act (ESEA); the Aid to Families with Dependent Children (AFDC) program; and the Work Incentive (WIN)

program. One tax expenditure—a tax credit for work-related

child care expenses—provides nearly all of the indirect federal

subsidies.

Social Services Grants (SSA Title XX)

The largest program of direct support for child care services is Title XX of the Social Security Act (SSA). Each year,

$2.7 billion is provided to states to support social services

23
TABLE 9. ESTIMATES OF FUNDING FOR FEDERAL CHILD CARE PROGRAMS, FISCAL YEAR

1977 a/

Agency /Program

Federal

Obligations

(millions of dollars)

Children

Served b/

(thousands)

Federal Cost

per Child c/

(dollars)

Matching

State /Local

Contributions

(millions

of dollars)

120.0

9.3

2.5

Department of Agriculture

Child Care Fopd Service

Program

Appalachian Regional

Commission

Community Services

Administration

Community Action

Agency Program

Department of Health,

Education, and Welfare e/

SSA, Title IV-A,

Social Services

SSA, Title XX,

Social Services

SSA, Title IV-A, AFDC

Work Expense Allowance

(Child Care)

SSA, Title IV-A, WIN

SSA, Title IV-B, Child

Welfare

Head Start

ESEA, Title I, Preschool

and Kindergarten Programs 136.0

808.6

ESEA, Title I-A

(Supplement), Migrants 14.4

580

47

207 None required

197

N/A N/A

799 1,013

367

38

N/A d/

1.2

269.5

84.4 fj

57.1

4.7

447.6

145

85

19

349

582

672

247

1,283

71.6

5.7

62.6

89.5

371 None required

382 None required

(Continued)

24
TABLE 9. (Continued)

Agency /Program

Federal

Obligations

(millions

of dollars)

Children

Served b/

(thousands)

Federal Cost

per Child c/

(dollars)

Matching

State/Local

Contributions

(millions

of dollars)

ESEA, Title VI-B, Education for the

Handicapped State

Grant Program 7.7

ESEA, Title VI-C,

Early Education for the Handicapped 14.0

260

HEW Total 1,574.5

Department of Housing

and Urban Development

Community Development

Block Grant Entitlement

Program 42.7

Department of Interior

Bureau of Indian Affairs

Kindergarten program 2.7

Parent-child develop2,075

85

30

1.000

759

500

1,125

NOTE: Components may not add to totals because of rounding.

25

None required

1.4

500.3

None required

None required

ment program

BIA Total

Small Business

Administration

Department of Treasury

(Tax Expenditures)

TOTAL

0.7

3.4

N/A

500.0

2,252.4

sJ

3

N/A

4.000

6,790

2.222

1,244

N/A

125

332

None required

None required

None required

501.5

(Continued)

1 TT
1

TABLE 9. (Continued)

SOURCES: Department of Health, Education, and Welfare; Treasury Department;

and Congressional Budget Office.

&_! Expenditures for the following are excluded even though some may provide

full- or part-day child care:

o Grants for training educational and/or day care personnel;

o Research and development funds;

o Administrative grants;

o Health program funds for children;

o Summer programs for teenagers;

o Programs for teenagers before and after school (Neighborhood Youth

Corps, Department of Interior recreation programs);

o Grants to school systems for postkindergarten children;

o Parent training and home intervention programs (for example, Department of Agriculture extension programs for improved family living).

Preschool programs are included.

b/ Federal cost per child is an average computed by dividing federal obligations by number of children. Total average cost is underestimated because

recipient data are not available for several programs.

c_l Numbers of children served are estimated in various ways and include

unidentifiable combinations of full- and part-day care as well as fulland part-year variations.

d./ N/A = Not available.

e/ SSA = Social Security Administration; WIN = Work Incentive program; ESEA =

Elementary and Secondary Education Act.

J7 Recent detailed examination of expenditures in selected states has revealed consistent underestimation of the amount of Aid to Families with

Dependent Children (AFDC) benefit increases because of child care cost

reimbursements. As a result, these figures may be substantially lower

than is currently true.

£./ Fewer than 500.

26
TABLE 10. PERCENTAGE DISTRIBUTION OF BENEFITS FROM DIRECT

SPENDING PROGRAMS AND TAX EXPENDITURES FOR CHILD

CARE BY ANNUAL INCOME, 1977

Annual

Income

Direct

Spending

Programs

Tax

Expenditures

0-5,000 60 1

5,000-10,000 25 13

10,000-15,000 12 19

15,000-20,000 3 24

20,000-30,000 - 33

30,000-50,000 - 8

Over 50,000 - 2

Total 100 100

SOURCE: Congressional Budget Office and Treasury Department

estimates.

to families living in or near poverty. \J One of the uses to

which these funds may be put is child care. The Department of

Health, Education, and Welfare (HEW) estimates that in fiscal

year 1977 about $800 million of the $2.7 billion was used for

child care services.

Child care services funded by Title XX may be purchased

by the states through local welfare agencies or from other

sources. Included among those providing services are licensed

At present, $2.5 billion is provided to the states on a 75

percent matching basis for use in funding social services.

An additional $200 million is provided on a nonmatching

basis, primarily for the purpose of child care. Legislation

to increase the Title XX ceiling to include this latter

expenditure is pending.

27
1

day care centers and family day care homes. Approximately 11

percent of total child care funds are used to purchase services

from profit-making centers. All facilities are required to meet

the standards set forth in the Federal Interagency Day Care

Requirements (FIDCR); some of these standards, however, have

been suspended from implementation and enforcement pending a

study of their appropriateness (see separate discussion below).

In general, some fee must be charged for these services if the

family's income exceeds 80 percent of the state median for

the particular sized family in question (fees may be charged for

families with lower incomes), and no subsidy may be provided if

the family's income exceeds 115 percent of the appropriate state

median. During the quarter ending September 1976 (the latest

for which data are available), approximately 526,000 children

received day care services through Title XX. Because of the

manner in which these figures are reported to the federal government, it is uncertain exactly how long children are in care

and, therefore, very difficult to estimate the total number of

children who receive services in any given year. HEW has offered

a preliminary estimate that about 800,000 children receive day

care services each year, though this estimate may prove to be

substantially lower than what actually occurs.

Head Start

Head Start is a comprehensive preschool program that includes medical, nutritional, and social services for recipient

children, largely from low-income families. Ten percent of

the enrollment slots are made available to handicapped children.

The public and private nonprofit agencies that administer the

programs are required to support 20 percent of the costs from

nonfederal sources (including contributions); the annual Head

Start appropriation provides the remaining 80 percent. In fiscal

year 1977, the federal appropriation totaled $475 million.

Because of the comprehensiveness of services offered and the

levels of services mandated by the regulations implementing the

program, Head Start is the most expensive major federal education

program on a per child basis. HEW's Administration on Children,

Youth and Families estimates that the average full-year Head

Start program spent $1,505 per child in fiscal year 1977.

Approximately 349,000 children were served through all parts of

the Head Start program.

