Within a notoriously underpaid workforce, Louisiana’s child care teachers receive some of the lowest wages—making on average $9.77 an hour in child care centers, often without health benefits, says Libbie Sonnier, executive director of the Louisiana Policy Institute for Children. In hopes of changing that, last month Louisiana became the second state to commit to paying for subsidized child care based on what care costs rather than on what local parents pay. It’s a wonky distinction, but one that advocates and researchers hope will have big implications for early education teachers throughout the state. So far, only D.C. and New Mexico also pay based on cost of care, though several other states are considering or piloting similar approaches.
Covering the actual cost of care may sound like a no-brainer. But even for subsidized child care, most states instead pay based on what local, private-paying parents manage to cobble together for their own child care. Because most working families cannot afford the true price of care, which by law requires heavy staffing, this results in an artificially depressed reimbursement rate, one that is rarely enough to pay teachers a living wage. More than half of the nation’s child care workers rely on public assistance.
“The current financing of the child care system is broken for providers trying to keep their doors open, parents struggling to pay for care and educators scrambling to provide for their own families.” – – Simon Workman, principal, Prenatal to Five Fiscal Strategies
As Dan Wuori, senior director of early learning at the Hunt Institute has pointed out, this means that even when it comes to government-funded care, the cost gets subsidized with the low wages of its workforce, one that is disproportionately women of color. Low wages, in turn, fuel teacher turnover and program instability, damaging program quality.
“The current financing of the child care system is broken for providers trying to keep their doors open, parents struggling to pay for care, and educators scrambling to provide for their own families,” explains Simon Workman, principal of Prenatal to Five Fiscal Strategies, in a recent report for the Center for American Progress.
In that report, Workman points out that basing subsidy payments on market rates can also mean that programs in the poorest areas receive the least funding, deepening inequities for vulnerable children during the time when brain development is most rapid and intense.
It’s for these reasons that even as President Joe Biden’s administration has pushed for sweeping child care reform through the Build Back Better bill, it is also urging states to reform subsidized child care. In June, the federal Administration for Children and Families called out the common practice of basing subsidy payment amounts on the broken market system, saying it “undermines program quality important to child development, leads to an insufficient supply of care, produces an underpaid workforce, creates an unstable sector and undercuts the employment of working parents.”
The Administration recommends that states follow the lead of D.C., New Mexico and now Louisiana: Stop basing subsidy payments on the deceptively low rate of what local parents can afford, and instead pay for the cost of child care that pays teachers fairly.
States have had this option to pay based on cost since 2014, and several have tested the waters with complex tools and models that help to quantify the vast gulf between what decent care costs and what providers actually get paid. The Center for American Progress, which developed an interactive cost estimation tool, found that the true cost of licensed child care for an infant is 43 percent more than what states reimburse programs for subsidized care.
In a field historically neglected by policy- and market-research, these tools provide valuable insight and data regarding which configurations, business models and quality incentives do and don’t work for child care. They put into numbers, for example, why child care programs serving children of different ages are more financially sustainable than programs for babies-only, and how some financial incentives for quality don’t even cover the costs of meeting quality benchmarks. This creates what Workman calls “a disincentive to invest in quality.”
D.C. was the first to pay based on cost of care, and has since seen a significant impact on the pay to lead teachers. The average salary of a lead teacher in a center increased by 28 percent, according to the Bureau of Labor Statistics—from just under $29,500 in 2018 to over $37,000 in 2021.
New Mexico’s new rates went into effect last year, so it’s too early to tell how they will impact teacher pay, but advocates are hopeful.
Workman warns that pay increases for teachers are not an automatic outcome of raising subsidy rates. Most subsidized care is offered by private providers who set their own teacher pay scales and cannot be forced to raise pay. Also, many child care programs cobble together a combination of tuition and subsidy payments, enrolling families paying out-of-pocket along with those paying with vouchers. In a program that has, say, only 20 percent of its children receiving subsidies, a bump in the subsidy payment may not be sufficient to raise teacher pay.
Then there’s the question of how states will afford to pay for more costly subsidies, when already there’s a dearth of government funding for child care. Only about 14 percent of children eligible for a child care subsidy receive it.
To help pay for their increased subsidy rates, Louisiana will be tapping newly available funds designed for child care programs recovering from the pandemic. “Some of those grant dollars are specifically to raise wages, but the worry is the grant dollars are only for two years,” says Sonnier. Sonnier is concerned that without a long-term solution, fewer families may receive funded child care.
To most policymakers, the overarching solution is clear: For child care to pay a living wage or better, government-subsidized care must be way more widely available, and programs must be paid what decent care actually costs. The Build Back Better bill languishing in Congress would accomplish all of this, and more.
In the meantime, states can look to reform the way they pay for the small number of families receiving subsidized care—an act Sonnier says is as important symbolically as it is economically. “We know 90 percent of brain development happens by age 4,” she says. “If you’re really factoring the true cost of care, you’re factoring in what it costs to recruit and retain really talented people who like children and know what to do with them.”
Kendra Hurley is a journalist and researcher focused on cities, families, policy and economic issues. Her journalism has appeared in The Atlantic, Bloomberg's CityLab, Slate and other publications. She was previously a policy researcher and editor at The New School, and also spent several years as a mentor-editor for a magazine written by and for teens in foster care.
