Since 2022, the District of Columbia has implemented a program to increase wages for early childhood educators according to a minimum salary schedule. Initially disbursed through direct payments to educators, as of October 2023, the program uses a formula to distribute funding to child care providers that agree to pay educators these minimums, with about 80 percent of providers participating. Under the compensation program, DC has seen improvements in the stability of the early educator workforce, child care businesses’ financial viability, and the quality of care available to children.

This report summarizes providers’ experiences with the second implementation year of this new structure, which occurred from October 2024 to September 2025. We discuss providers’ reported successes and challenges with the implementation of the program, early childhood policy leaders’ program design considerations, and shifts in child care supply in response to the program’s funding formula.

Why This Matters

Early educators are often paid low wages relative to their education and credentials, and child care businesses’ slim profit margins provide limited resources for increasing wages. In turn, early educators experience high turnover and poor emotional outcomes, and child care providers must often decide between having an unstable workforce or raising salaries by increasing tuition, leaving children and families worse off. As jurisdictions across the country consider how to address these challenges, DC’s compensation program can serve as a model for designing and implementing programs in pursuit of improving these outcomes.

What We Found

• Child care providers’ experiences with the implementation of the program were not as difficult under the second year of the new model compared with the first.
• Providers reported some remaining challenges, including uncertainty over the program’s long-term funding, insufficiency of funds to account for implementation costs, and wage compression. Policy leaders believe these challenges may help explain why some providers choose not to participate in the compensation program.
• Small child care centers, family child care homes, and providers accepting child care subsidies—facility types that have less flexibility in terms of costs and operational capacity—were more likely to report a misalignment between program payments and implementation costs.
• Some providers reported increasing subsidized enrollment in response to a funding formula change that provided more funding for facilities serving children with child care subsidies. Facilities participating in the compensation program enrolled a greater share of their licensed capacity with a subsidy after this provision was implemented.
• Fewer providers were able to offer more slots for infants and toddlers, despite the ability to receive a greater compensation program payment amount.

How We Did It

Urban Institute is undertaking a multiyear analysis of DC’s early educator compensation program in licensed child care facilities. For this analysis of fiscal year 2025 implementation, we administered voluntary web surveys in October–December 2025 and analyzed responses from 74 child care center directors and 22 child care home owners and operators participating in the compensation program. We also conducted limited interviews with early childhood policy leaders in July and August 2026. We supplemented these findings with analyses of administrative data on child care supply and subsidy use.