The economics of the market for early childhood care and education in California
Key takeaways
- Annual child care costs across California consume a sizable portion of household budgets, up to one-fifth or one-quarter of median income in some counties, particularly for families relying on full-time, center-based care and for those with infants and toddlers.
- 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.
Americans are grappling with the increasing cost of living and nearly a quarter live paycheck to paycheck.1 This financial stress is especially marked for Californians, as the state is tied (alongside Louisiana) for the highest proportion of residents in poverty.2 A prominent expense for working families is their young children’s early childhood care and education (ECE) with child care typically accounting for a sizable share of household budgets.
Across California counties, the annual median cost of child care ranges from $10,980 to $24,636, with center-based care for infants and toddlers the most expensive. Child care expenses range from 8 to 21 percent of household income, with the largest shares in rural and agricultural counties.3
And prices have been rising, with child care prices increasing at a much faster rate than overall inflation.4 These costs are often out of reach for thousands of families — particularly single parents, those with lower educational attainment, and rural Californians — who must confront difficult trade-offs about their own employment or education and the quality of care their young children receive. Indeed, many economically disadvantaged families face a tough choice: paying high prices for high-quality formal care or substituting toward lower- cost, informal, or parental care options, often at the expense of both child development and parental labor force participation.
This brief describes both the supply and demand sides of the market for early childhood care in California and outlines the economics of public investment in ECE. Evidence and modeling point to policy approaches that can address challenges in this market, making high-quality ECE affordable and accessible to more California families and generating benefits for them, their employers, and their communities.
The public and private stakes of investments in ECE go beyond short-term family finances. Decades of research into ECE demonstrate its pronounced and lasting effects. Estimates suggest that investments in high-quality ECE can yield returns of three dollars in broader benefits for every dollar spent, often surpassing the return on investments made later in life.5 In the short run, more accessible and affordable care allows more mothers to participate in the labor market, leading to greater productivity and economic growth.6 Studies of the long-term effects on participants themselves document higher rates of high school completion and college going, greater employment and earnings, and a lower reliance on public assistance programs.7 In addition, participation in ECE is linked to reduced delinquency and criminal engagement in adolescence and adulthood.8
Crucially, these benefits correspond to the quality of child care. One documented feature of high-quality programs is the existence of stable, nurturing relationships between children and their caregivers, potentially facilitated by low child–adult ratios or small group sizes and low staff turnover.9 Conversely, high turnover, often driven by low wages and economic stress among child care workers, weakens child outcomes and threatens the realization of long-term societal gains.10 Investments in the ECE workforce, including the preparation, compensation, and retention of early educators, are essential to ensuring the availability of high-quality care for families that want it.
The labor market ramifications of California’s child care crisis are profound — especially for women. Despite advances since the 1970s, mothers of young children in California participate in the workforce at significantly lower rates than their peers with older children. Nationally, the prime-age female labor force participation has fallen from 6th place in 1990 to 17th place among OECD nations.11 Researchers point to family-friendly policies — particularly, paid parental leave and affordable, accessible child care — as major drivers of this gap.12 Expanded ECE access leads to documented gains in parental employment and earnings, the latter of which persist for years.13 Closing the U.S. gender gap in labor force participation to mirror that of other developed countries, including Germany, Norway, and Canada, could mean 5 million more women working and up to $775 billion in added annual economic output.14 Estimates from the literature suggest a robust child care policy 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 at prevailing GDP per worker.15
Despite demonstrable returns, California’s child care market is marked by substantial frictions on both the demand and supply sides that are reflected nationally as well. Parents’ willingness to pay for care is constrained by limited resources, particularly in the earliest stages of their careers; only 15 percent of low-income households use formal ECE, compared to 53 percent in the highest quintile.16 On the supply side, the market is fragmented and under-resourced, dominated by small businesses and sole proprietors facing thin profit margins and frequent worker churn. In California, turnover rates among ECE workers are a staggering 19 to 29 percent, compared to 3.2 percent for all industries, and ECE wages lag 23 percent behind those of comparable peers.17 Due to these challenges, licensed ECE slots are often in short supply relative to potential demand — more than half of Americans live in areas where the number of young children outstrips licensed child care slots by at least three to one, with the most acute gaps in rural, low-income, and Hispanic/Latino communities.18
These frictions in the ECE market point to an urgent need for targeted public intervention. In sum, the current structure of California’s child care market is both unsustainable for families and suboptimal for society. Demand-side subsidies, in the form of vouchers or tax credits, can augment the resources families bring to the market for ECE, while supply-side subsidies can allow providers to make quality investments, raise wages, and reduce turnover, potentially offering high-need slots that they were not able to provide without additional funding. These public investments, particularly when tied to areas of high need and robust quality standards, can close the gap between what families can afford when their children are young and the cost of providing high-quality care. An economics lens on public investment in ECE provides insight and evidence on how to address these challenges and unlock the potential for economic development, opportunity, and growth.
