Recently, an unprecedented amount of attention has coalesced around the U.S. child care market. In the wake of Covid-19—with thousands of child care programs permanently shuttered and many child care workers having abandoned the field for higher pay—parents, journalists, policymakers and researchers alike now understand just how precarious it is for a country to depend on the private market for an essential work support, not to mention a work support that also has lasting implications for child development. “Child care is a textbook example of a broken market,” announced Treasurer Secretary Janet Yellen in 2021.
Arguably no field is better positioned to help identify exactly what’s wrong and how to chart a better path forward than economics. As Jessica Brown, an economist at the University of South Carolina, explained, “We have a useful lens to look at the market, and we have the lexicon to talk about market failures and identify possible ways to fix them.”
Brown is one of a growing number of economists who are doing exactly that for early education. While previously it was somewhat unusual when a child care study surfaced at an economics conference, today it has become routine. That’s a development that many in the field expect to endure; now that the connection between child care and the overall economy is widely recognized, there’s no walking it back.
To recognize and celebrate the contributions economists are making to the child care field, Early Learning Nation magazine asked 11 economic researchers to identify which studies of the last three years are especially surprising or helpful in deepening our understanding of the early education field and the child care market at this moment in time. The following three studies stood out.
1. Study: The Long-Term Effects of Universal Preschool in Boston
Authors: Guthrie Gray-Lobe, the University of Chicago; Parag Pathak, MIT and the U.S. National Bureau of Economic Research; and Christopher Walters, the University of California at Berkeley and the U.S. National Bureau of Economic Research
Key takeaway: Public preschool can have long-lasting positive effects for children.
The Perry Preschool Project and the Abecedarian Project are famous throughout the early education field for demonstrating how carefully designed early education programs can have long-lasting positive impacts on children, and in some cases even their children. But what about a public preschool program serving tens of thousands of children? Can enduring positive effects of early education emerge outside of relatively small pilot projects? This study published in The Quarterly Journal of Economics answers that question with a resounding “yes.”
Using admissions lotteries to compare similar children who were randomly awarded preschool seats with those who were not, researchers were able to estimate the effects of Boston’s large-scale, well-funded public preschool program. The study found that preschool enrollment boosts high school graduation and college attendance, and that it also decreases high school disciplinary measures, including juvenile incarceration. Effects on college enrollment and disciplinary outcomes were larger for boys than for girls, the study found.
“Prior to this research, we didn’t have this type of lottery-based evidence in a relatively recent period, looking at long-term educational attainment outcomes,” Chloe Gibbs, an economics professor at the University of Notre Dame wrote in an email. Some researchers point out that it’s important to note that Boston did not skimp on funding its program; this research suggests that investment paid off.
2. Study: The Effects of Financial Incentives on Teacher Turnover in Early Childhood Settings: Experimental Evidence from Virginia
Authors: Daphna Bassok, Justin Doromal, Molly Michie and Vivian Wong of EdPolicyWorks at the University of Virginia
Key takeaway: Even small boosts in child care teacher pay can make a big difference.
When Fairfax County in Virginia piloted a teacher recognition program, they lacked ample funding to give retention bonuses to all teachers in the county. So they partnered with a team of researchers at the University of Virginia to randomize which child care centers could participate in the program and then study the outcome.
Researchers discovered that even modest retention bonuses had a big impact on teacher retention. Teachers at child care centers who were offered up to $1,500 if they remained teaching at their sites over an 8-month period were half as likely to leave their jobs as were teachers who were not offered the incentives. At child care centers that offered the bonus, 15 percent of teachers left compared to 30 percent at centers that did not receive bonuses.
“Given what we know about the importance of stable bonds with caregivers for child development, this is a very important finding – a relatively small increase in pay can increase retention of child care teachers substantially,” said Brown of the University of South Carolina.
She added that the finding is particularly relevant to the discussion of spending under the American Rescue Plan that allowed many child care providers to increase teacher wages. Now that the funding has ended, some programs face tough choices about whether to increase tuition rates for parents or reduce wages for child care staff. If programs want to retain teachers, this study suggests they should in fact be increasing pay, not reducing it, said Brown.
3. Study: Minimum Wage, Worker Quality, and Consumer Well-Being: Evidence from the Child Care Market
Authors: Jessica Brown, University of South Carolina and Chris Herbst, Arizona State University and IZA
Key takeaways: Increasing the minimum wage improves child care quality. But also, as child care costs go up, fewer lower-income families receive care, and parents express less satisfaction with the care they receive.
Some studies have one clear takeaway. This one shows that raising a state’s minimum wage has a myriad of effects on the child care sector, many of which are beneficial to families and children, but not all.
Child care teachers are among the lowest paid workers in the economy and the authors of this study found, not surprisingly, that state minimum wage increases led to increases in teacher pay. Such increases did not cause child care providers to lay off teachers in an attempt to balance their budgets. Rather, to offset the increase in labor costs, child care businesses took other tactics, including enrolling more children, raising tuition and serving fewer low-income children receiving child care subsidies, possibly because the subsidy rates are lower than tuition paid by privately-paying parents and also because there are administrative costs involved in processing subsidies.
With teachers making more money due to the increased minimum wage, staff turnover declined and teachers were more likely to invest in their own education and skills, engage in educational activities with children and to generally have higher-quality interactions with kids, the study found. This led to overall quality improvements in the programs. Despite this, parents became less satisfied with their child care providers, and the researchers found evidence in Yelp reviews that the higher cost of tuition was to blame.
What to make of all of this? Aaron Sojourner, senior researcher at the W.E. Upjohn Institute for Employment Research, pointed to one clear conclusion: “This is important evidence in support of [early childhood education] worker wages as a lever for quality.”
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.