28
Child Care Food Service Program

The Child Care Food Service Program, operated by the Department of Agriculture, provides cash and donated food commodities to child care institutions to serve meals to children

in their care. Any licensed public or private, nonprofit child

care provider is entitled to receive reimbursement for meals

served. The amount of the reimbursement varies with the meal

served and the family income of the child. Children from

families with incomes below 125 percent of the Secretary of

Agriculture's poverty guidelines are eligible for free meals;

those between 125 and 195 percent of the poverty guidelines, for

reduced price meals; and those above 195 percent of the poverty

guidelines, for "paid" meals (in fact, a small subsidy). 2_l

Current reimbursement rates range from 6.25 cents for each snack

served to a child from a family with income above 195 percent of

poverty to 98.5 cents for each lunch or supper served to a child

whose family income is below 125 percent of poverty. In fiscal

year 1977, approximately 580,000 children were served by this

program.

Preschool Compensatory Education (ESEA Title I)

Title I of the Elementary and Secondary Education Act

provides grants to local educational agencies (LEAs) for supplementary compensatory education services for children in disadvantaged areas. The allocation of funds to states and local

agencies and the selection of particular schools as "Title I

schools" are based on the number of children in the district or

county from families below or near the poverty level (or by some

closely related and approved measure). The selection of individual children to receive compensatory services within Title

I schools is based on the student's academic skills and is

independent of his family's income. The Office of Education

estimates that about 8 percent of the children served by Title I

funds (approximately 367,000) were enrolled in preschool or

kindergarten.

2.1 In his 1979 budget, the President proposed not to increase

the level of reimbursement for meals for children in families

with incomes above 195 percent of poverty. Savings of

$16 million were anticipated.

29
AFDC Work Expense Allowance (SSA Title IV-A)

Another source of indirect expenditures for child care is

the Aid to Families with Dependent Children program. Under the

provisions of the AFDC program, when the states compute the

income of an applicant in order to determine eligibility for

benefits, expenses necessary to allow the applicant to find

employment (such as child care) may be deducted in their entirety

from actual income earned. Benefits are based on income net

of work expenses. For those who do not receive free child

care services under Title XX but who decide to purchase child

care on their own, this deduction provides the reimbursement of

those expenses. HEW estimates that in fiscal year 1977 approximately $84 million was expended under AFDC for this provision and

that 145,000 children were served.

Child Care Services for WIN Recipients

The Work Incentive (WIN) program is a job placement and

training assistance program for welfare recipients jointly

administered by the Departments of Labor and HEW. As a condition

of eligibility for AFDC, all persons must register for WIN

unless they are exempt by law. Included among those exempt

are single mothers of children under six years of age. For

those individuals required to register for WIN and for those

exempt persons who volunteer, states are required to provide

child care and other services that are necessary in order to

allow the individual to accept a job; more than one-third of the

WIN budget is devoted to those services. In fiscal year 1977,

about $57 million of these funds was expended on child care for

approximately 85,000 children.

Tax Expenditures

The U.S. Tax Code provides for subsidies for child and dependent care services by allowing a tax credit of up to $800 a

year for child care expenses. A related provision, which allows

five-year amortization of child care facilities, encourages the

construction of these facilities by employers. The revenue loss

associated with these provisions is expected to be about $500

million in fiscal year 1977.

30
Credit for Dependent Care Expenses. Taxpayers may claim

a credit against tax equal to 20 percent of dependent care expenses up to $2,000 for one dependent and $4,000 for two or

more dependents. The credit may not exceed the amount of the

taxpayer's income tax liability (that is, it is not refundable).

To be eligible for the credit, the taxpayer must maintain a

household for a dependent child under 15 years of age (or certain

other individuals). The expenses must be incurred to enable

the taxpayer and spouse to work or attend school. The credit can

be claimed for payments made to relatives only if the relatives

are not dependents of the taxpayer and if their services constitute employment for social security purposes. In calendar year

1976 (the only period for which actual data are available), 2.7

million taxpayers claimed dependent care credits averaging $170.

The actual number of children whose care was subsidized through

this credit is not known, though at least 4 million were likely

served.

Amortization of Child Care Facilities. Instead of depreciating child care facilities over their useful life, employers

may amortize them over a five-year period. Rapid amortization is

applicable to facilities used solely for the care of children of

employees of the taxpayer and cannot be used for multi-purpose

facilities. With rapid amortization, employers can receive tax

deductions earlier in the life of the asset than is allowed under

other forms of depreciation. This permits tax payments to be

postponed for a number of years, in effect providing an interestfree loan from the Treasury to the employer.

Although the provision for rapid amortization was begun as

an incentive for employers to create child care facilities for

the use of their employees, it has not been widely used. In

part, this is because businesses are not permitted to claim both

rapid amortization and the investment tax credit. As a result,

they often find it to their advantage to forego rapid amortization in favor of regular depreciation and the investment tax

credit. In addition, employers have found that providing day

care is not economically feasible unless they have large numbers

of employees willing to use the facilities. The savings to

employers provided by amortization alone is apparently not

sufficient to encourage large numbers to provide child care

services for their employees.

31

"IF"

CHAPTER IV. WHAT IS KNOWN OF THE DEVELOPMENTAL

EFFECTS OF CHILD CARE?

A major focus of the child care debate has been the effects

on the development of children and the appropriateness of

various federal attempts to influence the quality of child care.

In recent years, evidence has emerged that some day care experiences can have positive, long-term effects on certain children,

but that some of strategies used by the federal government

may not be the most effective. The impact of current federal

efforts follows a brief discussion of major research studies.

MAJOR STUDIES

The major studies of the developmental effects on children

of nonparental care have focused on group day care and have centered on three major areas: cognitive or intellectual development; emotional development (specifically, the attachment between

mother and child); and social development and motivation. _!/

Cognitive Development

A wide variety of research has been completed in the last

15 years on the intellectual development of children in day care

settings. The overwhelming majority of these studies have

examined costly, well-planned, university-based programs that are

not representative of day care offered in the United States.

Nonetheless, some important conclusions can be drawn from this

work.

\J A comprehensive bibliography of studies in these three areas

accompanies a review of that literature by Urie Bronfenbrenner in the appendix of Toward a National Policy for Children

and Families. National Academy of Sciences, National Research

Council, Assembly of Behavioral and Social Sciences, Advisory

Committee on Child Development, Washington, D.C., 1976.

33

"IT"
Studies that examined middle-class children largely from

intact families have found day care experiences, even in highly

enriched environments, to have little effect on the cognitive

development of their enrollees. These studies most often examine

short-term effects using standardized intelligence tests. In

addition, there is no strong evidence that any one type of

curriculum is any more effective than another with these middleclass children (again, using standardized intelligence tests to

measure "success").