The economics of investments in the child care market
Currently, fewer than 50 percent of children ages zero to 5-years old have regular child care arrangements in the state of California.19 While families face a range of barriers to accessing child care, two of the most significant factors are the high cost of care and a lack of available slots.
Figure 1. Median annual child care prices by region (center-based vs. home-based)
In California in 2023, child care costs averaged $11,900/year for one child, or roughly 11 percent of median income for households with young children.20 There is also considerable variation, as shown in Figure 1. Prices are higher for center-based care whencompared to home-based care, higher for infants and toddlers relative to preschool-aged children, and are highest in the San Francisco Bay Area counties. On the supply side, the most recent data estimate that the gap between the number of children potentially in need of child care and the available slots with qualified child care operators is above 600,000.21 This gap is highest in rural areas of the state, where child care providers are more dispersed. Together, these factors combine to lower the use of child care across the state of California, particularly among Black and Hispanic families.
In California, women — and mothers in particular — entered the labor market rapidly since the 1980s and their employment recovered swiftly from the pandemic-induced downturn (Figure 2). Recently, however, mothers’ labor force participation has fallen from its historically high levels, in both the state and in the nation as a whole. Family-friendly policies that support working parents in their dual roles in the workforce and in the home play a part in promoting parental employment. A growing body of causal evidence demonstrates that ECE availability, expansion, and subsidization has large, positive effects on maternal employment in particular.22
Figure 2. Labor force participation over time in California, by maternal status
Recent studies show broad-based parental employment effects in current contexts, including full-day kindergarten expansions, public pre-kindergarten programs across states, and full coverage universal preschool in New Haven, Connecticut.23 The historical literature often documented more pronounced effects among mothers with younger children, those with lower educational, or single mothers.24 More recent evidence suggests meaningful positive impacts for married and college-educated mothers, urban residents, and those at higher income levels as well.25 In California, parents at the low end of the income distribution face child care costs as high as 75 percent of their annual household income, so it is not surprising that only 40 percent of mothers with young children in the lowest income decile are in the labor force (Figure 3). At the high end of the income distribution, where child care expenses constitute a much smaller fraction of household income, mothers are employed at much higher rates, consistent with the large body of evidence that making ECE more affordable and accessible for families leads to more mothers in the workforce.
Figure 3. Average child care cost as share of income and labor force participation in California
Mothers with children under 5
Expanding mothers’ participation in the workforce yields substantial economic benefits. Historically, expanded female employment boosted the U.S. economy by almost 10 percent from 1970 to 2019.26 Between 1948 and 1990 alone, the rise in female participation contributed about 0.5 percentage points per year to potential GDP growth, and since 1979, women have accounted for the majority of gains in real household income.27 Currently, women in the U.S. earn roughly $8.2 trillion each year, more than the GDP of Germany. However, significant gaps in female labor force participation remain. The U.S. prime-age female labor force participation rate stagnated in the 1990s and 2000s, and now lags behind other advanced economies.28 A sizable portion of these cross-country differences can be attributed to a lack of family-friendly policies in the U.S., such as paid family leave and accessible, affordable child care, policies that other countries have implemented.29 The absence of such support is reflected in patterns of women’s work: women work fewer hours and earn less after having children.30 Economists estimate that if the U.S. had female labor force participation on par with Germany or Canada, approximately 5 million more women would be employed, potentially generating as much as $775 billion in additional economic activity annually.31
One specific way that investment in child care boosts productivity and contributes to thriving businesses is by reducing employee turnover. When families lack child care options, they are often forced to choose between working and caring for their children. This trade-off is evident in the data, as women tend to leave the labor force after having children.32 Survey results show that a lack of child care, particularly for women, is a major barrier to returning to work.33 Family-friendly policies such as child care have been shown to reduce worker turnover, and high rates of worker turnover impose substantial costs on employers, particularly small and younger firms.34 Elevated turnover is associated with lower revenue growth in subsequent quarters, with effects again most pronounced among smaller or newer businesses. One reason is that the cost of replacing an employee is high, anywhere between 50 and 200 percent of their annual salary when accounting for recruitment expenses, onboarding and training costs, and productivity losses during the transition period. Proactive investments in retaining working parents through more robust care infrastructure can mitigate these costs to businesses and contribute to their growth.
