Impacts of Eligibility Expansions and Provider Reimbursement Rate Increases on Child Care Subsidy Take-Up Rates, Welfare Use and Work

We find that reforms in the Rhode Island subsidized child care program, including income and age eligibility expansions and increases in the reimbursement rates paid to formal providers, significantly increased the likelihood that current and former welfare families: a) would use child care subsidies and b) would work 20 or more hours per week. In addition, these policy changes significantly increased the probability that family heads of household would leave welfare for work. The most powerful impact of the Rhode Island changes in child care policies was on families that had left welfare (i.e., former cash recipients) and that worked at least 20 hours per week. These policy changes had less effect on families receiving cash assistance and enrolled in some approved activity (e.g., education or training) other than work. We were not able to assess the impact of the Rhode Island policy changes on families who were never on cash assistance. However, the large increase in the number of such families receiving child care subsidies after the reforms were instituted suggests that the impact may have been substantial. We also estimate that Rhode Island's reform of its cash assistance program and of its child care subsidy program, in combination, almost tripled the probability that a typical head of household currently or formerly receiving welfare would work 20 or more hours per week (i.e., the probability increased from 7% in the second quarter of 1996 to 22% in the second quarter of 2000) and almost halved the probability that a single mother in the sample would be on cash assistance and neither working nor in some other approved activity (i.e., such probability decreased from 47% in the second quarter of 1996 to 25% in the second quarter of 2000).

Take-Up Rates and Trade Offs After the Age of Entitlement: Some Thoughts and Empirical Evidence for Child Care Subsidies

In this paper we develop a model of an eligible family's decision to take or not to take child care subsidies. This decision depends on the net benefits the family expects to derive from the subsidies over their expected duration. We contend that such a demand-side model for the take-up of child care subsidies and use of the term 'take-up' rate are only appropriate for programs that guarantee services to all eligible applicants. After welfare reform, most states do not offer such guarantees. For states that do not guarantee subsidies, the proportion of the eligible population that receives subsidies is better called a service rate than a take-up rate. Modeling service rates requires consideration of both governments' decisions (the supply side) and families' decisions (the demand side) regarding child care subsidies. We survey the general literature on take-up rates for social welfare programs and review existing estimates of the take-up rates and service rates for child care subsidy programs in various states. Using administrative data and survey data for states that guarantee subsidies for all eligible families, we estimate the family-level take-up rate for child care subsidies to be around 40% in early 2000. For states that do not guarantee subsidies, service rates range from 14% in Minnesota to 50% in Massachusetts. Finally, we suggest indicators to assess the trade offs that governments are making when designing and funding their child care subsidy programs. We use the percent of federally eligible families that receive child care subsidies and public expenditures per subsidized child to discern the relative importance that states place on using child care subsidies (1) to facilitate parental work and (2) to prepare its future work force by improving services to low-income children. For Rhode Island, we find increasing emphasis on the latter between 1996 and 2000. We also find that the Illinois subsidized child care program places relatively more emphasis on parental work facilitation, while Minnesota's program makes a more substantial investment in children through relatively more comprehensive and in-depth services.

Child Care and the Welfare to Work Transition

We assess the role of child care in the welfare to work transition using an unusually large and comprehensive data base. Our data are for Massachusetts, a state that began welfare reform in 1995 under a federal waiver, for the period July 1996 through August 1997. We find that both the nature of the child care market and the availability of subsidized care and early education affect the probability that current and former welfare recipients will work. Regarding the child care market, we find that the cost, stability and quality of care matter. We also find that child care subsidies and some types of early education serve to increase employment. To be more specific, we find that increased funding for child care subsidies and the availability of full day kindergarten significantly increase the probability the current and former welfare recipients work.

Evaluation of Rhode Island's Family Independence Program, May 1996 - April 2000

We assess the impact of Rhode Island's Family Independence Program (FIP) on the employment and earnings of current and former cash assistance recipients. We use administrative data from many sources, including data from state cash assistance records and from employer reports of employment and earnings from the Unemployment Insurance program. Our data are for all-female-headed households receiving Rhode Island cash assistance during the period May 1996 to April 2000. In all we have observations on 29,253 families for an average of 16.6 quarters. We estimate our models using a number of techniques and find that the impacts of major variables are robust across the techniques used. Our results indicate that the major impact of FIP was to increase the likelihood that current and former cash assistance recipients would work. Our best estimate is that the impact of the many changes associated with FIP was to increase the likelihood of work by about 10%. Estimates also indicate that FIP increased the quarterly earnings of current and former cash assistance recipients. However, the estimated increase in quarterly earnings due to FIP was relatively modest (i.e., about $200 per quarter). During the study period, earnings increased substantially (i.e., from a little over$1,000 per quarter to over $2,500 per quarter), but our results indicate that most of this increase was due to increases in the Rhode Island minimum wage, not to FIP

