What Drives Early Childhood Program Costs?

What Drives Early Childhood Program Costs?

Earlier, we posted about the Center for American Progress’ (CAP) 2018 “Early Learning Factsheets” that profile the reach and costs of each state’s early learning system for parents, and the economic potential that could be achieved from improving access to early learning programs. Many of the data points the fact sheets provide revolve around the cost of child care or preschool for the average family and the amount of subsidy needed for such a family to afford the true cost of those programs.

This is not a minor concern. As CAP notes,”Across the United States, it is not unusual for child care tuition to be the first- or second-largest household expense for families, costing more than mortgage or rent” (emphasis added). Given the crucial role child care and preschool play not only for children’s advancement but for caregivers to be able to work outside the home, it is important to understand why early childhood programs cost as much as they do. A February 2018 CAP analysis sheds light on this issue.

CAP’s “Where Does Your Child Care Dollar Go?” provides an overall analysis of early childhood program expenses, as well as an interactive tool to estimate a state-by-state breakdown. CAP notes the following:

  • 60-80 percent of early childhood education program income go toward staff salaries and benefits. Early childhood programs are labor-intensive: “[c]hildren need well-trained teachers to care for them and engage them in age-appropriate play and activities,” and, in fact, the personnel costs per child are higher for infant programs than for preschool programs, since infants require more hands-on care and a lower child-caregiver ratio.
  • The remaining 20-40 percent of income pays for occupancy, office and administrative, and classroom material expenses. Just as personnel expenses are lower for preschool programs than for infant or toddler programs, classroom material expenses are higher for older children, as preschoolers require more toys and educational materials and, of course, more food.
Distribution of child care program expenses for an infant, toddler and preschooler in a child care center meeting basic state licensing standards and paying current average wages, based on United States averages

Not All Early Childhood Programs Cost the Same

When discussing early childhood programs, advocates particularly call for high quality programs.

The greatest determinant of program quality is the teacher—specifically, the quality of their interactions with children. … A highly skilled teacher will structure a learning environment based on young children’s development and interests and use verbal and nonverbal responses to engage children as they explore their environment. As young children’s brains are rapidly developing, a highly skilled teacher will build a ‘unique relationship with each child in her care,’ using her training, experience, and observation of each child ‘to take advantage of learning opportunities that emerge through daily routines.’

In addition to teacher quality, higher quality programs generally also feature lower child-teacher ratios; more classroom resources; and more learning space, to allow greater exploration and play.

All of these elements are reflected in the higher true costs of high-quality programs. To illustrate the difference, CAP presents two hypothetical child care programs: 123 Child Care Center and XYZ Child Care Center. XYZ, the higher quality program, costs nearly two times what 123 costs, and the breakout of expenses explains why this is the case:

CAP’s interactive tool for estimating the cost of child care programs in each state indicates that, on average, the typical base quality infant program costs $14,700 per year vs. $27,100 per year for a high quality program; the typical base quality toddler program costs $11,000 per year vs. $20,800 per year for a high quality program; and the typical base quality preschool program costs $9,100 per year vs. $15,800 per year for a high quality program. In other words, high quality adds between 73 and 89 percent to the base cost of a base quality early childhood program.

The Costs are Worth The Investment, but—CAP Argues—the Investment Needs to Be Made

Quality measures add to the cost of early childhood programs. However, based on evidence from the White House and from Nobel Prize-winning economics professor James Heckman of the University of Chicago, CAP reports that there is between a $3 and $13 return for every dollar invested in high quality early childhood program. Even at the low-end of this range, this is clearly a worthwhile investment.

Nonetheless, high quality child care remains unaffordable for many families. Public finding, which comes primarily from Child Care and Development Block Grants, does not cover the true cost of providing high quality programs. CAP finds that “[i]n only three states—Hawaii, Indiana, and South Dakota—does the infant subsidy cover the full cost of minimum quality, which is based on current wages and benefits. In no state does the subsidy cover the cost of high quality for infants or preschoolers.” Moreover, only 1 in 6 children who are eligible for subsidies receive them, and the low eligibility levels mean that many families earn too much to receive subsidies: in 15 states, for example, an income of only $30,000 for a family of three makes that family ineligible for assistance.

The children who would most benefit from early childhood programs typically come from those low- and moderate-income families who are least able to pay for those programs. This gap between the need for affordable early childhood programs and their availability keeps the American workforce from achieving its fullest potential both now, by keeping parents from entering the workforce, and in the future, as those children grow up less-prepared to enter the workforce themselves. And as lower-income children are left behind, the income and achievement gap between higher- and lower-income families will only widen in the future. CAP concludes:

The data presented in the ‘Where does your child care dollar go?’ interactive and this report make it clear that the child care market is broken. The revenue streams currently available to child care providers are not sufficient to cover the costs of providing high-quality care. Meanwhile, decades of research have made the case for high-quality care and have illustrated the benefits it brings to children, families, and society. Yet high-quality early childhood programs remain out of reach for too many families.

To fully address the issues of affordability, accessibility, and quality, a significant new public investment in early childhood education is needed. This investment must go far beyond the current subsidy system, provide support to all low- and middle-income families, and ensure that early childhood teachers are compensated fairly. Helping parents and policymakers understand the true cost of high-quality child care is an important step in building support for this public investment.