How to fix California's child care crunch

In California, families face child care costs that consume up to a quarter of household income. With the balance between careers and caregiving increasingly untenable, parents are forfeiting earnings, compromising their professional paths, or leaving the workforce altogether because they can't find care that meets their needs at a price they can afford.

The toll amounts to a $23 billion annual loss in economic output, according to a new policy brief by the Stanford Institute for Economic Policy Research (SIEPR), authored by Policy Fellow Chloe Gibbs and a team of SIEPR researchers. 

“We examine the child care market in California and make the investment case for fixing the challenges that both families seeking care and care providers experience,” Gibbs says. “Every dollar invested in high-quality early childhood care and education (ECE) can generate returns of three dollars or more through increased parental labor supply, improved child outcomes, more productive businesses, and the resulting economic growth.” 

In the first comprehensive analysis of the costs and benefits of a robust child care program in California, the authors model a program providing universal, high-quality ECE for children ages 0 to 3 and estimate the cost would range from $12 billion to $21 billion, depending on levels of take-up. A universal program would likely move 100,000 mothers into the workforce, producing benefits in excess of costs in short order.

How those public resources are deployed matters. That’s why Gibbs and her collaborators at SIEPR teamed up with researchers at the University of California at Irvine and the University of California at Berkeley to synchronize the release of a sibling policy brief, which delves into ways California can deliver universal child care for 0-3 year olds.

The insights from these companion papers, released on January 30, come as policymakers across the U.S. are grappling with the issue of affordability and access in child care. Major cities like New York and San Francisco are driving toward universal child care, and states are blazing a trail, with New Mexico's first-in-the-nation universal child care program and Vermont's recent introduction of universal pre-K for 3- to 5-year-olds.

“The question is whether California — the world's 4th largest economy — can keep up,” says Gibbs.

Takeaways from the SIEPR policy brief include:

• Annual child care costs across California consume a sizable portion of household budgets, up to 20 - 25 percent of median income for infant and toddler care.
• Challenges in the market for early childhood care and education (ECE) contribute to an inadequate supply of high-quality slots and less-than-optimal rates of participation, with many parents forgoing formal care and relying on informal arrangements or reducing their own labor market participation to provide care themselves.
• A California ECE program, aimed at improving affordability and access for families with infants and toddlers, would cost between $4 billion and $8 billion annually when targeted to low- and middle-income families and $12 billion and $21 billion annually with universal income eligibility, and would likely generate substantial societal returns in excess of the public investment.
• As an example, robust public investment in child care in California could allow more than 100,000 mothers of young children to join the workforce, contributing as much as $23 billion to the state’s GDP.

In addition to Gibbs, the policy brief co-authors are T.V. Ninan, a research scholar at SIEPR, and Caleb Brobst and Abigail Sanchez, both predoctoral research fellows at SIEPR.