Getting Help with Child Care Expenses

Assessing the New Federalism Occasional Paper No. 62

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

This report is available in its entirety in the Portable Document Format (PDF).

About the Series

Assessing the New Federalism is a multiyear Urban Institute project designed to analyze the devolution of responsibility for social programs from the federal government to the states, focusing primarily on health care, income security, employment and training programs, and social services. Researchers monitor program changes and fiscal developments. In collaboration with Child Trends, the project studies changes in family well-being. The project aims to provide timely, nonpartisan information to inform public debate and to help state and local decisionmakers carry out their new responsibilities more effectively.

Key components of the project include a household survey, studies of policies in 13 states, and a database with information on all states and the District of Columbia, available at the Urban Institute's web site. This paper is one in a series of occasional papers analyzing information from these and other sources.

Contents

Executive Summary

Introduction

The NSAF Data

Understanding Child Care Help

What Percentage of Families Gets Help?

What Types of Help Are Most Common?

How Do the Types of Help Vary by Income Level?

Among Low-Income Families, How Do the Types of Help Vary by Family Characteristics?

What is the Relationship between Getting Help and Paying for Child Care?

At Current Levels of Help, How Much Do Families Pay for Child Care?

Does the Incidence of Child Care Help Change from 1997 to 1999?

Summary and Conclusions

Notes

References

Appendix A: State-Level Results

Appendix B: Identifying and Categorizing Child Care Help

About the Authors

Executive Summary

Working families with children find different ways to cope with the high cost of nonparental child care. Families may obtain help from relatives, the government and other organizations, employers, nonresident parents, or other individuals. In some cases, families are able to use nonparental child care without paying anything—for instance, by participating in a program that does not require a parental payment, or by having a relative care for the children without payment. Other families get help with part of their child care bill but still have some child care expenses.

This analysis explores how much help employed families get with child care expenses and the types of help they receive. The findings are presented for all employed families as a whole and for different groups of families—low-income families, families with preschool-age children, and so on. The paper also examines the relationship between child care help and child care expenses.

The analysis is based on the National Survey of America's Families (NSAF), a nationally representative survey focused on families with children. The NSAF has been conducted twice, in 1997 and in 1999. This analysis focuses on the 1999 data, with some discussion of differences between the 1997 and 1999 results.

The key findings are listed below, by topic. More details and explanation can be found on the pages listed in parentheses.

Incidence and Types of Child Care Help

• At least 29 percent of all employed families with children under age 13 receive some type of non-tax child care help, including help from relatives, the government and other organizations, employers, nonresident parents, and other individuals. (page 4)
• Among families with some type of help, two sources of help predominate:

• Fourteen percent of families receive free child care from a relative and pay no child care expenses at all. (page 6)
• At least 12 percent of families receive free or subsidized child care from a government agency or a private organization. (page 6)

Child Care Help for Low-Income Families

• Low-income families (those with income under 200 percent of the federal poverty level [FPL]) are more likely to get some sort of child care help. At least 39 percent of low-income employed families with a child under age 13 get non-tax child care help, compared with 24 percent of higher-income families. (pages 4 and 8)
• Among low-income families, those most likely to receive help are families with income below the poverty level and single-parent families. (pages 4 and 11)
• Among low-income single-parent families, those most likely to receive help are families with children under age 5 and families with some welfare history. (pages 4 and 12-13)
• Between 1997 and 1999, there was an increase in the percentage of low-income families with no child care expenses because of help from relatives (from 13 to 16 percent). (page 19)

Relationship between Child Care Help and Child Care Expenses

• Approximately 20 percent of all employed families with children under age 13 pay no child care expenses because of help that they receive from relatives, the government, private organizations, or other sources. At least 8 percent of families receive child care help but still have some child care expenses. (These two groups make up the 29 percent of families with some sort of child care help.) (page 13)
• Among families with government/organization child care help, approximately half still have some child care expenses. Either the family must pay a copayment or the subsidy pays entirely for one child care arrangement but the family must pay for another arrangement (either for the same child or a different child). (page 6)

Child Care Expenses at Current Levels of Help

• Overall, 48 percent of employed families with children under age 13 pay for child care, spending an average of $303 per month, which amounts to 9 percent of parental earnings on average. (These figures are based on what the families pay on their own, which is less than the total cost of the child care for families that get some type of help but still have expenses.) (page 15)
• At the current levels of child care help, low-income families that pay for child care pay an average of 14 percent of earnings for that care (compared with 7 percent for higher-earnings families). Poor families that pay for child care pay an average of 18 percent of their earnings. (page 17)

For families that receive child care help, that help makes a major difference in their ability to cope with the high costs of nonparental child care. Twenty percent of families use nonparental child care but do not pay for it, because of some form of help. Nevertheless, even with current levels of child care help, the 42 percent of low-income families that pay for child care spend an average of $1 in every $7 of earnings to purchase that care.

