Select a result to preview

'The Key takeaway: research in New Haven demonstrates that 'every dollar spent on a program providing free, full-time day care for preschoolers generated $6 in economic benefits. Most of that return came from extra pay that parents could earn because they had additional hours of care for their kids.'

Clearly, if corroborated, it should become federal policy to make significant investments in no-cost childcare.

They ask: 'If the returns to additional care hours are so huge, why don’t parents just shell out the money to buy more hours themselves? Part of the problem is that most of the boost in earnings happens over the longer-term, whereas the cost of care must be paid upfront.' Because low- and middle-income people can afford it. Splice in that Janet Yellen idea of +childcare loans, like college loans. See 2024-03-30 Janet L. Yellen - Shortages in the Child Care System.

'If you want to help workers, help them care for their kids.'

Politicians have spent much of 2024 debating how best to help American workers. Reduce immigration? Subsidize U.S. manufacturing? Add training programs?

Turns out that with One Weird Trick, politicians could massively increase Americans’ earnings: Just expand child care.

A groundbreaking new study from researchers at Yale and Brown universities shows spending on child care as one of the most effective, pro-work policies ever evaluated in the United States. Using tax data and other administrative records, they found that every dollar spent on a program providing free, full-time day care for preschoolers generated $6 in economic benefits. Most of that return came from extra pay that parents could earn because they had additional hours of care for their kids.

This makes intuitive sense: If child-care slots aren’t available, or are extremely expensive, parents might have difficulty holding down a job. Or maybe they’ll cut back their hours or change careers. Care shortages can therefore have large ripple effects throughout local economies, affecting kids, parents, employers, local tax revenue and so on.

Of course, publicly subsidized child-care programs are extremely expensive. And until now, we haven’t much rock-solid evidence quantifying how the labor-market benefits stack up against the costs.

This new randomized study provides some answers. The working paper looks at a universal prekindergarten program in New Haven, Conn., similar to those in New York, Boston and other cities. New Haven’s program began in response to a 1996 court ruling, and is run by the public school system. It is considered “universal” in the sense that it is tuition-free and open to every family regardless of income.

But because the program has limited funding, not every interested family can enroll. With more applicants than openings, the city allocates slots by lottery.

The researchers painstakingly matched lottery winners and losers against other government data, such as student test scores and state labor department records. They also surveyed parents to find out, for example, whether families that lost the lottery found other child-care programs.

Turns out that the outside option from free child care isn’t zero child care; rather, it’s less child care. Nearly every New Haven kid who didn’t get a universal pre-K slot still wound up in some kind of formal care arrangement. Lower-income kids typically enrolled in different public programs, such as Head Start; higher-income kids were more likely to land in private programs.

But (and this is key) the lottery-losing kids ended up in pre-K for fewer hours per week than their peers in the universal pre-K programs — and usually at much greater out-of-pocket costs to parents. The universal pre-K program also had a positive but small effect on student achievement (such as test scores).

There was one group with more noticeable gains though: middle-income kids. Yale professor Seth Zimmerman, one of the study’s co-authors, said this might be because of the “doughnut hole” in access to high-quality pre-K programs. Poorer children can access subsidized care and wealthier children can access high-quality private programming. Both options are often out of reach for the middle-income families.[1]

If New Haven’s universal pre-K had relatively modest effects for kids, it had enormous benefits for parents. On average, lottery-winning families had 11 more hours of child care per week than those who didn’t. This was enough to raise parents’ earnings by about 20 percent each year — not just while their children were in pre-K but for at least six years afterward.

This enduring effect appears related to the benefits of job continuity. Prior research has found that career disruptions can permanently lower a worker’s pay trajectory. (Interestingly, New Haven mothers and fathers saw similar long-term earnings increases, in percentage terms.)

The upshot, the authors found, was that every tax dollar put in the program returned about $6 of benefits back; if you strip out the gains for kids, the benefits for families were still about $5.50. This kind of payoff is almost unheard of in government labor-market policies — much higher than for most other pro-work programs, such as the earned-income tax credit.

If the returns to additional care hours are so huge, why don’t parents just shell out the money to buy more hours themselves? Part of the problem is that most of the boost in earnings happens over the longer-term, whereas the cost of care must be paid upfront.[2]

In fact, the report that Treasury is releasing today finds the most parents need child care at the exact moment when they can least afford it – at the beginning of their career when their income is lowest. There’s no financing to help them pay. If you walked into a bank, and asked for a daycare or nanny loan, no one would give it to you. Economists call this particular market failure, “a liquidity constraint.” Instead, families have to spend out-of-pocket, and they have to spend a lot. Our estimate is that to get quality child care, the average family would have to spend 13 percent of their income, more than they spend on food.[3]

Really fascinating take. What if states or the Feds in fact offered a childcare loan, which costs little (or nothing) at the time of use, and which is paid back years or decades later when families are making more? Could be adjusted for income level?

That’s why public expansion of child care can be so valuable — especially if it allows parents to maintain normal work schedules. The authors found that it was especially helpful that New Haven’s universal pre-K programs offered extended (and typically free) “wraparound” hours, starting at 7:30 a.m. and ending at 5:30 p.m. Half-day pre-K might help kids, if that’s the only formal schooling they’d otherwise get, but it may not do much to keep parents attached to their careers.

“A few more hours of care can have long-run returns for families that are quite a bit larger than the costs of provision,” Zimmerman said.

Despite the popularity of child-care expansions, the issue has received short shrift this election cycle. Vice President Kamala Harris supports expanding care programs, though gives them relatively little airtime compared with, say, manufacturing subsidies. Meanwhile, her GOP rival, Donald Trump, struggles to express a coherent thought on the issue.

Trump's weavy answer to a question about his plans for childcare:

Well, I would do that, and we're sitting down, and I was, somebody, we had Senator Marco Rubio, and my daughter Ivanka was so, uh, impactful on that issue. It's a very important issue. But I think when you talk about the kind of numbers that I'm talking about, that, because, look, child care is child care is. Couldn't, you know, there's something, you have to have it – in this country you have to have it.

But when you talk about those numbers compared to the kind of numbers that I'm talking about by taxing foreign nations at levels that they're not used to — but they'll get used to it very quickly – and it's not gonna stop them from doing business with us, but they'll have a very substantial tax when they send product into our country. Uh, those numbers are so much bigger than any numbers that we're talking about, including child care, that it's going to take care.

We're gonna have - I, I look forward to having no deficits within a fairly short period of time, coupled with, uh, the reductions that I told you about on waste and fraud and all of the other things that are going on in our country, because I have to stay with child care. I want to stay with child care, but those numbers are small relative to the kind of economic numbers that I'm talking about, including growth, but growth also headed up by what the plan is that I just, uh, that I just told you about.

We're gonna be taking in trillions of dollars, and as much as child care, uh, is talked about as being expensive, it's, relatively speaking, not very expensive compared to the kind of numbers we'll be taking in. We're going to make this into an incredible country that can afford to take care of its people, and then we'll worry about the rest of the world. Let's help other people, but we're going to take care of our country first. This is about America first. It's about Make America Great Again, we have to do it because right now we're a failing nation, so we'll take care of it. Thank you. Very good question. Thank you.

This new study suggests child care should be front and center. If you want to help workers, help them care for their kids.

  1. Biggest impact: middle income families in the 'doughnut hole'. ↩︎

  2. Splice in that Janet Yellen idea of +childcare loans, like college loans. ↩︎

  3. Really fascinating take. What if states or the Feds in fact offered a childcare loan, which costs little (or nothing) at the time of use, and which is paid back years or decades later when families are making more? Could be adjusted for income level? ↩︎