Windham Child Care: It Takes a Community to Raise A Child

The Economic Impact of Vermont's Child Care Industry

June 2002

This report is a joint project of Windham Child Care Association and the Peace & Justice Center. It has been generously funded by the Child Care Services Division of the Vermont Department of Social and Rehabilitation Services (SRS) and the Autumn Harp Foundation.

Advisory Committee

Elizabeth Christie
Executive Director
Windham Child Care Association

Kim Friedman
Advocacy Coordinator
Windham Child Care Association

Ellen Kahler
former Executive Director
Peace & Justice Center

Kim Keiser
Director Child Care Services Division, SRS
Vermont Agency of Human Services

Elaine McCrate
Assoc. Professor
Dept. of Economics
University of Vermont

Ellen Pratt
Marketing Director
Windham Child Care Association

Louise Stoney
Stoney Associates

Mildred Warner
Asst. Professor
Dept. of City & Regional Planning
Cornell University

Research
Doug Hoffer, Policy Analyst

Funding
Child Care Services Division, SRS
Vermont Agency of Human Services

Autumn Harp Foundation
We are indebted to the National Economic Development and Law Center of Oakland, California, for its 1998 report entitled: The Economic Impact of the Child Care Industry in Alameda County.

Note: Throughout this report we use the term "child care" as shorthand for "early care and education." Our methodology includes data on Vermont children aged birth through 11 years old. We use the term "provider" to refer to an individual working in a child care center or family child care home. When referring specifically to individuals who run a child care program from their home, we use the term "family child care provider."

Contact:	Windham Child Care Association 130 Birge Street Brattleboro, VT 05301 802-254-5332
	Peace and Justice Center Jen Matthews 21 Church Street Burlington, VT 05401 802-863-2345 ext. 8

Thanks to the following for their assistance with this report:

Howell Martin Marketing and Advertising: Design
Howard Printing: Production Assistance
Chittenden Bank: Printing

We all know there is a crisis in child care. Increasing numbers of women with young children have entered the workforce while the supply of child care has remained static. To date there has been little information linking child care resources to the economy. This report fills that gap by providing documentation of the relationship between the insufficient supply of reliable, affordable, accessible child care and the health of Vermont's economy. It is clear that child care is a problem belonging to all players on the economic stage, not just to individual working parents.

The report that follows illustrates how investments in the child care infrastructure, like investments in the infrastructures of transportation, public works, affordable housing and higher education, can have direct, positive effects on the ability of Vermont's economy to experience growth and vitality.

This report is the first step in integrating child care planning into local, regional and state economic development plans. It calls for economic developers, businesspeople, planners and public officials to collaborate with child care specialists so that we all make sound decisions that strengthen the State's economy and ensure the well-being of Vermont's children.

Child Care Contributes to the Economy

Vermont's child care industry contributes directly and indirectly to the state's economy. The industry not only directly supports child care jobs and the jobs of the parents who rely on child care, but also jobs supported by the goods and services that child care providers procure.

There are at least 7,231 jobs in Vermont as a result of child care: 4,999 direct child care jobs (not including unregulated providers) plus 2,232 indirect jobs.
Most licensed child care centers and registered family child care homes are small businesses, but their aggregate employment is substantial. With 4,999 registered child care workers and self-employed family child care providers, the child care industry has more workers than some high-profile sectors like food processing, public utilities and communications (see Figure 1).
If all child care providers worked for one employer, it would be larger than Fletcher Allen, IDX or C & S Wholesalers, three of the largest employers in the state.
For every $1 million spent on child care, 35 jobs are created (24 direct, 11 indirect).
We estimate that there are 37,489 working parents who rely on child care services and are employed by over 11,000 Vermont businesses. (see Methodological Notes)

The economy benefits from the earnings and taxes of the child care workers and of the workers supported by the child care industry. Clearly, the child care industry is a critical component of economic development in the state.