Public investment in high-quality ECE can lay a strong foundation for children’s skill development across the life-cycle. In the short-term, ECE promotes greater school readiness and enhances early cognitive development.35 These academic gains are often accompanied by improvements in social and emotional development.36 Moreover, increased access to healthy meals through Head Start and other ECE programs has been shown to improve a child’s nutritional intake and reduce household food insecurity.37
The long-run effects of ECE are even more notable, influencing outcomes such as educational attainment, economic self-sufficiency, and delinquency.38 Numerous studies measure the causal effects of ECE investments on children’s educational progress over the long run, including higher test scores, lower likelihood of special education placement and grade retention, and greater likelihood of high school completion and college enrollment.39 While some research indicates that initial educational achievement gains may diminish in the short- or medium-term, studies tracking longer-term outcomes consistently find substantial improvements in life prospects.40 These gains extend to improved employment opportunities, earnings, and economic self-sufficiency, as ECE participants are less likely to rely on government benefits or in-kind transfers in adulthood.41
Significantly, many studies also report reductions in delinquency and improvements in behavioral outcomes, measured by fewer arrests, lower likelihood of incarceration, and reduced rates of violent and property crime, with these effects lasting into adulthood.42
These benefits reach beyond the ECE participant, generating positive effects on overall productivity and economic growth.43 Because of the broader realization of improved outcomes, estimates imply a social rate of return of $3 to $12 for every dollar invested in comprehensive ECE programs.44 And importantly, improvements in well-being extend beyond the direct participants of early childhood programs. Research has shown that ECE exposure generates both intra- and intergenerational spillovers benefitting siblings and the children of those exposed to these programs.45
The positive outcomes may be more readily realized or enhanced with investments in improving ECE program quality. While households define quality and match based on location, linguistic and cultural match, hours of operation, and/or program type, the overall quality of care is often measured by state-specific standards — usually based on the lead teachers’ educational attainment and child–caregiver ratios. Research on ECE quality has centered on the nature of relationships and interactions between ECE staff and children in the care setting. Critically, stable, healthy attachments between children and caregivers provide a strong foundation for children’s development.46 High turnover among ECE staff is associated with weaker language and social skill development.47 Moreover, child care workers experiencing economic stress may struggle to fully engage with children and maintain high-quality learning environments.48 These studies suggest that improvements in compensation, working conditions, and staff retention could lead to better developmental outcomes for children and economy-wide benefits.49
Because families do not internalize the broader societal benefits of ECE participation — produced through both their children’s improved long-run outcomes and their own increased productivity — when deciding on care settings for their young children, the private market under provides high-quality care. Moreover, the ability of ECE providers to invest in quality improvements is fundamentally constrained by the revenues they can generate from price- sensitive families, who often cannot afford the true cost of high-quality care in the early stages of their earnings trajectories.50 These features of the market result in chronic underinvestment in the supply of high-quality care, particularly in the workforce. While a typical production or nonsupervisory worker makes an average of $28.19/hour, child care workers earn $17.95/hour on average.51 As seen in Figure 4, the gap between overall wages and child care worker wages is less pronounced, but the gap between child care staff earnings and those of pre-kindergarten and kindergarten teachers is sizable.
Figure 4. Mean annual wages in California (2024 Dollars)
3-year rolling average, 2004-2024
ECE workers earn 23 percent less than peers in similar demographic and educational cohorts and about half what kindergarten and elementary school teachers earn.52 It is then no surprise that 53 percent of child care workers rely on public assistance programs such as Medicaid or SNAP, compared to 21 percent of the overall U.S. workforce.53 Related to low wages, child care worker turnover rates range from 17 to 50 percent annually.54 In California, turnover is estimated at 19 to 29 percent, 55 compared to a turnover rate of 3 percent for all industries in the state.56 High rates of turnover have important implications for quality, particularly in a labor-intensive industry.