In contrast, there is considerable evidence that wellplanned day care and preschool programs can have a substantial

positive effect on the development and experiences of children

from low-income families. In September 1977, the Administration

on Children, Youth and Families published the findings of

a consortium of 14 separate preschool experiments, some begun

in the late 1950s and early 1960s. The experimenters, headed by

Irving Lazar of Cornell University, pooled much of their data

gathered over some 15 years and, in addition, collected common

follow-up data in 1976-1977, when their subjects ranged in age

from 9 to 18 years. They report:

o "Infant and preschool services improve the ability of

low-income children to meet the minimal requirements

of the schools they enter. This effect can be manifested in either a reduced probability of being assigned

to special education classes or a reduced probability

of being held back in grade. Either reduction constitutes a substantial cost reduction for the school

system."

o "Low-income adolescents who received early education

rate their competence in school higher than comparable

adolescents who did not have preschool education."

o "As measured by the Stanford-Binet and the WISC tests,

preschool programs produce a significant increase in

the intellectual functioning of low-income children at

least during the critical years of the primary grades

in school." 3/

.37 Irving Lazar and others, The Persistence of Preschool Effects; A Long-Term Follow-Up of Fourteen Infant and Preschool

(Continued)

34
In addition, they concluded that:

o The characteristics of the most effective programs

(those that included to some degree a home visit) lead

them to support the hypothesis that increased parental

sensitivity to their children's education may have

played an important role in reducing the rate of assignment to special education and retention in grade.

o The evidence to date does not suggest that there is a

"magic age" at which intervention should begin nor

a known optimal length of intervention.

o "... the failure to require a deliberate, well-planned

curriculum for young children in federally supported

day care programs is likely to cost more money in

later special education expenditures than would be saved

in day care costs." kj

o "The tendency to adopt uniform policies and philosophies

in districts mitigates against the capacity of many

school districts to be responsive to individual and

subcultural needs in the way a fifteen-child Head Start

site can. Until further research data are available, it

would seem imprudent to assign either day care or Head

Start responsibilities solely to school districts in

general." 5/

Not all day care experiences are as well planned and carefully executed as were the ones performed by the Lazar consortium. In a recent report to HEW's Office of the Assistant

Secretary for Planning and Evaluation, researchers Bronfenbrenner, Belsky, and Steinberg conclude:

Experiments. Education Commission of the States, The Consortium on Developmental Continuity, final report to the Department of Health, Education, and Welfare, Administration on

Children, Youth and Families (September 1977), p. 107.

47 Ibid., p. 109.

I/ Ibid.

35
The effects on the child's intellectual development of

day care that is not of high quality remains unknown.

The statement applies to all forms of care including

center care, family day care, or care by someone other

than a parent in the child's own home. j>/

Emotional Development

Most of the research on the effects of group care on the

emotional development of children has centered on mother-child

attachment. Because of several widely read studies on institutionalized children published in the 1940s and 1950s, many

hypothesized that periods of separation of a child from his or

her mother, particularly at an early age, would adversely affect

the child's emotional development. Again, most of these experiments were performed in settings (in this case, laboratories)

that were not representative of the real world, and they may only

partially describe the effects of various home and center experiences .

Taken collectively, the studies of this area are ambivalent

and inconclusive. Some studies have found center care to

affect emotional development negatively, some have found the

effects to be neutral, and some have found center care to have a

positive effect. It appears that neither a positive nor a

negative conclusion is warranted. In this area, too, little is

known about the emotional effects of poor quality care or in-home

care.

Social Development

A number of studies have found significant effects of day

care on the social development of children. ]_/ While many of

jj./ U. Bronfenbrenner, J. Belsky, and L. Steinberg, "Day Care in

Context: An Econological Perspective on Research and Public

Policy," prepared at Cornell University for the Department of

Health, Education, and Welfare, Office of the Assistant

Secretary for Planning and Evaluation (December 1976), p. 13.

T_l See bibliography by Bronfenbrenner in Toward a National

Policy for Children and Families.

36
these studies are methodologically flawed, certain conclusions

emerge from them. Children with group care experience before the

age of five exhibit greater interaction with their peers than

children who were raised exclusively at home. But this interaction is both positive and negative; children with group care

experience were more inclined to socialize with other children

and also more likely to display aggressive behavior toward their

peers. In contrast, children reared at home appeared to interact

more easily with adults than with their peers and to be somewhat

more respectful of authority.

These phenomena may be culture-bound, however. Bronfenbrenner, Belsky, and Steinberg note that:

Such outcomes [aggressive behavior], however, do not

appear to be characteristics of day care programs in

other countries, nor of all centers studied in the

United States. Rather, they seem to be products of

certain kinds of program emphases more common in this

nation than elsewhere and reflect the special character

of children's peer groups in America, which are distinguished by a stress on autonomy, individualism, freedom

of expression, competition, and permissiveness toward

and encouragement of interpersonal aggression. JJ/

THE EFFECTS OF FEDERAL EFFORTS TO IMPROVE QUALITY

The federal government attempts to improve the quality of

child care services in the United States in two major ways.

First, programs funded by the federal government (in particular,

Title XX of the Social Security Act and Head Start) are subject

to considerable regulation. And second, day care center operators are eligible to receive subsidies for meals served to

improve the health of the enrolled children.

Title XX

Under the Title XX program, operators of family day care

homes and day care centers who receive federal subsidies are

JJ/ Bronfenbrenner, Belsky, and Steinberg, "Day Care in Context,"

p. 15.

37

"TT"
required to meet the Federal Interagency Day Care Requirements

(FIDCR). Among the most controversial aspects of the FIDCR are

the staffing requirements (see Table 11). These requirements,

which specify the maximum number of children allowed per staff

member, are aimed at insuring adequate quality of care for

enrollees but are generally more stringent than those required by

state law or regulation. Some parts of the FIDCR, including

the child-staff ratios for preschool-aged children, have been

suspended from implementation pending a review of their appropriateness; the findings of the review are anticipated in 1978.

TABLE 11. CHILD CARE CENTER STAFFING REQUIREMENTS UNDER LAW

AND REGULATION

Age of Child

Maximum Number

of Children per

Staff Member Source of Requirement

Under 6 Weeks 1

6 Weeks to 3 Years 4

3 to 4 Years 5

4 to 6 Years 7

6 to 9 Years 15

10 to 14 Years 20

Required by regulation

Required by regulation

Required by law

Required by law

Maximum allowed by law &J

Maximum allowed by law aj

a/ The Secretary of Health, Education, and Welfare may lower the

maximum number of children per staff member, thus increasing

the staff required.

Important implications for the nature of federal standards

have emerged from preliminary findings of the National Day Care

Study prepared by Abt Associates for HEW. _9/ While pointing out

that child-staff ratios should not be abandoned altogether, the

study indicates that the size of the group in which preschoolers

are cared for has a greater developmental effect than small

variations in the ratio of children to staff. For example,

they point out that "groups of 12-14 children with two caregivers

38
had, on the average, better outcomes than groups of 24-28 children with four caregivers." 10/ In addition, the study notes

that the number of years of formal schooling or experience

of the caregivers, by itself, had little discernible effect on

child development. The Abt researchers note, however, that

"caregiver specialization in child-related fields such as developmental psychology, early childhood education or special education was associated with distinctive patterns of caregiver

behavior and with higher gains in test scores for children." ll/

For infant children, they found that child-staff ratios and

caregiver qualifications were important factors in maximizing

developmental effects.

•V

Because many states indicated that they would be unable to

meet the FIDCR standards without additional financial assistance,

$200 million in new Title XX monies were made available to the

states in fiscal years 1977 and 1978 without state matching

required and to be used principally for child care. These funds

were provided primarily to help the states upgrade day care

staffing to meet the FIDCR standards and to encourage the employment of welfare mothers in day care centers. In a recent unpublished paper for HEW, the Urban Institute concluded, based

on the opinions of regional Title XX staff, that only 20 states

and the District of Columbia are spending all their additional

funds on child care services and that another 20 states, representing nearly 60 percent of the total services provided,

may not be using even the majority of their funds for child

care. Funds have been spent on other social services or have

been employed in a fiscal shell game in which these nonmatched

funds replaced previously allocated matching monies (75 percent

federal, 25 percent state) for child care.

