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Want to Make Child Care Cheaper and More Accessible? Deregulate It.

August 14, 2018 in Economics

By Ryan Bourne

Ryan Bourne

The push for federal subsidies for child care is gaining
momentum. Ivanka Trump has urged Congress to pass a tax deduction
for child-care expenses. During the 2016 presidential campaign,
both Hillary Clinton and Bernie Sanders proposed new federal
preschool and child-care programs. And recently, one commentator
even advocated
opening federally subsidized care centers nationwide

The concern is understandable. According to 2016 data compiled
by Child Care Aware, the average annual cost of full-time
center-based infant care
varies dramatically nationwide
, from $5,178 in Mississippi to
$23,089 in the District of Columbia. That amounts to 27.2 percent
of median single-parent family income in Mississippi and fully 89.1
percent in D.C. Such high burdens not only have a crippling
financial impact on poorer families but can make it uneconomic to
work and pay for child care at the same time.

Yet none of the proposed solutions to costly care would make it
cheaper. They would simply transfer the high costs to taxpayers. A
better starting point would surely be to ask: Why is child care so
expensive? One important answer, it turns out, is state-level
regulation. Staff-child ratio rules and worker-qualification
requirements, in particular, increase prices and reduce
availability, particularly in poor areas. These are things state
legislators can do something about.

Suppose a staff-child ratio is made more stringent, meaning that
fewer children can be cared for per staff member, and qualification
requirements for directors of infant centers are increased. These
could theoretically improve care by heightening the quantity and
quality of interactions with children. The regulations may even
convince wary parents that their child would be well cared for,
increasing demand for formal, center-based care.

But both regulations raise the cost of serving a given number of
children. These increased costs reduce supply, increasing prices
and encouraging parents to use less-costly alternatives. Child-care
centers could try to compensate by paying staff lower wages, but
this may mean the industry attracts lower-quality workers. They
might also try to hire cheaper, lower-quality support staff. Both
could actually lower quality, rather than increase it.

Empirical research analyzing differences across states shows
that the net effects of these requirements are costly and that
relaxing them would have beneficial effects without significantly
compromising quality. Mercatus Center economists Diana Thomas and
Devon Gorry, for example,
that loosening ratios by just one child across all age
groups would result in prices falling by 9 percent or more. That’s
over $2,000 per year for a family using full-time infant-center
care in D.C. Requiring lead teachers to have high-school diplomas
likewise raises prices by between 25 percent and 46 percent.

The rules the …read more

Source: OP-EDS

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