We estimate that the total annual earnings for all regulated child care providers is $72.5 million. Total annual child care earnings, including unregulated child care providers, is approximately $120 million.
We estimate that one out of every nine Vermonters in the labor force (37,489) has a child under 12 in child care. Together, these working parents earn over $1 billion annually, or 13% of total wages in Vermont, and pay about $100 million in state and federal income taxes. (see Methodological Notes)
With almost 40,000 children under age 12 in child care, the total amount spent for child care in Vermont from all sources is about $208 million per year (see Methodological Notes). These funds are called direct expenditures.
The total economic impact of the child care industry in Vermont is estimated to be almost half a billion dollars annually: $208 million in direct expenditures and an additional $218 million in indirect spending. (Indirect spending occurs when child care providers and centers purchase goods and services like paper products, furniture, utilities and cleaning supplies.) This represents 2.5% of Vermont's Gross State Product.

The economy also realizes long-term savings from investments in high-quality child care.

A cost-benefit analysis of the High/ Scope Perry Preschool study shows savings to the public of more than $7 for every $1 invested in high-quality child care per child.
Society realizes long-term savings in areas of crime, welfare, tax and schooling by investing in high-quality early care and learning programs.

Child Care Enables People to Work

More and more families need two incomes to meet their basic needs. In 1998, 80.3% of Vermont women with children under the age of six were in the workforce-25% more than the U. S. average of 64.1%. Child care is clearly an essential support mechanism for the labor market.

Nationally, 61% of married couples with children under age six had both parents in the work-force in 2000. In half of these couples, both parents worked full-time.
73% of all single parents in the U. S. with children under age six were employed in 2000. In Vermont, the 2000 Census found 14,792 households headed by a woman with a child under 18 (or 19% of all Vermont households with children under age 18).

An estimated half of all businesses in Vermont have employees with children in child care - 11,595 businesses (see Methodological Notes) (See Figure 2).

Figure 2 Estimated Distribution of Vermont Workers with Children Under 12 in Child Care
Size of firm: # of employees	# of firms by size	# of workers w/ children< 12 in child care	% of firms w/ workers w/ children< 12 in child care	# of firms w/ workers w/ children< 12 in child care
< 5	12,766	3,213	25%	3,114
5-9	4,253	3,717	84%	3,591
10-19	2,581	4,410	100%	2,581
20-49	1,548	6,016	100%	1,548
50-99	449	3,906	100%	449
100-249	235	4,567	100%	235
250-499	52	2,488	100%	52
500-999	16	1,102	100%	16
1,000+	8	2,047	100%	8
Totals	21,908	31,467	53%	11,595

"An ancillary effect of the increase in women in the workforce is that it reduces the number of women (relatives/ friends) who had previously been available for informal child care but who now work and can no longer provide such services."
For those families with two wage earners, the value of the second income is greatly diminished by child care expenses. (see Figure 3) This problem is exacerbated by the fact that so many women work in relatively low-wage jobs. While child care enables people to work outside the home, a significant amount of the household income goes towards paying for child care. (See Figure 4).
As a result of welfare reform, low-income single parents must be employed so child care is necessary.

Insufficient Supply of Regulated Child Care Impacts Economic Growth

An insufficient supply of reliable, affordable and accessible child care negatively impacts Vermont's economy. Parents who can't find or afford child care are less likely to enter the workforce, be productive at work, and remain employed. These problems are particularly acute for parents working in the retail and service industries - which comprise almost half of Vermont's total jobs, including a significant percentage of all low-wage jobs.

Figure 3 Est. Percentage of 2nd Wage Earner's Income Spent for Child Care
Annual total family income	$26,000	$30,000	$35,000	$40,000
Avg. hourly wage- each parent	$6.25	$7.21	$8.41	$9.62
Est. net income after taxes	24,747	26,639	30,172	33,852
Maximum annual child care subsidy	4,053	2,705	1,351	0
Out of pocket annual child care cost	2,842	4,190	5,544	6,895
Out of pocket -% of 2nd income	22%	28%	32%	34%
Effective hrly wage -2nd income	$4.88	$5.20	$5.75	$6.30
Assumptions: Both parents work FT and have 2 children ages 4 & 6. Both parents earn the same wage and receive two weeks vacation and 10 paid holidays. Therefore, the 4-yr old requires FT child care for 240 days and the 6-yr old requires PT care during the school year (38 wks) and FT care during the summer (10 wks). We used the statewide average cost of care at a licensed center. Figures for state subsidies are from the CCSD.