One reason that some states are not using all their additional Title XX funds for child care may be that it is not

particularly clear that the funds are needed to bring staffing in

JJ/ Abt Associates, National Day Care Study. Preliminary Findings

and Their Implications, prepared for the Department of

Health, Education, and Welfare, Administration for Children,

Youth and Families, Day Care Division (January 31, 1978).

107 Ibid., p. 13.

ll/ Ibid., p. 14.

39

ir
centers up to federal standards. Researchers at Abt Associates,

who recently completed a comprehensive study of day care centers

for the Department of Health, Education, and Welfare, estimate

that only about $33 million would be needed to bring actual

child-staff ratios in line with FIDCR standards. 12/ Because of

data from this survey, HEW personnel were able to reevaluate

earlier estimates that led, in part, to the enactment of the

additional $200 million in child care funds. They found that

because assumptions (now known to be erroneous) had to be

made about conditions in states in which no data existed at the

time, the amount of funds necessary to bring federally subsidized

centers up to FIDCR standards may have been considerably overstated.

In addition to its influence on staffing standards, the

federal government seems to have had an effect on other aspects

of day care center operations (some of which are also covered

by the FIDCR). In their recent examination of day care centers,

Abt Associates found that those centers which receive some

governmental assistance (largely federal) by serving eligible

children offer more services (such as health diagnostic care),

have more transportation services, and have more parental involvement in staffing and budgeting decisions than other types

of centers. 13/ The costs per child in subsidized centers

averaged $168 a month in 1976-1977, compared with $119 a month

in unsubsidized nonprofit centers and $103 a month in unsubsidized profit-making centers.

12/ Abt Associates' estimate is based on current staffing and

expenditure patterns in the states and is independent of

federal involvement in child care services. At present, the

Title XX distribution formula spreads social services funds

evenly across the country, whereas the need for additional

funds to meet standards may be concentrated in certain

areas. If the present formula were used, considerably more

than $33 million would be needed to channel enough funds to

those states that are furthest from meeting FIDCR standards.

13 / Ibid.

40
Head Start

Guidelines for the Head Start program are even more comprehensive than those for Title XX. Head Start programs are to

include a full range of early childhood services, including

health and nutritional as well as educational components.

A recent review of research on Head Start by the Social Research

Group at the George Washington University arrived at conclusions

similar to those reported by the Lazar consortium for other

cognitively oriented preschool programs for disadvantaged children. The review of Head Start research found:

o The majority of studies showed improvement in performance

on standardized tests of intelligence or general ability.

o Studies reported that Head Start participants performed

equal to or better than their peers when they began

regular school and they experienced fewer grade retentions and special class placements. 14/

The review also found that no one approach to Head Start

produced better gains than another, except that achievement gains

were not found among children who had participated in a program

for only a short period of time.

Child Care Food Service Program

The Child Care Food Service Program has not been evaluated

for its effectiveness in improving the health of preschool-age

children. A related program, the National School Lunch program,

was the subject of a recent report by the General Accounting

Office (GAO). In that report, GAO concludes:

Although studies show that the school lunch, when

paired with a nutritional supplement or with the school

breakfast, can affect the nutritional levels of schoolchildren, their findings about how the lunch itself

14/ Ada Jo Mann, Adele Harrell, and Maure Hurt, Jr., A Review of

Head Start Research Since 1969. George Washington University, Social Research Group (December 1976), p. 5.

41
1

affects nutritionally deprived and nutritionally

adequate participants are inconclusive.

Although the type A lunch appears to be effective in

increasing food consumption, GAO is not convinced that

it is the best choice for a nutritional standard. The

absence of any indication that the program is having a

net benefit on the health of either needy or nonneedy

children raises questions about the nutritional value

of the lunch. 15/

15/ General Accounting Office, The National School Lunch Program

—Is It Working? Report to the Congress by the Comptroller

General of the United States, PAD-77-6 (July 26, 1977),

p. iii.

42
CHAPTER V. DO DAY CARE OPPORTUNITIES HAVE A MEASURABLE

IMPACT ON LABOR FORCE PARTICIPATION?

One of the most frequently expressed reasons for federal

child care assistance, whether through tax credits or through

the various direct spending programs, is to facilitate the

labor force participation of women. Some of these subsidies (the

tax credit, the allowance for child care expenses under AFDC, and

the free child care provided under WIN) are only available to

those who work. Following a discussion of recent trends in

family size and structure and in the labor force participation of

mothers, recent data on the effects of child care availability on

the decision to work are reviewed.

DEMOGRAPHIC TRENDS

Two trends in the characteristics of families have been

affecting child care in the United States most strongly: the

diminishing size and changing structure of the family unit, and

the growing labor force participation of mothers. In general,

when mothers are absent from the home for employment reasons,

other sources of care must be found, particularly for children

younger than school age. The size and structure of the family

often affects the mother's decision to enter the labor force. If

there are a large number of children who must be cared for while

the mother works, particularly if that care must be paid for, it

is often not cost-effective for mothers to work. Other factors,

such as mobility, affect a family's ability to secure free or

in-kind care for children, though to a lesser extent.

Size and Structure of Families

In recent decades, the size of the typical family in the

United States has been steadily decreasing. In 1960, the average

number of children per family with children was 2.33; by 1976,

the number had dropped to 2.04. This change has placed two

conflicting pressures on the care of children: having fewer

children places less pressure on mothers to be at home for

43
.Jl 1

a large number of years, and makes paid care less costly per

family when such care is desired; but it also reduces the number

of older children who have often assisted in the care of their

younger siblings.

The number of single-parent families headed by women has

risen sharply in recent years (women head more than 90 percent of

single-parent families). Three forces, working simultaneously,

have produced this increase. First, the divorce rate has risen

dramatically in the past two decades. In 1960, the number

of divorces per 1,000 persons in the population was 2.2; by

1976, it had climbed to 5.0. Second, the rate of remarriage

among men traditionally has been higher than among women. And

third, courts more often award custody of children to mothers

than to fathers in divorce proceedings.

Labor Force Participation of Mothers

The number and proportion of mothers participating in the

labor force has been changing dramatically in the past quarter

century. In 1950, just over one-fifth of the mothers with

children under 18 years of age were in the labor force; by

1978, over half were (see Table 12). The largest proportional

increases in labor force participation have occurred among

mothers with children under 6 years old. Between 1950 and 1978,

the participation rate of mothers with children only between 6

and 17 years old increased 82 percent, while the rate among

mothers with children under 6 more than tripled (from 14 percent

in 1950 to 44 percent in 1978).

Labor force participation varies considerably depending on

the age of the children and the marital status of the mother

(see Table 13). As might be expected, participation is lowest

among married women with children under 3 years of age (38

percent in 1978) and highest among single mothers with children

between 6 and 17 years old (71 percent in 1978). The largest

proportional increases between 1970 and 1978 occurred among

married women with children under 3 years old, whose rate

of participation increased from 26 percent to 38 percent.

44
TABLE 12. LABOR FORCE PARTICIPATION RATES OF MOTHERS, SELECTED

YEARS: IN PERCENT a/

Year

Mothers with

All Children under

Mothers 6 Years

Mothers with

Children 6

to 17 Years

1950

1960

1964

1967

1970

1973

1976

1978

22

30

34

38

42

44

49

53

14

20

25

29

32

34

40

44

33

43

46

49

52

53

56

60

SOURCE: Department of Labor.