Additionally, the industry is sensitive to economic headwinds: child care responds more strongly to negative economic shocks and downturns than other low-wage industries and takes longer to recover from recessions than the rest of the economy.57
Strategies to advance policy solutions
The persistent challenges facing both families and providers in the ECE market require targeted policy interventions that address affordability, quality, and access. To guide policymakers in advancing effective solutions, it is critical to consider the economic dynamics on both the demand and supply sides of the market, the role of public subsidies, and regulatory reforms that can lower barriers to entry while safeguarding essential quality standards. The following sections outline key considerations and evidence-informed strategies for supporting a more equitable and resilient ECE system.
On the demand side, families are constrained in their ability to afford high-quality care, especially since parents of young children often face tighter budget constraints during early and relatively unstable phases of their earning trajectories.58 Families with young children exhibit a high price elasticity of demand for formal child care, particularly those with lower household incomes, and they more readily substitute towards informal or parental care. Only 15 percent of households with young children in the lowest income quintile pay for ECE, compared to 53 percent in the highest quintile.59 As previously mentioned, the opportunity costs of parental care include their earnings and career advancement. Shifts to informal and ad hoc care arrangements may also affect children’s developmental and learning outcomes, relative to licensed, formal care settings. Evidence suggests that, while there is substantial variation in quality within child care sectors, such arrangements are often of lower quality than center- based care or parental care.60
Because providers face substantial uncertainty and the business model often relies on very thin margins, they often constrain supply below its optimal level, turning families away from oversubscribed slots or operating waitlists. Such approaches to excess demand ensure that providers always operate at full capacity but also result in restricted supply. More than half of Americans live in neighborhoods where the number of young children outpaces licensed child care slots by at least three to one, with these gaps in access most common in rural, low-income, and Hispanic/Latino communities.61 Further, there are only 63 Head Start slots for every 100 income-and age-eligible child within 5 miles of a Head Start center.62
The child care industry’s structure further constrains its ability to invest in the workforce and improve quality. It is highly fragmented, dominated by sole proprietorships and small firms that are constrained in their ability to innovate and invest in quality. Given that the industry is highly labor-intensive — where 60–80 percent of business expenses are devoted to labor — providers have limited levers for the resources required to invest in quality improvements.63 Additionally, 97 percent of child care businesses are woman-owned and half are minority-owned, borrowers who are often met with lower loan approval rates and higher interest rates, even after adjusting for firm and financial characteristics.64
Public subsidization and publicly-provided ECE are critical policy tools in addressing the mismatch between the quality of care that generates social benefits and the quality of care that families with young children can afford. Given that higher-income families can often afford to absorb the increases in cost associated with higher quality, the ECE market is increasingly segmented by family income. As high-quality ECE produces better societal outcomes, this segmentation and lack of investment in quality for all children results in lower provision of and access to high-quality care. Subsidies can address the gap between socially optimal and current levels of ECE participation. Importantly, subsidies have important implications for the impact of public investments made thereafter, including transitional kindergarten and in K-12 schooling as high-quality investments in the earliest years of life make subsequent investments more efficacious.
Mechanically, subsidies allow parents to more affordably enter the formal market and incentivize providers to increase slots and their quality (to the extent subsidies are tied to quality standards). Regardless of whether subsidies flow to consumers or producers in the market for ECE, they can help to close the gap between prices parents can afford and the true cost of providing high-quality care. As an example, lawmakers in Texas increased reimbursements to providers serving infants and toddlers from low-income households, and required child care programs receiving public subsidies to participate in the Texas Rising Star quality rating and improvement system, a voluntary state licensing agency that awards classes of licenses based on quality standards and works with centers to improve their ratings.65
In particular, public investments in child care staff, such as bonuses or incentives, can be effective at shoring up the workforce. Evidence suggests that retention bonuses lowered turnover rates in Maryland and Virginia by 2 and 11 percentage points respectively, with more pronounced effects among early career and low-income child care workers.66 Because early educators and caregivers are critical to the provision of high-quality care, innovation in how to recruit and retain a qualified, stable workforce could prove particularly useful to policymakers.