Introduction

Child care can be very expensive, and employed parents with low or moderate incomes may find that they either need to get help in paying for it, or avoid paying for it at all. Getting help with child care expenses may broaden a family's choices in at least two ways. First, affordable child care increases parents' employment choices. If child care is more affordable, a single parent may be better able to remain off welfare, a parent in a two-parent family who has been staying at home may prefer to go back to work, and a parent with school-age children may choose to work a full day instead of only during school hours. Second, more affordable child care broadens parents' child care choices. Although the link between cost and quality is not direct, elements of high-quality child care—such as low student-to-teacher ratios—are expensive to provide. Thus, a family with help in paying for child care expenses may be able to afford a high-quality program that would otherwise have been out of reach financially. In contrast, parents might continue to use a child care arrangement that they are not happy with if they are unable to afford other options.

Child care help can come from a variety of sources. Family members may provide child care for free, obviating the need for parents to use other types of arrangements. Many families receive subsidies that cover part or all of their expenses through the federally funded Child Care and Development Fund (CCDF) block grant, the Temporary Assistance for Needy Families (TANF) block grant, or state or local programs. However, with the exception of a few state programs, government-funded subsidies are not entitlements. Some low-income parents can access free part-day services for 3- and 4-year-olds through federally funded Head Start centers (again, to the extent funds are available); and 4-year-olds receive free pre-kindergarten education in some states. Local programs or agencies (such as the United Way) or individual child care centers may offer full or partial child care "scholarships." Employers may subsidize child care as a benefit to their employees, and noncustodial parents may pay part or all of the bill for their children's care. Child care expenses may also be defrayed through the child care tax credit in the federal income tax system, tax credits and deductions in some state income tax systems, or employersponsored Dependent Care Assistance Plans (commonly known as flexible spending accounts), which allow some child care expenses to be paid with pretax dollars.

This analysis examines the extent to which families receive many types of nontax help with child care, considering both the source of the help—relatives, the government or other organizations, employers, nonresident parents, and other individuals—and whether the assisted families still have child care expenses. The first section describes the data used for the analysis—the National Survey of America's Families, or NSAF—and the second describes how the concept of child care help is defined and categorized in this analysis. The subsequent sections describe the incidence of child care help—overall, for different types of assistance, and for families at different income levels—the relationship between receiving help and paying for child care, and the amounts paid for child care at current levels of child care help. These sections are followed by a discussion of national-level changes in the incidence of child care help from 1997 to 1999. The final section summarizes the results and draws some conclusions. Appendix A presents variations in child care help across the NSAF focal states.¹ Appendix B gives details on how families were identified as getting help and sorted into the types of help they receive.

This report is available in its entirety in the Portable Document Format (PDF).

Acknowledgments

This report is part of the Urban Institute's Assessing the New Federalism project, a multiyear effort to monitor and assess the devolution of social programs from the federal to the state and local levels. Alan Weil is the project director. The project analyzes changes in income support, social services, and health programs. In collaboration with Child Trends, the project studies child and family well-being.

This paper received direct funding from The John D. and Catherine T. MacArthur Foundation. The Assessing the New Federalism project is currently supported by The Annie E. Casey Foundation, The Robert Wood Johnson Foundation, the W.K. Kellogg Foundation, The John D. and Catherine T. MacArthur Foundation, and The Ford Foundation.

The authors gratefully acknowledge the significant contributions of Gina Adams, Freya Sonenstein, and Matthew Stagner to the analysis and interpretation of these data. We thank Helen Blank, Christine Johnson-Staub, Joan Lombardi, Marcia Meyers, Karen Tvedt, and Sheila Zedlewski for their review of this paper and their very helpful comments.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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