.a/ Data apply only to women who have been married at some time

during their lives.

DAY CARE AND LABOR FORCE PARTICIPATION

One of the most controversial questions in the child care

debate has been the degree to which child care opportunities

influence the employment decisions of mothers. Unless day

care services are available at the work site (a rare occurrence),

mothers who decide to seek employment must make some arrangement

for the care of their children. Although each family faces

a different set of alternative arrangements, depending on where

they live and work, in most cases some form of care is secured.

To be sure, many families would like more varied and less expensive alternatives than they now have. But the question remains,

given the current structure of the day care market, are mothers

inhibited from participating in the labor force? Unfortunately,

very few studies of this question have been undertaken. The

small amount of data that do exist, however, do not indicate

such an effect.

The strongest suggestion that lack of day care opportunities

inhibits the labor force participation of women was found among

45
TABLE 13. MOTHERS IN THE LABOR FORCE BY MARITAL STATUS AND AGE OF

CHILDREN, MARCH 1970 AND 1978 a/

Marital Status and

Number

(in thousands)

As Percent of

Women in Respective Population

Age of Children

Mothers with Children under

18 Years

Married, husband present

Widowed, divorced, or separated

Total

Mothers with Children 6 to 17

Years Only

Married, husband present

Widowed, divorced, or separated

Total

Mothers with Children under

6 Years b/

Married, husband present

Widowed, divorced, or separated

Total

Mothers with Children 3 to

5 Years (None under 3) b_/

Married, husband present

Widowed, divorced, or separated

Total

Mothers with Children under

3 Years b/

Married, husband present

Widowed, divorced, or separated

Total

1970

10,203

1.919

12,122

6,289

1,278

7,567

3,914

641

4,555

1,934

347

2,281

1,980

294

2,274

1978

12,469

3.202

15,671

7,829

2.293

10,122

4,640

909

5,549

2,082

518

2,600

2,558

392

2,949

1970

39.7

60.6

42.0

49.2

67.3

51.5

30.3

50.7

32.2

37.0

58.8

39.2

25.6

43.6

27.3

1978

50.2

67.7

53.0

57.2

71.3

59.9

41.6

60.0

43.8

47.9

63.9

50.4

37.6

55.5

39.3

SOURCE: Department of Labor

a_/ Includes only mothers 16 years of age and over who have been

married at some time during their lives.

b_/ May also have older children.

46
women responding to a National Longitudinal Survey in 1971.

In that survey, women who were out of the labor force in 1971

were asked if they would be willing to seek employment if free

day care centers were available to them. Among those women

with children under six years old, 17 percent of the whites and

50 percent of the blacks responded positively. _!/ While the

black mothers in the sample were largely from low-income families, the whites were not. If a program such as that supported

by Title XX were expanded, most of the white women responding

positively to this question would not be eligible for heavily

subsidized care. In addition, since this question was a hypothetical one, actual responses may differ substantially from

those indicated here.

In the Survey of Income and Education, taken in the spring

of 1976 (for incomes in 1975), women who were not in the labor

force were asked to indicate why they were not; one possible

response was "can't arrange child care" (see Tables 14 and 15).

Among married women with children under 14 years old, the vast

majority (about 84 percent) responded that they were not in the

labor force because they did not want a job. Another 11 percent

said that they wanted a job but were not looking because of

personal reasons (such as family responsibilities or ill health).

Only 3 percent of those with children under 6 and 2 percent of

those with children 6-14 years old said that they wanted a job

but were not looking because they could not arrange child care.

About 70 percent of the married women wanting to work who

could not find care for their children were in families with

incomes between $5,000 and $15,000, or what might be called

"lower-middle income" families. (In 1975, the federal government's official poverty-level income for a nonfarm family of four

was $5,500; the median family income for husband-wife families

with children in the Survey of Income and Education was $16,426.)

Among female heads of families, the picture was quite

different, though the percentage who were not looking for a job

because of child care problems remained quite small. Nearly

two-thirds of the female family heads who had children under 14

JY Richard L. Shortlidge, Jr., The Hypothetical Labor Market

Response of Black and White Women to a National Program of

Free Day Care Centers, Ohio State University, Center for

Human Resources Research (August 1977), Table 1.

47

"IT"
TABLE 14. REASONS FOR WOMEN NOT PARTICIPATING IN LABOR FORCE, 1975: PERCENT DISTRIBUTION

With Children

under 6

Wives

Female heads

of families

With Children

6-14 Only

Wives

Female heads

of families

Total Not

in Labor

Force

(thousands)

6,540

820

7,789

1,075

SOURCE: Congressional Budget

Does

Want

89

62

83

66

Office

Wants Job — Reasons

Can't

Not Work- arrange

Job related J>/ child care

.0 1.5 3.1

.5 6.0 11.8

.9 2.2 1.9

.9 6.6 6.2

tabulations from the Survey

for Not

Personal

10.0

20.4

11.1

21.0

Looking a/

Other/

cj don't know

2.1

5.2

2.4

4.0

of Income and Education.

a/ Includes multiple responses.

b/ Work-related reasons include: believes no work available in line of work or area;

couldn't find any work; lacks necessary schooling, training, skills, or experience;

and employers think too young or too old.

cj Personal reasons include: family responsibilities; in school or other training; ill

health or physical disability; and other personal handicap in finding job.
TABLE 15. FAMILY INCOMES OF WOMEN NOT LOOKING FOR WORK BECAUSE THEY CANNOT ARRANGE

CHILD CARE, 1975: PERCENT DISTRIBUTION

With Children

under 6

Wives

Female heads

of families

With Children

6-14 Only

Wives

Female heads

of families

NOTE: Components

U.S.

Total

(thousands)

203

97

146

67

may not add

SOURCE: Congressional Budget

Under $5000- $10,

$5,000 10,000 15,

10.8 35.8 36

86.4 13.2 0

5.3 29.6 39

76.6 22.4 1

to totals because of

Family Income

000- $15,000- $20,000- $25,000- Over

000 20,000 25,000 30,000 $30,000

.1 9.9 3.8 1.2 2.4

»

.5 11.4 7.6 1.8 4.7

.0

rounding.

Office tabulations from the Survey of Income and Education.
years old and were not in the labor force said they did not want

a job. Another 20 percent said they were not looking for a

job for personal reasons. About 12 percent of those with children under 6 years old and 6 percent of those with children 6-14

said they were prevented from working because they could not

arrange child care.

The vast- majority (about 82 percent) of the female family

heads who could not work because they were unable to arrange

child care had incomes under $5,000. An even greater proportion

(92 percent) were AFDC recipients, all of whom are eligible

for child care subsidies of one sort or another. Because of

this latter fact, it is uncertain how accurate a picture these

responses paint of the constraints imposed by lack of child

care opportunities on the labor force participation of female

family heads.