Targeting of subsidies to families or providers serving certain families, children, or geographic areas can help to alleviate gaps in access. Subsidies will have a greater impact in communities with high concentrations of families who have forgone formal care altogether. Of those that pay for formal ECE, the lowest-income quintile families spend 33 percent of their annual income on ECE, compared with the highest-income quintile who spend an average of 10 percent.67 While subsidies that target low-income households or are more generous for low-income households can address these gaps in access to high-quality care, place-based subsidies can help address spatial mismatch between supply and demand by making it financially viable for providers to offer services in sparsely populated regions. Policy could also address other areas of high need in the market for high-quality ECE through subsidy targeting or generosity, including care for infants and toddlers and care for children with disabilities and special needs.
Restrictions on how subsidies flow to providers, classrooms, and children, including prohibitions around co-mingling or blending funding within settings, dampen the positive effects of subsidies on the functioning of the ECE market.
The broader discourse on affordability in the U.S, points to reducing regulatory and procedural burden as a primary lever in creating more accessible, inclusive markets. In the market for ECE, certain regulatory changes could be effective, such as streamlining pre-service and ongoing training requirements to reduce barriers to entry. Pooling resources to assist small (particularly home-based) providers in completing necessary paperwork, meeting licensing requirements, and participating in monitoring and compliance could make it easier for sole proprietorships to both enter and persist in the child care market. Offering centralized support to small providers for paperwork and compliance and simplifying application and licensing procedures are both means to lowering costs for small businesses, and may again be particularly impactful for home-based providers.
Other areas of regulation have received attention, including staffing ratios, which vary considerably across states, and building and zoning codes that often lead to higher real estate costs for child care providers. Health and safety regulations likely present limited opportunity to address the broader challenges in the market for ECE. There is, to date, no rigorous evidence on the impact of having or relaxing such regulations. Denver, Colorado recently removed a licensing requirement for child care centers to be placed on the ground floor which could increase supply by enlarging the pool of possible properties for child care facilities.68 Such policies require cautious implementation as raising staff-to-child ratios and changing safety standards could have unanticipated, even harmful, consequences.
A final policy angle and role the government could play in the market for ECE is supporting providers in entering unserved or underserved markets and subsidizing the existence of slots where market provision is thin (e.g., for infants or families using public subsidies to access ECE). The government could insure the provision of those slots by guaranteeing that providers will be reimbursed, either in full or in part, for the slot when it goes unfilled for a particular duration, so that providers do not have to resort to maintaining waitlists or turning families away to remain full.
Modeling policy options
To understand the costs to the government of implementing a more robust child care policy for families with young children, we develop a simple model of a universal or quasi-universal ECE program in California that would extend publicly provided or subsidized slots to young children, ages zero to 3-years old. To generate cost estimates of this type of expansion, we use the number of children ages zero to three in California, by age, and apply center-based prices by age group.69 We use the most recent year of child care prices in the National Database of Childcare Prices matched with 2023 American Community Survey data. We also vary the take-up rate (applying lower take-up rates for infants— younger than 2-years old — than for toddlers, ages 2-and 3-years old). We base this assumption on estimates suggesting that approximately 30 percent of infants in California are in regular, non-parental care, while the proportion for toddlers is substantially higher.70
Table 1. Program design and estimated annual program costs, in billions
POLICY DESIGN FEATURES
Panel A. Low program take-up
Infant (0-1 years old) | Toddler (2-3 years old) | Eligibility | Total Cost ($B) |
|---|---|---|---|
20% | 40% | 100% | $4.60 |
20% | 40% | 200% | $8.32 |
20% | 40% | 300% | $10.19 |
20% | 40% | Universal | $12.22 |
Panel B. Medium program take-up
Infant (0-1 years old) Take-up Rate | Toddler (2-3 years old) Take-up Rate | Eligibility(% SMI) | Total Cost ($B) |
|---|---|---|---|
40% | 60% | 100% | $5.69 |
40% | 60% | 200% | $10.30 |
40% | 60% | 300% | $12.60 |
40% | 60% | Universal | $15.14 |
Panel C. High program take-up
| Infant (0-1 years old) Take-up Rate | Toddler (2-3 years old) Take-up Rate | Eligibility(% SMI) | Total Cost ($B) |
|---|---|---|---|
| 60% | 80% | 100% | $7.99 |
| 60% | 80% | 200% | $14.46 |
| 60% | 80% | 300% | $17.70 |
| 60% | 80% | Universal | $21.25 |
Notes: Population estimates are drawn from 2023 data. Eligibility is calculated based on household income as a proportion of California state median income (SMI). Within each panel, take-up rates are held constant, and income eligibility increases in generosity.