A recent survey of employees in Windham County, VT reveals that problems with child care have negatively affected their work: 38% of respondents were forced to miss work; 24% were unable to work overtime; 21% believed it was harder to do a good job at work because of child care-related problems.
A recent New Hampshire report by the Governor's Business Commission on Child Care and Early Education stated that "the absence of reliable and affordable child care is a barrier for many employees entering the workforce, so businesses can benefit by investing in... child care - especially during periods of low unemployment."
This same report states: "Many companies... believe that there are substantial benefits from offering child care services: 62% of respondents reported higher morale, 54% reported reduced absenteeism, 52% reported increased productivity, and 37% reported lower turnover."
New Hampshire businesses lose as much as $24 million a year becauseof child care-related absenteeism. It is not surprising, therefore, that "the John Hancock Mutual Life Ins. Co. found that the estimated pay-back for every dollar invested in family-friendly policies was $4.17 (in employee time, retention, performance, and stress reduction/ health care cost prevention)

The existing regulated child care system is meeting only 65% of the estimated need. The shortfall between the supply of existing regulated child care slots and the total estimated need for child care could be as high as 14,000 slots. Note: The Child Care Services Division (CCSD) estimates that the 26,000 licensed and registered child care slots are actually used by about 36,000 children since some part-time slots are used by more than one child.

Demand for child care services has increased dramatically in the last few decades primarily as a result of the increase in the percentage of women in the labor force, welfare reform, more female-headed households, and more people working non-traditional hours and second jobs. The supply of child care, however, has not kept pace with the demand. The problem is evidenced by waiting lists for licensed care, which can be up to two years for infants.
Since 1990, the capacity of licensed child care centers in Vermont has grown 55%. In contrast, the number and capacity of registered family child care homes have declined by 24% since 1995. As a result, total capacity has only increased 7% since 1995.The total number of licensed and regulated slots is now just over 26,000 (see Figure 5).
An insufficient supply of high-quality child care leads many working parents to use informal unregulated child care which is often unreliable. As noted above, we estimate there are almost 40,000 children under age 12 in child care in Vermont. Although the State Child Care Services Division does not have data on the number of children in unregulated, informal child care, CCSD staff believe that up to as many as 10,000 more children are cared for through these arrangements. No doubt some of these families are satisfied with informal, unregulated child care, but anecdotal evidence suggests that many would prefer regulated care if it were available, and if the price and quality were right.
The shortage of regulated child care is especially acute for parents working non-standard hours, mixed shifts and weekends. According to Vermont's Child Care Services Division, only 17% of the state's licensed centers are open before 7:00am and only 3% are open after 6:00pm; 3% offer weekend or overnight care.

The Quality of Child Care Affects the Future Workforce

Business owners and economic development officials all agree on the importance of a well-educated workforce. There are many pieces to the puzzle, but we know that high-quality early learning improves the likelihood of success throughout a person's life. While the findings from the Abecedarian Project, the study of Chicago's Parent-Child Centers and the High/ Scope Perry Preschool Study do not shed light on children's well-being throughout adulthood, the findings do underscore the positive foundation that high-quality early care and education lays in a child's life. The results of three well-known studies are compelling:

In the Abecedarian Project, children who received enriched, high-quality early care and education had long-term gains in IQ, reading and math scores.
Children who participated in high-quality early learning programs in Chicago Child-Parent Centers were shown to have significantly higher math and reading scores, lower grade-retention rates, higher high school completion rates and significantly lower rates of juvenile arrests than children not in the program.
In the High/ Scope Perry Preschool Study, those who had participated in high-quality child care programs were less likely, by age 27, to have been arrested, had mean monthly earnings almost double those of control-group members and were much less likely to be receiving public assistance.

In order to maximize children's potential, we need to ensure high-quality early care and learning experiences for our children. A critical component of high-quality care is consistency of care. Unfortunately, due to low wages and no benefits, there is a high turnover among child care providers-reaching 40% nationally.

In Vermont, the median hourly wage for child care providers at licensed centers was $7.60 in 2000, which is lower than that of short order cooks and stock clerks (see Figure 6).
The Mills & Pardee survey found that "over half [of family child care providers] had a net income under $10,000." Since they work more than 50 hrs/ wk on average, [the] effective hourly wage [for family child care providers] is below the minimum wage."
According to a recent survey conducted for the Child Care Services Division by Mills & Pardee, almost two-thirds of all family child care providers receive health coverage through the Vermont Health Access Plan (VHAP), an income-sensitive public assistance program.