The particular case of low-income mothers has been examined

in three income-maintenance experiments (Seattle, Washington;

Denver, Colorado; and Gary, Indiana). In the Seattle and Denver

experiments, researchers found that child care subsidies had

some small effect on the type of care chosen by mothers. Only

the formal methods (or market forms) of care were eligible for

subsidies, and the expected shift toward those modes was observed. Mothers largely preferred informal types of care,

however, much the same as at present. In reference to the experiments' effects on the labor force participation of women, the

researchers concluded:

Because the utilization of market care is positively

associated with earnings of the female head, child care

programs which subsidize market care are regressive in

nature and tend to conflict with the redistributive

objectives of other social programs. We conclude from

this result that subsidizing child care is neither an

efficient, nor an equitable means for increasing

women's participation in the labor market. 2_/

Researchers generally observed a similar pattern of use of child

2_f Mordecai Kurz, Philip Robins, and Robert Spiegelman, A Study

of the Demand for Child Care by Working Mothers. Stanford

Research Institute, Center for the Study of Welfare Policy,

Research Memorandum 27 (August 1975), p. viii.

50
care subsidies in the Gary experiment, though flaws in the experimental design and the small sample size limit the validity

and usefulness of their conclusions. 3/

_3/ See Lois B. Shaw, The Subsidized Child Care Program. The

Gary Income Maintenance Experiment, Initial Findings Report,

Indiana University Northwest (October 1976).

51

CHAPTER VI. WHAT ARE SOME ALTERNATIVES TO CURRENT POLICY?

A wide variety of child care alternatives have been considered (and actions taken) in recent years, largely because

of the diversity of concerns expressed by those attempting to

shape the course of federal involvement in day care and preschool. Some proponents are concerned primarily about the quality

of child care available in the United States and encourage

the expansion of federally regulated programs that emphasize

licensed family day care homes and day care centers. Others

point to the repeatedly observed parental preference for inexpensive, nearby family care and encourage bolstering the current

collection of individual caretakers through technical assistance

for them and referral and information services for parents.

Still others are concerned primarily about working mothers,

particularly those with school-aged children, and support the

establishment of before- and after-school care programs. And

finally, some are concerned largely with simplifying federal

assistance and emphasize the ways in which federal subsidies are

distributed over the care actually provided.

A number of directions the Congress could take to alter or

expand day care and preschool opportunities are examined in this

chapter. None of these are necessarily representative of legislation that may have been introduced in the 95th Congress (with

the exception of the Administration's welfare reform proposal),

but they are examples of the variety of ways to satisfy concerns

that have been expressed.

Five alternatives, some of which may be pursued in combination, are examined; three are modifications of current programs

and their funding levels, and two are new initiatives:

o Expansion of Head Start to all eligible children,

o Expansion of Title XX funding,

o Expansion of the tax credit,

53

T"1T
o New categorical day care/preschool initiative, and

o New before- and after-school care program.

In addition, the effects of the Administration's welfare reform

and jobs creation program are examined. Table 16 summarizes the

costs and effects of each alternative. All cost figures are in

1978 dollars.

MODIFICATIONS OF CURRENT PROGRAMS AND FUNDING LEVELS

Current federal direct expenditure programs are aimed primarily at children from low-income families while tax expenditures largely assist middle- and upper-income groups. The

following three options involve expansions of or alterations

to existing legislation.

Expansion of Head Start to All Eligible Children

In fiscal year 1978, the Head Start appropriation of $592

million for full-year and summer programs (excluding evaluation, research, and technical assistance) will provide services

to approximately 391,000 children. This number represents

about 24 percent of the eligible population of low-income

children. At current per child spending levels ($1,604 in

federal funds per child in a full-year program), an additional

$2 billion would be needed to serve the remaining 1.2 million

children who qualify for services. If such an option were

pursued, it would be necessary to phase in full funding over a

period of several years. During this expansion, some pressure to

expand Title XX services would be alleviated, particularly if

more Head Start programs operated on a full-day basis.

Despite recent findings that Head Start services may have

been provided to some who did not qualify, this program is

still the most heavily targeted of the options on low-income

children. As indicated earlier, disadvantaged, low-income

children are the group that has been shown to benefit most in

improved school experiences from well-planned, comprehensive

preschool services. To be sure, not all Head Start programs are

as effective as those that have been examined in research projects. But the key elements to the Head Start program—comprehensive services, a diversity of community-based delivery sites

54
TABLE 16. COSTS AND IMPACTS OF ALTERNATIVES TO CURRENT FEDERAL CHILD CARE

POLICIES

Option

Incremental Change in

Federal Number of

Cost Children

(billions Served

of dollars) (millions)

Targeted Possible

Recipient Mode of Developmental

Population Care Effects

Expand Head

Start to All

Eligibles

Expand

Title XX

Expand Tax

Credit

Categorical

Day Care/

Preschool

Initiative

(3- and 4-

year olds)

Before- and

AfterSchool Care

(6- to 13-

year olds)

Induced

Effects of

Welfare

Reform

2.0

1.0

0.7

4-9

1.2

0.2

Uncertain

2-4

3-6.5 7-19

0-0.2

Lowincome

Low- and

moderate

income

All except

higherincome

All income

groups a/

All income

groups a_/

Low- and

moderateincome

Compre- Positive if

hensive well planned

preschool

Licensed

care

Modest

At discre- Low

tion of

recipient

Licensed Greatest

care or effect among

preschool low-income

children

Schools None

intended

At discre- Low

tion of

recipient

a/ These programs could be targeted on low- and middle-income families by

adjusting fees according to the ability of parents to pay for services.

Instituting such a fee schedule would reduce costs.

55

"IV
(including schools), and active parental involvement—are the

same as those in the most effective experimental situations.

There is no guarantee that an expanded Head Start program would

dramatically alter the school experiences of new recipients, but

its characteristics are far closer than those of any other

federally supported program to what appears to work well from a

developmental point of view.

Critics of the Head Start program often cite at least two

reasons for curtailing its expansion. First, the program is

costly. For each child served, the Head Start program spends

more than half again as much as a Title XX day care program, for

example. Consequently, enrollees receive more expensive services

than middle-income families are often able to purchase on their

own. And second, many object to isolating low-income children

from their more affluent peers with whom they will share their

later schooling. This latter effect could be minimized by

expanding Head Start enrollments among children from moderateand middle-income families, though such a move would be very

costly if the goal of first serving low-income children were to

be retained.

Expansion of Title XX

Child care opportunities could be expanded by increasing

the ceiling on Title XX federal reimbursements. When the $2.5

billion maximum was first imposed in 1973, only 5 states expended

enough of their own funds to use their total federal allotment.

In fiscal year 1978, 31 states are at their ceilings. In fiscal

year 1979, 43 states are expected to reach their ceilings and

$2.45 billion of the $2.5 billion will be matched by the states.

The additional $200 million currently available in nonmatching

Title XX grants is fully utilized by the states.

In response to the concerns of many states that have been

at their ceiling for some time and believe they are faced

with cuts in social services expenditures without some federal

relief, Representatives Donald H. Fraser and Martha Keys have

introduced a bill (H.R. 10833) that would raise the Title XX

ceiling to $2.9 billion in fiscal year 1979, to $3.15 billion

in 1980, and to $3.45 billion in 1981. While these increases are

greater than the anticipated inflation during the period, they

56
are intended partially to compensate for the real decrease in

funds available to states that have been at their ceilings since

the mid-1970s. These same states, however, have received considerable increases in funds from closely related federal grant

programs, such as general revenue sharing, during that same

period.