The Policy Context and Infant and Toddler Care in the Welfare Reform Era

We provide descriptive evidence from Miami-Dade County (MDC) in FL and from five representative areas in Massachusetts (MA) that government policies governing welfare reform, the child-care subsidy system, and minimum-standards regulations have had considerable influence on the availability, price, and quality of infant and toddler care as welfare reform progressed from 1996 to 2000. We suspect that the markedly different proportion of the population that is native born and differences in income and education in MDC and MA also have had an influence on the very different situations for infant and toddler care in MDC and MA. Our data suggest that minimum regulations for the care of infants and toddlers, market prices, and provider reimbursements in MDC are not in synchrony. For example, we estimate that, during the period of our study, a center-based provider would have to charge approximately $129 per week to cover the costs of providing full-time infant care that is in compliance with state-imposed minimum caregiver-to-child ratio requirements. We find that the vast majority of center providers in MDC charged less than$100 per week for infant care. In addition, the publicly set reimbursements paid to centers in MDC for providing full-time infant care never exceeded $95 per week during the period of the study. This suggests that, in order to be in compliance with the state-promulgated standards, infant care in MDC must be subsidized by sources other than the prices paid by parents or the State for the care of their infants. This is different from the situation we observe in Massachusetts, where prices, reimbursements, and regulations are more closely aligned. We find that prices of infant and toddler care in MDC are strikingly lower than in MA, even after adjusting for the higher cost of living and the more stringent regulatory environment in MA. We suspect, and provide some evidence, that this marked difference reflects, at least in part, lower average quality of infant and toddler care in MDC. We find that Florida?s welfare reform, with its requirement that cash assistance recipients be active when their youngest child is three-months-old and with stringent time limits for the receipt of cash assistance, is associated with a large increase in the number of infants and toddlers from low-income families in formal care. In contrast, Massachusetts? welfare reform, which imposes neither time limits nor activity requirements on cash assistance recipients with children under the age of two, is associated with only a moderate increase in the numbers of infants and toddlers from low-income families in care. For example, during our study period the number of infants in care increased by 150% in MDC and by only 10% in Massachusetts. During the period surrounding welfare reform, enrollments at facilities offering infant and toddler care in MDC increased if they accepted child-care subsidies and declined if they did not. Altogether, the growth in the full-time enrollment of infants and toddlers at subsidized facilities has been far less dramatic than the increase in the number of subsidies issued for infant and toddler care. This suggests that there may have been a displacement of private-pay infants and toddlers by those with child-care subsidies. During the period of our study, displacement by those with subsidies is more likely because payments to providers accepting vouchers exceeded the median prices charged by providers that did not participate in the child-care subsidy program. We find that the formal care of infants and toddlers in MDC, as compared to MA, is much more likely to take place at child care centers and much less likely to take place at family child care homes. We suspect that the more pronounced racial and ethnic diversity, higher poverty levels, and a much larger unlicensed, family child care underground economy in MDC have had considerable influence. We present evidence of some deterioration in the quality of infant and toddler care purchased with child-care subsidies in MDC during the course of welfare reform. Specifically, we observe an increase in the proportion of staff with less than a high school education at subsidized centers offering infant and toddler care. In addition, observational assessments of the quality of infant and toddler programs at subsidized centers in MDC indicate that the proportion of low-quality infant and toddler programs has approximately doubled (from 5% of programs in 1996 to 11% of programs in 1999) during the course of welfare reform. This is a worrisome development, given the large numbers of low-income infants and toddlers in formal child care in MDC. The level of accreditation of centers with infant and toddler programs in MDC (1 ? % of subsidized and 3% of unsubsidized facilities during the period of our study) is distressingly low. By way of contrast, over 30% of centers with infant and toddler programs that take vouchers in MA are accredited and between 20% and 25 % of those that do not take vouchers also are accredited. The low level of accreditation in MDC exists despite the fact that, under FL?s Gold Seal program, subsidized providers can receive up to a 20% increase in reimbursements if they become accredited

Unintended Consequences? Welfare Reform and the Working Poor

We have used a unique longitudinal database that incorporates information from diverse administrative and research sources to examine the impact of the early stages of welfare reform on poor working families who do not receive cash assistance. Our data are for 2791 working poor families from March 1996 through February 1997. Using a number of different estimation techniques, we find that the impact of the simultaneous October 1996 implementation of welfare reform and a federal minimum wage increase was to lower the earnings of the working poor families in our sample by approximately 6%. We find that increases in funding for Child Care Subsidies associated with welfare reform led to a significant increase in earnings. On net, the increase in Child Care Subsidies and the decrease in earnings because of the October 1996 changes approximately cancel out, with the representative family in our sample experiencing an estimated monthly earnings change of between -$18 and$68, with an earnings gain of $25 being most likely.

credit, including © notice, is given to the source. Child Care and the Welfare to Work Transition

results. All errors are our own. The views expressed herein are those of the authors and are not necessaril