High-Quality Child Care Essential For A Thriving Economy

Dec 16, 2008

Improving access to affordable, high-quality child care is important to the nation for many reasons. From a business perspective, high-quality child care is vital because it increases current workforce productivity and invests in our future labor force. Parents are able to go to work while their children, our future workforce, begin building the foundations for lifelong success. Despite the economic benefits of quality care, the child care industry faces various market challenges, such as low revenue and lack of capital. These challenges are highlighted in a new report, Child Care in Appalachian Kentucky: Financial Sustainability in a Low-Income Market, prepared by the Mountain Association for Community Economic Development (MACED).

In the communities of eastern Kentucky, high poverty rates and obstacles associated with rural economic development increase the difficulties of providing quality child care to low-income, working families. The report looks at the challenges that these rural counties face in building the supply of financially viable, quality child care. MACED finds that child care providers lack financial resources as a result of a dysfunctional market. Many families, particularly low-income families, are unable to afford the costs of high-quality care. Exacerbating this problem, state subsidy reimbursement rates are set below what it costs to provide child care. In order to provide affordable services, child care providers maintain low prices, which in turn generate low revenues. These revenues are insufficient for making quality improvements.

To increase the financial viability of child care in the market, the report identifies five issues affecting the industry and details how to make improvements within those areas:

• Subsidy reform: Revise state policies so that child care subsidy rates are based on the cost of providing service rather than low market rates.
• Tax reform: Reform child care tax credits, including designating child care tax credits as refundable.
• Workforce development incentives: Expand professional development opportunities and incentives, such as scholarships and wage supports, to pursue further education.
• Small business support: Provide greater technical assistance as well as business planning and development support to child care center owners and operators.
• Access to capital: Increase access to financing through capital grants, loan funds, and other financial assistance.

Overall, the report shows that affordable, high-quality child care is essential for a thriving economy and both the present and future well-being of the nation.