The Economic Impact of Vermont's Child Care Industry
Executive Summary
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.
Thanks to the following for their assistance with this report:
Howell Martin Marketing and Advertising: Design
Howard Printing: Production Assistance
Chittenden Bank: Printing
Child Care Contributes to the Economy
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.
- The total economic impact of the child care industry in Vermont is approximately $426 million annually ($208 million in direct expenditures and an additional $218 million in indirect spending). This represents 2.5% of Vermont's 1999 Gross State Product.
- The child care industry employs 5,000 people in Vermont. If these individuals worked for one employer, it would be larger than Fletcher Allen, IDX or C & S Wholesalers - three of the largest employers in the state.
- The child care industry also generates employment through the goods and services the industry and its employees purchase. At least 2,232 indirect jobs are also created and sustained by the child care industry.
- There are an estimated 37,489 working parents who rely on child care services and are employed by over 11,000 Vermont businesses. 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.
- The total estimated annual earnings of all child care providers is $120 million.
Child Care Enables People to Work
Stagnant inflation-adjusted wages, the rising cost of living, and an increase in women-headed households have made child care part of the social infrastructure and an essential support for the labor market.
And reliable, affordable child care is critical to low-income families entering the workforce as a result of welfare reform.
- Nationally 61% of married couples with children younger than six had both parents in the work-force in 2000.
- In 1998, 80% of Vermont women with children younger than six years old were in the workforce.
- An estimated half of all Vermont businesses have employees with children in child care - 11,595 businesses.
- There are an estimated 40,000 Vermont children under 12 in child care.
Insufficient Supply of 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.
- The existing regulated child care system is meeting only 65% of the estimated need.
- The shortage of 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; only 3% are open after 6:00pm; 3% offer weekend or overnight care.
The Quality of Child Care Affects the Future Workforce
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.
- High-quality child care enhances brain development and improves children's preparation for and performance in school. Research also indicates that failing to provide at-risk children with high-quality early care and learning programs reduces their lifetime earnings and increases the risk that they will engage in criminal activities.
- In Vermont, the median hourly wage for workers at licensed child care centers in 2000 was $7.60, lower than that of short-order cooks and stock clerks.
- Almost two-thirds of all family child care providers are unable to afford health coverage and therefore receive health coverage through theVermont Health Access Plan (VHAP), an income-sensitive public assistance program.
Low-Wage Working Parents Require Child Care Subsidies to Enter and Stay in the Workforce
Many Vermont businesses do not pay wages that are high enough to cover the cost of child care. By helping these families purchase the child care they need to go to work, Vermont is also providing financial assistance to thousands of small businesses in the state, who can't operate without working parents. In short, for many Vermont small businesses, publically-funded child care is employer-supported child care.
- The market price for child care is, on average, $5,487 a year - a hefty bite out of the average annual wage of $28,920 (2000 figure).
- The number of families that seek help from theVermont Child Care Services Division to pay for child care has increased by a dramatic 190% since 1975 (and will likely hit 230% when FY 2002 figures are complete).
- The average subsidy per child in FY01 was $3,157, which is 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 child care has a shortfall of between $130-$200/month, depending on whether they use a licensed center or a registered family child care home.
- Despite state and federal funds spent on child care subsidies, parents still pay 60% of all the money spent nationally for child care. The federal and state governments pay 39%; the private sector pays only 1%.
Note: this is an abbreviated version of the executive summary. For a full version, please view the file in adobe acrobat format or contact Windham Child Care at 802.254.5332
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