Why do they leave the child care subsidy program?

Background and Purpose: Since welfare reform low-income mothers with young children have increasingly been expected to obtain employment, but high child care costs have made this process difficult for many mothers. In response to the increasing need for affordable child care, child care subsidies have substantially expanded. However, prior studies show that few eligible mothers received subsidies and they typically receive subsidies for a short time period (average 3-6 months). However, little is known about why families leave subsidies after such short spells. Little evidence exists about factors related to various economic outcomes at the time of exit. This study attempts to address these gaps and examine factors related to subsidy exit and how these factors shape different exit types.

Methods: This study used longitudinal administrative data from Wisconsin and explored five years of child care subsidy receipt by single-mother families who began receiving subsidies in 2000. Subsidy exit is the dependent variable and is divided into three categories: high-earnings job exit, low-earnings job exit, and job-loss exit. Independent variables include variables related to human capital, demand for child care, family structure, and contextual factors (county characteristics, policy rules for subsidies and other public assistance programs). As a type of event-history model, a discrete-time multinomial logit regression model was used focusing on the first spells. The study also conducted separate analyses for families with preschool children and those with school-age children.

Results: The study found that only 9% of mothers left subsidies for high-earnings jobs. Thirty-two percent left due to job loss, and 56% left subsidies with low-earnings jobs. Among 56% of mothers with low-earnings job exits, 50% returned to subsidies within 3 months after leaving subsidies and 75% returned within 6 months. Mothers with high human capital were three times more likely to have high-earnings job exits. High demand for child care decreased the probability of subsidy exit by 20 to 85%, regardless of exit types. Contextual factors including county characteristics, receipt of other public assistance, and being in the last month of an eligibility period were also significantly, differently related to types of exits, all else being equal. Finally, human capital was the most important factor for mothers with pre-school children to retain subsidies and have positive exit outcomes. Factors related to demand for child care were the most influential factors for two-parent families in retaining subsidies and subsequent exit outcomes.

Conclusions and Implications: Child care subsidies were a relatively reliable source of work support for mothers with a high demand for child care and for those with high human capital. Even after controlling for all other factors, contextual factors were significantly related to the probability of subsidy exits. These findings inform policymakers of potential barriers to subsidy use and ways to enhance the child care subsidy program. Variation in the relationship between contextual factors and different types of exit also implies that different local agencies may have different practices. These findings provide insights on improving practices according to diverse needs of single-mother families in different areas.