The Relationship Between Child Care Subsidies and Use of Quality Care and Employment Among Low-Income Families in South Carolina

Background and Purpose: Despite literature suggesting the importance of quality of child care in supporting parental employment and family well-being, little information is available on the accessibility and utilization of quality care among low-income families. Prior studies have found a positive relationship between subsidy use and employment, yet there is a dearth in research that has empirically examined the low-income child care market, particularly the role of the quality of care quality of care. Thus, there is limited evidence on how quality of care affects employment outcomes among low-income families. To address this gap, this study examines (1) the types and quality of child care that welfare recipients use and (2) the extent to which quality of care affects the stability of employment and earnings of welfare recipients.

Methods: This study utilizes South Carolina administrative data on single-mother families who received TANF between 2007 and 2009. The dataset includes individual-level information on subsidy receipt, types of care used, and the state's quality rating of the care (on a scale of AA, A, BB, B, CC, C; AA signifies the highest quality). Unemployment insurance records were merged to obtain information on employment and earnings. A sample of single mothers with at least one child under age 5 who received subsidies and used some type of regulated care (n=20,068) was used to estimate the impact of subsidy use on employment and earnings. A multinomial model was used to estimate the impact of care quality on employment stability. Quality of care was measured as a continuous variable. Employment stability was measured as a categorical variable (employed year-round, employed intermittently, or unemployed). A Tobit regression model was used to estimate the impact of care quality on earnings. Several sensitivity tests were conducted to consider those who used unregulated care and selection bias.

Results: The study found that 88% of those who received subsidies used either licensed or state-certified group day care. However, less than 1 percent used the highest quality care (AA). About 15% used BB quality care, and another 43% B quality care. About 23% used C quality care, and 19% of mothers used multiple levels of care quality for one child over the observed time period. The results show that using child care with a quality rating one-level higher was significantly associated with 50% higher chance of being employed year-round and a 24% higher probability of working intermittently. Additionally, using child care at one-level higher was significantly associated with a 70 percent increase in mothers' earnings. Sensitivity tests resulted in similar findings.

Conclusions and Implications: Even after controlling for other factors, high-quality care was significantly related to positive economic outcomes of low-income mothers. The finding suggests that in order for child care subsidies to be a viable work-support for low-income working families, it is important not only to expand eligibility for subsidies but also to increase the availability and accessibility of regulated, quality care for low-income families. 4-30-2010-->