Because the use of Title XX funds is at the discretion of

the states (within the broad limits imposed by the federal

government), the effect on day care of expanding Title XX cannot

be estimated with any degree of certainty. Some fiscal substitution is likely to occur. But, even if the states were to

allocate funds in the same proportion as at present and no

substitution occurred, only about 24 percent of the additional

monies would go to child care programs. If the Title XX ceiling

were to be raised by $1 billion, for example, and if the state

were to come up with the full $333 million necessary to match

that $1 billion, slightly less than $320 million additional would

be spent on child care services and about 240,000 extra children

would be served. Other social services would, of course, be

expanded as well.

Most of the recipients of an expanded Title XX day care program would be children from families with low incomes; but

through the increased use of graduated fee schedules as allowed

under current law, services could be provided at partial subsidy

to families with incomes as high as 115 percent of the state

median. At present, however, federal officials generally believe

that the states make little effort to ensure that those required

fees are indeed collected.

Proponents of increased day care services cite the need

for adequate care arrangements for an expanding workforce of

mothers. While greater opportunities for care would undoubtedly

be helpful, no evidence exists to determine the effect of the

availability of care at a reduced price on the employment decisions of mothers. In addition, the Title XX program places

substantial restrictions on the choices of participating mothers.

The vast majority of families currently arrange for care in ways

that are not eligible for Title XX subsidies (that is, in unlicensed care). To the degree that noneconomic considerations

play a role in choosing less formal care arrangements, Title XX

subsidies would do little to assist many of those who would

nonetheless qualify for assistance based on their income.

57

ir
Expansion of the Child Care Tax Credit

The use of paid forms of day care could also be encouraged

by expanding the subsidies available through the tax system. The

present 20 percent credit undoubtedly assists those who must

secure care in order to work, but it is probably not much of an

incentive either to work or to purchase high-quality care, and it

is unavailable to those with lower incomes. In 1977, two-thirds

of the tax expenditure funds went to families with incomes over

$15,000.

Securing day care in centers or preschools can be an expensive proposition. The average cost of full-year care in a

nonprofit facility subject to federal standards is more than

$2,000 per child. If a woman took a minimum-wage job and

had only one child to find care for, the costs of this arrangement would be more than 30 percent of her before-tax earnings.

This proportion far exceeds the average amounts that women appear

willing to spend from their earnings—that is, one-sixth to

one-fifth of weekly earnings—even with the aid of the tax credit

(if it were available to her). With two or more children needing

care, more than half of her minimum-wage earnings would be taken

by child care expenses if a day care center or preschool were

chosen.

If the tax credit were expanded to half of work-related

child care expenses, with benefits reduced or eliminated for

families with high incomes, substantial assistance could be

provided to moderate- and middle-income families. Improved

targeting on those with greater need for assistance could also be

provided by making the credit refundable. Benefits would still

be available only to those who use child care in order to work,

and the choice of type of care would be left to the parents. If,

for example, a 50 percent refundable credit (subject to the

current maximums) were made available to families in 1978 and

benefits were phased out between family income levels of $30,000

and $50,000, the additional cost to the Treasury would be at

least $700 million, more than doubling the current tax expenditure. Less aid would be provided to upper-income families, but

assistance for lower- and middle-income families would be increased substantially. The degree to which families would alter

their current patterns of child care is uncertain, however. It

is unclear how many families would chose to switch arrangements

in favor of those with programs oriented more toward development.

58
NEW INITIATIVES

It has been suggested recently that the federal government

expand child care services to all children regardless of family

income. Two examples are discussed here. The costs of these

alternatives have been estimated on the assumption that services

would be provided free of charge and that the federal government

would be the sole source of funding. Both options, however,

could clearly incorporate a fee structure that would phase out

subsidies with increases in family income and thereby reduce the

costs of the program. In addition, funds could be provided on a

matching basis, thereby reducing federal costs.

A Categorical Day Care or Preschool Initiative

Day care or preschool opportunities for all three- and

four-year-olds could be initiated by the federal government. At

present, this age group comprises approximately 6 million children, about 2.6 million of whom are currently enrolled in a day

care center or preschool, j./ The degree to which those who do

not now enroll their children would take advantage of these

services would likely depend on the hours of care, the availability of irregularly scheduled care, the location of the

facilities, the quality of care, and its price.

Such an initiative would vary considerably in cost depending

on its structure. There are two major ways by which subsidies

could be provided. One would be a center-based day care program

supported by federal grants to states. Services might be similar

to those provided in Title XX centers and subject to the FIDCR

or similar federal regulations. Programs of this type might

cost from $4 billion to $9 billion. For example, at the low end

of the spectrum might be moderate-cost day care programs that

would enroll all of those currently in Title XX and other

center-based day care programs, a third of those now in nursery

school, and a quarter of the three- and four-year-olds not

currently enrolled in either. At the other end of the spectrum

might be a universal preschool program operated through the

public schools, staffed primarily by certificated teachers,

_!/ Estimates range from 2.2 million to 3.0 million; an average

of 2.6 million was used here.

59

ir
and used by a high proportion of three- and four-year-old children. Unlike some current preschool programs, services would

be available on a full-day, full-week basis to accommodate

working parents.

A second major mechanism would be a federal child care

voucher. The primary objective of this form of support is to

underwrite a variety of types of care, at the parents' discretion, while retaining some federal control over quality of

care. In particular, a voucher could be utilized in a variety

of family-based arrangements, which many parents prefer to center

care. Proponents of voucher plans are quick to point out, however, that care subsidized through vouchers would be licensed

and subject to federal or state health and safety standards.

Although no specific proposal has been advanced, a voucher

program for child care would involve substantial administrative

expenses. Some governmental agency would be responsible for

processing applications and distributing vouchers, and considerably more licensing inspectors would be required than are at

present. Caregivers, in particular, would have to alter their

current practices in order to be eligible to accept federally

financed vouchers. Most family caregivers are not licensed

and many do not pay themselves the equivalent of the minimum

wage, two likely federal requirements. A large portion of these

caregivers may be unwilling to subject themselves to governmental

control (many, indeed, would be ineligible for subsidies) in

return for the potential for some increase in revenues. In

addition, a modified version of the current child care tax credit

could accomplish many of the goals of a voucher scheme, but

without either the benefits or the drawbacks of governmental

regulation.

Regardless of the mechanism of support chosen, such an

initiative could include a program of technical assistance for

family caregivers and of referral and information for parents.

Though no data exist on which to base an accurate estimate of

-the costs of these services if implemented nationwide, they

would surely be far less expensive than the care itself.

The developmental effects of any federally supported program would depend considerably on the type of care chosen and

the flexibility of the caregiver to meet the individual needs

of the children. As mentioned earlier, researchers who have

examined successful child care programs have cautioned against

60
the sole use of the school systems to provide care, citing their

characteristic inability to adapt to the often unusual needs of

preschoolers. They are also quick to point out, however, that

poorly planned day care settings would be equally ineffective in

meeting the developmental needs of the children.

The effects of widely available, inexpensive day care on

the labor force participation of women is uncertain. On the

one hand, few women appear to be prevented from seeking employment because they are unable to arrange some sort of child care,

and most women do not now purchase the kinds of care current

legislative proposals would finance. On the other hand, if

economic considerations play a strong role in the preference for

informal care, and if federal support were to reduce substantially the costs of center-based day care for most families,

women might be more willing to utilize these services in order to

accept employment or to work for longer hours than at present.

