Child Care Regulations Backfire on Mom and Dad
Well-intentioned state governments want to place strict regulations on child care facilities in order to keep children safe. But new evidence shows that such regulation is making child care far more expensive than necessary, to the detriment of the children and parents it aims to help.
A Mercatus Center working paper by Diana W. Thomas of Creighton University and Devon Gorry of Utah State University finds that states with stricter regulations on child care facilities also have higher tuition, placing a greater burden on families seeking care options for their children during the workday. Additionally, the authors identify several regulations that simply do not provide significant benefits for children and should be repealed.
The average annual cost of child care for an infant in America is $9,466, or 47 percent of the federal poverty line for a family of three. The average masks significant variation: child care costs range from $4,863 in Mississippi to $16,430 in Massachusetts. Such significant child care costs are sure to make a parent think twice before even trying to get a job—it might make more economic sense to stay home and look after the children yourself. This rings true especially for low-skilled parents who are most in need of the money, but are likely to receive the lowest wages in the labor force.

Indeed, women with children under six years old have a labor force participation rate of 65 percent, versus 76 percent for women with school-aged children. Parents who leave the labor force to take care of children are more likely to see skills atrophy and experience become obsolete, making the climb up the economic ladder that much harder.
Common regulations affecting the child care industry include caps on child-staff ratios and overall group sizes, as well as training and certification requirements for teachers. Some regulations have a greater impact than others. For instance, increasing the cap on the child-staff ratio by one child (i.e., lifting the cap from a three-to-one ratio to a four-to-one ratio) is associated with a 9 to 20 percent decrease in the cost of child care, according to the paper. Raising the cap by just one student could save families between $850 and $1,890 per year.
It is tempting to see the child care industry as the victim of burdensome occupational licensing rules like so many other sectors of the economy. While the authors do find that teacher certification requirements increase the price of child care, they also find some benefits to ensuring better teacher quality, such as improved child safety. This cannot be said for most other licenses such as interior design.
The problem is that government regulation does not leave room for market forces to ensure teacher quality. Upper limits on child-staff ratios force child care centers to hire more workers, with the result that each staff member gets paid less. This situation makes it more difficult for child care centers to hire (and retain) workers with better skills. That is why early childhood education ranks last on lists of college majors by average pay. The most talented workers will head to other industries.
The authors recommend that states take steps to reduce the burden of child care regulations but stop short of eliminating teacher training requirements entirely. Most child care regulations are implemented at the state level, so it is states that will need to take action to make child care more affordable for their residents. As the vast gulf between Mississippi and Massachusetts shows, most states have plenty of room for improvement.
Preston Cooper is a Policy Analyst at Economics21. You can follow him on Twitter here.
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