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Child care availability raises concerns

Movement is away from home-based programs and toward child care centers

July 18, 2018


Ashwini Sankar Research Analyst
Child care availability raises concerns

Across the Ninth District and nationwide, many parents struggle to find child care. For parents, affordable child care can be critical to both joining the labor force and moving from part-time to full-time work. Data on licensed child care capacity describes an industry undergoing structural changes that could further stress rural areas facing problems related to child care scarcity, while affordability presents a more universal barrier across geographies.

Not all district states provide public data on child care capacity. For those that do, the data show that total child care capacity—defined as the total number of child care spots at all licensed providers—in Minnesota and Wisconsin declined by about 5 percent over the past five years. In contrast, North Dakota experienced a substantial increase in total capacity during this period, due largely to population and workforce increases driven by the oil boom in the western part of the state. However, even there, the big increase in supply has not been enough to support an even larger increase in demand.

There are generally two types of licensed child care providers: Child care centers and family child care. A primary difference is the location where the service is provided. Child care centers provide service in nonresidential settings, while family child care is supplied from the provider’s home. Child care centers enroll more children at a single location, often across multiple classrooms, while family child care businesses are limited to fewer children. For example, in Minnesota, the maximum number of children allowed in a family child care setting can range from five to 14, depending on the number of adults and the ages of the children.

Center capacity increases in all of Minnesota ...
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The industry is in the midst of structural changes with the mix of centers and family providers changing over time. In 2011, more than three-fifths of all child care capacity in Minnesota and half in Wisconsin and North Dakota was family child care. By 2018, family child care fell to two-fifths in each state. The downward trend in family child care has been under way for some time and is more pronounced in metro areas. For example, over the past 15 years, the number of family child care slots in the seven-county Twin Cities region has declined by roughly half and in Greater Minnesota by one-third. During this 15-year period, center child care capacity increased in the Twin Cities area, enough to stem the decline in family child care; however, this was not the case for rural areas (Chart 1).

As family child care declined, child care centers increased their capacity (Chart 2). While the number of new centers in Minnesota increased by only 10 percent over the past 15 years, their licensed capacity increased by 26 percent. Most of this capacity growth is occurring in metro areas because centers sprout mostly where the population density is relatively high. North Dakota is a bit of an anomaly. Center-based care in the state has more than doubled over the past five years, with a larger share accruing in the rural oil-producing areas.

Family child care declines ...
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Child care demand and affordability

One measure of potential demand is the number of children under age 6 with all of their parents in the labor force. (While working parents with children over age 6 also use child care, their use is usually just for a few hours after school or full-day during the summer.) Census data show variation across district states, but overall potential demand was relatively level. North Dakota saw the highest increase from 2012 to 2016 with a 9 percent gain; South Dakota had more modest growth of 3 percent. Minnesota and Montana were relatively level, while Wisconsin decreased almost 4 percent. Historically, the share of young children with all of their parents in the labor force has been relatively high in the district, ranging from 64 percent in Montana to 75 percent in Minnesota and South Dakota during 2016. Nationwide, 65 percent of young children have all of their parents in the labor force.

The sharp decline in home-based care generally reduces affordability because these providers are typically less expensive. While pricing data are spotty across district states, Minnesota data suggest that in-home child care costs are roughly two-fifths lower per week (almost $150 cheaper for infants and about $100 cheaper for toddlers and preschoolers) than at child care centers in metropolitan areas. Differences are smaller in rural parts of the state.

While affordability is a major concern for parents, it is also a key concern for policymakers. In North Dakota, average child care costs (adjusted for inflation) have risen by 11 percent over the past five years. Rates in the Bakken region have risen more steeply (16 percent), and core Bakken counties, like McKenzie, have seen costs rise by 34 percent, reflecting the large demand for child care. Meanwhile, inflation-adjusted prices have remained relatively steady in Minnesota from 2010 to 2016. Across the district and the country, the cost of child care is often higher than tuition at public universities.

District states and other areas of the country draw on federal and state funding to provide subsidies that help low-income families pay for child care through the Child Care Development Fund and other sources. Earlier this year, Congress passed increased funding for CCDF, but combined state and federal funding still falls well short of providing support to all eligible families. In Minnesota, the state also funds scholarships for young children in low-income families, which can help subsidize tuition in high-quality school-, center- or home-based programs.

Myriad factors drive the decrease in family child care. A recent legislative report in Minnesota detailed family child care providers’ frustrations with increased regulation, which can place an outsized compliance burden on smaller, rural child care providers. Pay is also low, and in a growing district economy, there are more higher-paying job alternatives. In addition, a number of at-home providers in many areas are reaching retirement age.

Regardless of the overall cause, the decline in family child care can exacerbate the challenges parents face in finding an opening at a child care program. And for areas with a relatively low ratio of child care supply to the number of young children, business and economic growth can suffer.