Figure 6 Comparison of Child Care Workers' Wages
Occupation	Median Hourly Wage
Stock clerks	$8.29
Counter & retail clerks	$7.96
Short order cooks	$7.77
Child care workers	$7.60
Maids & housekeepers	$7.53
Food preparation workers	$7.26
Cashiers	$6.91
Source: DET 2000 OES

Low-Wage Working Parents Require Public Child Care Subsidies to Enter and Stay in the Workforce

Vermont's economy depends heavily on lower-wage, service-sector jobs. Many parents working low wage jobs require child care subsidies to help them pay for child care.

In 2000, 48% of the state's jobs were in the retail and services industries, whose annual average wages of $16,558 and $26,623 respectively were well below the state's annual average wage of $28,920.
Estimates indicate that 45% of all Vermont job openings through 2008 will require nothing more than short-term on-the-job training - an indicator of low wages. Although government support for child care has expanded somewhat to help meet the growing demand, declining real wages (adjusted for inflation) have made the cost of child care a greater parental burden and forced more and more families to seek public assistance.
Vermont's Child Care Services Division spent almost $27 million in FY 2000 on child care subsidies for low-income families. Adjusted for inflation, this was 58% higher than in FY 95.
However, the State's contribution to child care has declined 38% since FY 96, as more federal funds became available (see Figure 7). Had the State maintained its former level of support, the Child Care Services Division could provide subsidies for 1,041 additional children or raise the subsidy, which is well below the market price.
The average subsidy per child was $3,157 in FY01, which was only 58% of the average market price ($5,487). Even with a subsidy, a family earning $28,000 with a four year old child in full-time care has a shortfall of between $130-$ 200 per month, depending on whether they use licensed centers or registered family child care homes.
In FY 01 there were 6,900 Vermont children receiving subsidies from the Child Care Services Division, a 190% increase since 1975. (see Figure 8). [Note: Incomplete FY02 figures show a substantial increase up to 8,028 children receiving subsidies.]
As Figure 9 illustrates, families currently pay 60% of all the money spent nationally for child care. In contrast, families pay only about 23% of the cost of a public college education because tuition and fees represent only a small portion of the total cost. The private sector makes a much greater investment in higher education than in early care and education. The difference in the burden is especially note-worthy because families with young children in need of care are much less likely to have the necessary resources than when the children are older and ready for college.

The child care industry is a growing part of the Vermont economy - pumping money into local communities by supporting working families, creating jobs and generating taxes through employment and the purchase of goods and services. Money spent on child care stays in Vermont communities, helping children, families and local businesses.

As the number of two-wage-earner families and women-headed households has increased, child care has become an essential social infrastructure, enabling parents to enter and remain in the workforce. Reliable, affordable child care is critical to low-income families entering the workforce as a result of welfare reform and may make the difference between climbing out of poverty and falling deeper into it.

An insufficient supply of reliable, affordable, and accessible child care negatively impacts Vermont's economy. Parents who can't find child care, can't afford child care, or can't rely on child care arrangements are less likely to enter the workforce, be productive at work, and remain employed.These problems are particularly acute for parents working in the retail and services industries, which are defined by lower wages and non-traditional, mixed and weekend shifts. And it is these industries which comprise almost half of Vermont's total jobs.

There is a steadily growing body of scientific evidence that the quality of children's social and environmental experience lays the groundwork for future success in school and life. Consistency of care is a determinant factor in high-quality early care and learning programs. Yet, the national turnover rate among child care providers is 40% annually and is due, in large part, to low wages and poor benefits.

For many small businesses in Vermont, publicly-funded child care is essential. Many Vermont businesses do not pay wages that are high enough to cover the cost of child care. By helping low-wage families pay for child care, Vermont is also providing financial assistance to thousands of small businesses in the state.

NOTE: This is a shortened version of the report. It does not include citations. For the full version either download the Adobe Acrobat Version or call Windham Child Care at 802.254.5332 last update 7/22/02 Site Map