These estimates imply that a program targeted at low-and middle-income families would cost between $4 billion and $8 billion, under reasonable assumptions for participation, while a universal program would cost about three times as much. Table A1 in the Appendix presents annual cost estimates for subsequent years of the program, accommodating population decline, as well as the full range of assumptions for the take-up rate among infants and toddlers. While this model does not formally include behavior change of parents in response to the policy, higher take-up rates incorporate the response among families to reduced child care costs.
Conclusion
As California families with young children continue to confront rising child care prices, they will face trade-offs in addressing their care needs and pursuing their careers. Frictions in the market for ECE lead to a lack of affordable slots and sub-optimal choices for families, including forgoing formal care and relying on informal, ad hoc arrangements or reducing their own workforce participation to provide care themselves. These decisions ripple throughout the economy with profound implications for children and families, businesses, and communities. Significantly, a large body of rigorous evidence documents the benefits of high-quality ECE —to parents, children, and the economy — pointing to the importance of public investment in addressing these challenges.
To support a well-functioning ECE market, public investments must attend to both the demand and supply sides of the market, enabling families to afford high- quality care while ensuring providers are equipped to deliver it. Policy modeling suggests a California program subsidizing care for young children, ages zero to 3-years old, in low- and moderate-income families would cost between $4 billion and $8 billion annually. A similar program with universal income eligibility would cost between $12 billion and $21 billion annually, depending on take-up rates. Existing evidence suggests that such investment would likely generate substantial societal returns — in the forms of increased parental labor supply, improved child outcomes, more productive businesses, and economic growth — well in excess of upfront costs.
Appendix
Figure A1. California counties by region
Table A1. Estimated annual program costs, in billions
Year 0
| Infant (0-1 years old) Take-up Rate | Toddler (2-3 years old) Take-up Rate | Eligibility 100% SMI Total Cost | Eligibility 200% SMI Total Cost | Eligibility 300% SMI Total Cost | Universal Eligibility – Total Cost |
|---|---|---|---|---|---|
| 20% | 20% | $3.52 | $6.35 | $7.77 | $9.31 |
| 20% | 40% | $4.60 | $8.32 | $10.19 | $12.22 |
| 40% | 60% | $5.69 | $10.30 | $12.60 | $15.14 |
| 60% | 80% | $7.99 | $14.46 | $17.70 | $21.25 |
| 80% | 100% | $15.73 | $28.48 | $34.87 | $41.92 |
| 100% | 100% | $16.94 | $30.67 | $37.55 | $45.12 |
Year 1
| Infant (0-1 years old)Take-up Rate | Toddler(2-3 years old)Take-up Rate | Eligibility100% SMI -Total Cost | Eligibility200% SMI -Total Cost | Eligibility300% SMI -Total Cost | UniversalEligibility -Total Cost |
|---|---|---|---|---|---|
| 20% | 20% | $3.42 | $6.17 | $7.55 | $9.05 |
| 20% | 40% | $4.48 | $8.11 | $9.92 | $11.90 |
| 40% | 60% | $5.55 | $10.04 | $12.29 | $14.76 |
| 60% | 80% | $7.79 | $14.10 | $17.25 | $20.71 |
| 80% | 100% | $15.36 | $27.82 | $34.07 | $40.94 |
| 100% | 100% | $16.53 | $29.94 | $36.66 | $44.04 |
Year 2
| Infant (0-1 years old)Take-up Rate | Toddler(2-3 years old)Take-up Rate | Eligibility100% SMI -Total Cost | Eligibility200% SMI -Total Cost | Eligibility300% SMI -Total Cost | UniversalEligibility –Total Cost |
|---|---|---|---|---|---|
| 20% | 20% | $3.35 | $6.06 | $7.41 | $8.88 |
| 20% | 40% | $4.41 | $7.98 | $9.76 | $11.71 |
| 40% | 60% | $5.47 | $9.89 | $12.11 | $14.55 |
| 60% | 80% | $7.67 | $13.88 | $16.99 | $20.40 |
| 80% | 100% | $15.16 | $27.46 | $33.63 | $40.42 |
| 100% | 100% | $16.31 | $29.53 | $36.16 | $43.44 |
Year 5
| Infant (0-1 years old)Take-up Rate | Toddler(2-3 years old)Take-up Rate | Eligibility100% SMI -Total Cost | Eligibility200% SMI -Total Cost | Eligibility300% SMI -Total Cost | UniversalEligibility –Total Cost |
|---|---|---|---|---|---|
| 20% | 20% | $3.22 | $5.81 | $7.11 | $8.52 |
| 20% | 40% | $4.20 | $7.60 | $9.30 | $11.16 |
| 40% | 60% | $5.19 | $9.39 | $11.49 | $13.80 |
| 60% | 80% | $7.29 | $13.19 | $16.15 | $19.38 |
| 80% | 100% | $14.32 | $25.93 | $31.75 | $38.16 |
| 100% | 100% | $15.43 | $27.94 | $34.21 | $41.10 |
Notes: Estimated costs are based on the per child annual price of center-based care at the 75th percentile from the National Database of Childcare Prices. Baseline (Year 0) inputs use 2023 population data. Subsequent years apply a rate of population decline to account for lower fertility. Bolded estimates are the most likely ranges of actual participation as the program scales up over time.
