What If We Expanded Child Care Subsidies?

Research Report

What If We Expanded Child Care Subsidies?

A National and State Perspective

Abstract

This brief was corrected July 1, 2019. On page 7, the number of states that would see monthly caseload increases between 100 and 150 percent is 14, not 13 as originally published. On page 14, table 4 has been replaced to correct errors in the “Percent change” column for Missouri through Wyoming.

 

Child care subsidies can help low-income parents ensure the healthy development of their children while working to support their families. Yet the Child Care and Development Fund—the primary federal program supporting access to affordable child care—only has enough funding to serve a fraction of eligible families. This brief examines what would happen if child care subsidies were funded so every family with income below 150 percent of the federal poverty guidelines that is eligible under their state’s other rules could get a subsidy if they wanted one.

Using the Urban Institute’s Analysis of Transfers, Taxes, and Income Security (ATTIS) microsimulation model, we find that guaranteeing child care subsidies for eligible families at the proposed income level—currently $31,995 a year for a family of three—would allow more families and children to be served by subsidies, let more parents work, raise incomes, and reduce poverty:

  • The first result would be that at least 800,000 families with incomes below 150 percent of poverty who already meet their state’s other eligibility rules (including that they are already working or in school) would receive subsidies; this represents a 73 percent increase in the number of families receiving subsidies in an average month.
  • In addition, about 270,000 mothers—including roughly 130,000 mothers with children younger than age 3—would start working, knowing they would be able to obtain a child care subsidy. When the families who are newly working are added to the 800,000 families described above, the current family caseload would double, increasing by more than 1 million families in an average month.
  • The net result is that more than 2 million additional children younger than 13 (or older than 13 with special needs)—including 588,000 children younger than 3—would benefit from subsidies in the average month. The 2 million additional children include 1.6 million children whose parents were already working or in other allowed activities in their state and 500,000 children resulting from their parents starting work. The number of children receiving subsidies nationwide would more than double. The impact varies state by state given the wide variation in their policy and funding environments.
  • Almost 400,000 children—including 100,000 children younger than 3—would be raised out of poverty, resulting in a 3 percent reduction in the number of children living in poverty (as measured by this analysis), stemming mostly from increased parental employment.
  • Though we do not provide a formal cost estimate for this proposal, our analysis suggests that the direct cost of child care subsidies would rise by close to $9 billion a year nationwide. This estimate does not include administrative costs and related funding requirements.

Research suggests that increased access to subsidies could result in a range of longer-term benefits for children and their families. With a subsidy, families could choose higher-quality child care, which can benefit their children’s development. Increased family income and reduced poverty can have short- and long-term benefits for children’s achievement and success. More stable child care can help families take less time out of the labor force and support their longer-term financial well-being and earnings trajectory.

Learn more through our state fact sheets to see how expanding child care subsidies would play out in all 50 states and the District of Columbia.

Read the technical appendix here.

Download a national fact sheet with our findings.

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