But again, there is no way to estimate accurately the magnitude

of these effects, if any.

Before- and After-School Care

About one-third of the 44 million school-age children in the

United States have mothers who work full time. While many

of them, particularly older children, are undoubtedly quite

capable of caring for themselves during the afternoon until a

parent arrives home from work, the remainder are the object of

concern among some policymakers. At present, about 1.7 million

of these children participate in some form of organized beforeor after-school program, most of which amounts to supervised

recreation. The remainder, however, are cared for in much the

same way as younger children—for example, by relatives or in

family day care homes.

What would it cost to expand organized before- and afterschool care to all 6- to 13-year-old children of mothers who

would like to work (or to all those, working or not, who might

want to participate)? If all of those whose mothers are currently employed full time were to be looked after, such a program

would cost around $3.0 billion. More realistically, though, this

service might be utilized by far more children. If all of those

whose mothers currently work full time and half of those whose

mothers do not were to participate, costs might range as high as

$6.5 billion. Some mothers might be encouraged to enter the

61

ir
labor force as a result of such a program, though no data exist

that would allow an accurate estimate. Developmental effects

would not be the major focus of this effort.

EFFECTS OF THE ADMINISTRATION'S WELFARE REFORM PROPOSAL

The Administration's welfare reform proposal is designed,

in part, to minimize its impact on the child care market and,

in particular, on federal social service child care expenditures. 2_l Because no one in need of child care would be required

to work, only those who volunteer to work would affect total

demand for child care services. Despite this design, a considerable amount of voluntary work effort might occur among

those not required to work and consequently a large number of

children might need care. This effect could be counteracted by a

change in the treatment of work expense in the computation of

benefits.

Increased Demand for Child Care

The Administration assumes that about half of those single

parents involved in some aspect of the welfare program with

children under six years old will be working during the year.

Among those who do not already have a job or whose current

job pays less than a subsidized public service job, about 38

percent are expected to apply for and receive employment. These

assumptions seem exceedingly high in view of recent experience in

the AFDC and WIN programs. Although these programs differ

substantially from the proposed welfare and jobs system, they can

provide insight into the likely effects of the reform scheme. In

May 1975, only 16 percent of the AFDC mothers were employed and

another 10 percent were registered for WIN but were unemployed.

Consequently, estimates of the impact of the proposal on

child care derived from the Administration's estimation model

are likely to be considerably overstated. Using the Administration's assumptions, about 1 million children under six years old

.2./ For a more comprehensive discussion of the Administration's

proposal, see Congressional Budget Office, The Administration' s Welfare Reform Proposal; An Analysis of the Program

for Better Jobs and Income, Budget Issue Paper (April 1978).

62
in single-parent families would find their parents volunteering

for and receiving public service employment in a given year.

Further, the Administration assumes that the parents of these

children would be in the labor force during the entire year,

but only in need of a public service job during part of the

year. If, however, the AFDC/WIN experience is a more accurate

predictor of what might be expected under the proposal, about

half as many children would need care.

In either case, the impact of these children on the formal

day care market would likely be small. If the newly employed

single parents chose the various types of care in the same

proportions as those who currently are substantial users (and

if none of the cost or subsidy arrangements were altered),

between 15 and 25 percent could be expected to use day care

centers or licensed family day care homes. If all these children

were enrolled in subsidized nonprofit day care centers (the most

expensive situation), the additional public expenses would amount

to between $150 and $500 million, depending on which estimate of

the number of children is used. These amounts are far less than

the savings to the states anticipated by the Administration upon

adoption of its welfare reform proposal. If the Title XX program

were expanded to accommodate these additional children, 25

percent of the associated costs would be borne by the states and

75 percent by the federal government.

Change in the Treatment of Child Care Expenses

The Administration also proposes to change the manner in

which child care expenses are treated in the computation of

benefits. Under the proposed program, child care expenses would

be deducted in full from income before welfare benefits are

calculated. It is sometimes assumed that such treatment is

equivalent to the current full reimbursement under the AFDC

program or would substitute for free care when none is provided

by the state. Because of the way in which benefits would be

calculated, however, those receiving directly subsidized child

care will always be better off than those who must secure care on

their own and then receive a subsidy through the proposed welfare

system.

The hypothetical cases shown in Table 17 illustrate the

situation. In the first instance, a welfare mother receives

fully subsidized child care, perhaps through Title XX or another

63

"IT"
social service program, in order to enable her to work. Because

she has no out-of-pocket expenses, none of this care is reflected

in the computation of her welfare benefits. In the case of the

second mother, for whom free child care is not available, the

amount of money she pays out in child care expenses is deducted

from her earnings before her welfare benefits are computed.

TABLE 17. HYPOTHETICAL EXAMPLES OF THE EFFECTS OF CHILD CARE

EXPENSE ALLOWANCES ON WELFARE BENEFITS OF A SINGLE

MOTHER UNDER THE ADMINISTRATION'S WELFARE REFORM

PROPOSAL: IN DOLLARS

No Direct

Child Care

Expenses

(1)

With Child

Care Expenses

(2)

Difference

(1) - (2)

Earnings 5,000

Child Care Expenses 0_

Net Earnings 5,000

Basic Welfare Benefit 4,000

Reduction for Earned

Income (at 50 percent

of net earnings) -2,500

Net Assistance 1,500

Net Total

(earnings plus

assistance) 6,500

5,000

-1,000

4,000

4,000

-2,000

2,000

6,000

1,000

- 500

- 500

NOTE: The welfare benefits and the percent reduction in benefits

for earnings that appear here are purely hypothetical.

Actual benefits and earnings reductions may vary considerably by state.

64
Because her benefits are then reduced by some proportion of her

net earnings (which implicitly include her child care expenses),

only a portion of the costs of care for her children will be

subsidized. In the example, if the "tax" on earnings is 50

percent, she will be reimbursed for only half of her expenses.

Because of this treatment of expenses, welfare mothers who

must use this method of securing child care subsidies can receive

proportionately less assistance than moderate- and even middleincome families who receive subsidized care through the Title

XX program.

At present, many states are under considerable pressure to

expand their child care and other social services programs

which, when funded through Title XX, are 75 percent subsidized

by federal funds. Under the current system, some have found

that, by forcing AFDC mothers to utilize the work expense deductions to underwrite their child care needs, they can free up

social service funds for use in other areas, eliminate the

need to provide care that must meet the federal day care standards, and transfer the costs of child care to the recipients and

to a source of funds that does not have a ceiling (and that is

also heavily subsidized by the federal government). In some

states that have adopted such a policy, AFDC mothers have moved

their children to less expensive forms of care and reduced the

number of hours their children are in care. Two factors appear to

play an important role in this change: because expenses are

reimbursed, few families have the cash necessary to secure

high-priced care; and welfare mothers are often unfamiliar with

the variety of sources of care available.

This effect—a reduction in hours and quality of care

received—would be exacerbated by the Administration's proposal.

First, those mothers who currently receive reimbursements for

work-related child care expenses would find their subsidies

cut in half. And second, if increases in demand for child

care materialized, states might find it increasingly attractive

to adopt a policy of utilizing the work expense allowance instead of providing care directly through an already limited

source of funds, Title XX.

65

o