Child-Care Subsidy Instability and Arrangement Discontiniuity: Does Type of Care Matter?

Background. The relationships that children in nonparental care form with caregivers are important to healthy development (Shonkoff & Phillips, 2000). Yet, children experience frequent breaks in child-care arrangements, and low-income children report especially high rates of care instability (Davis et al., 2013). Government child-care subsidies can improve continuity of care by reducing out-of-pocket costs to parents. However, subsidy spells themselves are relatively brief (Henly et al., 2017). Thus, families may be at increased risk of child-care exits in the face of subsidy loss. Families using center care may show a greater risk of losing care after a subsidy exit since centers are more expensive than home-based arrangements. On the other hand, centers may be more financially prepared than home-based settings to help parents maintain care through a subsidy loss, especially if the break in subsidy is temporary. To date, there is limited quantitative research examining these relationships between subsidy exit, type of care, and child-care continuity. Thus, we test the hypothesis that subsidy exits increase the risk of leaving a child-care arrangement. In addition, we investigate if this relationship is moderated by child-care type.

Methods. The Child Care Research Partnership Study links administrative child-care assistance records with telephone survey data from a random sample of 516 new subsidy program entrants in 2011-2012—from Illinois and New York. Using a multivariate Cox proportional hazards models, we identify whether exiting the subsidy program within 6 months of entry increases the risk (hazard ratio) of leaving a provider within 18 months after program entry. Child-care continuity is measured as the spell of a subsidized primary care provider for the youngest child. We analyze the interaction of child-care type by subsidy exit, to test the differential risks of exiting care in the face of subsidy loss for families who use centers compared to family child-care homes or informal care. In all models, we control for a robust set of child and parent demographic information.

Results. As hypothesized, subsidy exits put families at a significantly greater risk of a child-care exit. Families who left the subsidy program in the first 6 months had a 65% greater risk of child-care discontinuity than those who did not leave the program within the first 6 months (p<.001). The interaction analysis shows that informal care users had more than twice the risk of leaving their provider in the face of subsidy loss compared to families using centers (p<.001). The effect of subsidy exit on child care discontinuity did not differ between family child-care homes and centers. We conduct sensitivity tests that consider timing and length of subsidy exit and we assess several potential explanations for the interaction results.

Conclusion. This paper indicates that subsidy instability is a contributor to child-care discontinuity, especially for families using informal care. These findings raise questions about the effectiveness of the subsidy program to meet its child development and parental employment goals, underscoring the importance of advocating for policy reforms that encourage subsidy stability and assist families financially during periods of subsidy loss.