About the Authors
Chloe Gibbs, PhD, is a policy fellow at SIEPR. She is a senior economist at the W.E. Upjohn Institute for Employment Research and recently served as a senior economist with President Biden’s Council of Economic Advisers.
Caleb Brobst is a predoctoral research fellow at SIEPR. His research interests are energy and environmental policy, industrial organization, behavioral and political economy.
T. V. Ninan, PhD, is a research scholar at SIEPR. His research spans housing, child care and environmental economics, with a focus on improving economic policy and social outcomes in the U.S. and developing countries.
Abigail Sanchez is a predoctoral research fellow at SIEPR. Her research applies structural economic models to the study of immigration, housing and child care policy.
The Stanford Institute for Economic Policy Research (SIEPR) catalyzes and promotes evidence-based knowledge about pressing economic issues, leading to better-informed policy solutions for generations to come. We are a nonpartisan research institute, and SIEPR policy briefs reflect the views and ideas of the authors only.
Endnotes
[1] Paycheck to paycheck: Slowing but growing, Bank of America Institute, November 10, 2025.
[2] California’s Persistent Poverty Crisis: 2024 Rates Remain Alarmingly High, California Budget & Policy Center, September 2025.
[3] The counties with the five largest child care shares are Trinity (21%), Kern (20%), Madera (20%), Tulare (19%), Modoc (19%), How Expensive Is Childcare in California?, Public Policy Institute of California, October 15, 2025. Annual child care expenses for infants are even higher, with several counties with prices constituting nearly one-quarter of median household income, National Database of Childcare Prices, U.S. Department of Labor, Women’s Bureau, 2024.
[4] Consumer Price Index for All Urban Consumers: Tuition, Other School Fees, and Childcare in U.S. City Average, Federal Reserve Bank of Saint Louis, January 2026.
[5] Schools, Skills, and Synapses, NBER Working Paper Series, June 2008; The rate of return to the HighScope Perry Preschool Program, Journal of Public Economics, February 2010.
[6] Maternal Labor Supply and the Introduction of Kindergartens into American Public Schools, The Journal of Human Resources, January 2009; The Impacts of Expanding Access to High-Quality Preschool Education, Brookings Papers on Economic Activity, Fall 2013; Access to Head Start and Maternal Labor Supply: Experimental and Quasi-Experimental Evidence, Journal of Labor Economics, December 2024.
[7] Lottery evidence on the impact of preschool in the United States: A review and meta-analysis, Blueprint Labs, November 2023; Prep School for Poor Kids: The Long-Run Impacts of Head Start on Human Capital and Economic Self-Sufficiency, American Economic Review, December 2021.
[8] Benefits and Costs of Investments in Preschool Education: Evidence from the Child–Parent Centers and Related Programs, Economics of Education Review, February 2007; HighScope Perry Preschool Program, February 2010.
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[69] These data from the National Database of Childcare Prices reflect information on the 75 percentile of prices from market rate surveys, so they likely reflect higher-quality care, at least as captured by price. We use prices for center-based care, again likely better approximating the true cost of higher-quality care on average.
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