The relationship between child care subsidies and children's cognitive development

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Abstract

Child care subsidies help low-income families pay for child care while parents work or study. Few studies have examined the effects of child care subsidy use on child development, and no studies have done so controlling for prior cognitive skills. We use rich, longitudinal data from the ECLS-B data set to estimate the relationship between child care subsidy use and school readiness, using value-added regression models as well as parametric and non-parametric models with propensity score matching. Compared to a diverse group of subsidy non-recipients in various types of non-parental care as well as parental care only, we find that child care subsidy use during preschool is negatively associated with children's math skills at kindergarten entry. However, sensitivity analysis suggests that these findings could be easily overturned if unobserved factors affect selection into subsidy receipt.

Highlights

► We estimate the relationship between child care subsidy use and school readiness. ► We use propensity score matching and value-added regression with ECLS-B data. ► Subsidy use in preschool is negatively associated with math outcomes. ► However, unobserved factors affecting subsidy receipt could overturn the findings.

Introduction

Child care subsidies defray the costs of family-selected early care and education for low-income, employed parents. Each year, over 1.1 million children under age six use child care subsidies provided through the Child Care Development Fund (CCDF) program, at a cost of several billion dollars (Committee on Ways and Means, 2008). With so many children participating and so much public investment at stake, it is important to understand how child care subsidies affect recipients.

Child care subsidies offset all or part of the cost of child care and, thereby, increase the short-run returns to employment for parents in families with low socio-economic status (SES). In the long run, increased levels of employment among low-SES parents with subsidies are expected to result in higher family SES. The primary goal of child care subsidy programs is to increase parent workforce participation, and most of the research on child care subsidies has focused on employment-related outcomes (Herbst and Tekin, 2010a, Zaslow et al., 2002). A sizeable body of research suggests that use of child care subsidies has positive effects on parent workforce participation and family economic outcomes (Blau, 2000, Brooks et al., 2002, Ficano et al., 2006, Joo, 2008, Lemke et al., 2000, Schaefer et al., 2006, Tekin, 2007).

However, parents are not the only family members affected by the child care subsidy. The decisions parents make about child care after receiving a subsidy also have the potential to affect children's development, positively or negatively. Subsidies can affect parent decisions about whether to use any non-parental care, and can also affect parents’ choice of child care arrangements. These choices may have positive or negative implications for children's cognitive development, to the extent that they affect children's early learning experiences in both parental and non-parental care. The purpose of this study is to estimate the relationship between child care subsidy use during preschool and children's cognitive development by the time they enter kindergarten.

Child care subsidies are payments, usually delivered as a voucher, that help cover the cost of child care for the recipients. Child care subsidy programs are operated by states using a combination of federal and state funds, and states set income eligibility limits, provider reimbursement rates, family co-payment rates, and other regulations in accordance with flexible federal guidelines. A notable feature of child care subsidies is that, in contrast to highly regulated publicly funded early childhood programs such as Head Start or state pre-kindergarten, the quality and operational standards for participating providers are quite minimal. Although standards for provider participation vary by state, federal CCDF law prohibits states from imposing standards that would significantly restrict family choices, because the goal of the program is to maximize flexibility in order to meet the needs of low-income working parents (Government Accountability Office [GAO], 2005).

Child care subsidies are available to families who are employed or in training and who meet the state's income requirements. However, subsidies are not an entitlement and eligible families may be denied access to child care subsidies altogether or placed on wait lists. Although child care subsidies serve over one million children under age 5 each year, access rates among eligible families are fairly low, with an estimated 16–20% of eligible children using child care subsidies at a given time (Burstein and Layzar, 2007, Committee on Ways and Means, 2008). Low utilization among eligible families is due partly to state funding levels that limit the supply of child care subsidies (Adams et al., 2002, Crosby et al., 2005, Herbst, 2008, Witte and Queralt, 2003). However, parents’ employment decisions also affect use. As a result, eligible families that use child care subsidies may differ from eligible families that do not in ways that matter for studies focused on estimating the impacts of the subsidies on child outcomes.

Child care subsidies are predominantly used by very poor families. In 2005, the median family income among subsidy recipients was just over $15,000 per year, and just 13% of participating families earned over 150% of the federal poverty level (Child Care Bureau, 2005). A number of family characteristics are predictive of subsidy use among low-income families, including being a single parent, being African American, speaking English at home or being native born, having low income, and being a current or prior recipient of welfare and other means-tested benefits (Adams et al., 2002, Blau and Tekin, 2007, Burstein and Layzar, 2007, Committee on Ways and Means, 2008, Danziger et al., 2004, Durfee and Meyers, 2006, Herbst, 2008, Johnson et al., 2011, Schaefer et al., 2006, Shlay et al., 2004, Tekin, 2005, Tekin, 2007, Weinraub et al., 2005). There is some evidence of regional differences in subsidy utilization, and urbanicity is also related to subsidy use (Burstein and Layzar, 2007, Johnson et al., 2011, Tekin, 2005, Tekin, 2007). Evidence is mixed on whether parent education level, parent age, and the number and ages of young children in the home are positively or negatively related to subsidy receipt (Blau and Tekin, 2007, Burstein and Layzar, 2007, Danziger et al., 2004, Herbst, 2008, Shlay et al., 2004, Tekin, 2005, Tekin, 2007, Weinraub et al., 2005).

In estimating the relationship between child care subsidies and child outcomes, the analyses should control for these known predictors of subsidy receipt in order to reduce bias in the estimates. Welfare receipt is a particularly important control variable because states that cannot serve all eligible applicants for child care subsidies usually give first priority for child care subsidies to TANF recipients (Cohen and Lord, 2005, Government Accountability Office, 2005). Of course, there may be other, less easily measured differences in families that do and do not receive subsidies, such as differences in the extent to which parents value gainful employment or are able to obtain it, or differences in educational values. Differences of this sort are a particular challenge when studying the effects of child care subsidies on child cognitive development, requiring careful consideration of the study design and the use of analysis methods that can reduce the threat of selection bias.

This study estimates the net relationship between child care subsidy use during preschool and children's cognitive skills at kindergarten entry, using the Early Childhood Longitudinal Study – Birth cohort (ECLS-B) data set. We compare child care subsidy recipients to a diverse counterfactual group of subsidy non-recipients that includes children in any type of non-parental care that is not paid for with a child care subsidy, as well as children who do not receive any regularly occurring non-parental care. This counterfactual includes all conditions that child care subsidy recipients might experience in absence of the subsidy. Child care subsidies were initially designed to increase access to child care among families that could not otherwise afford it, so it is important to include children who do not attend child care in the counterfactual in order to estimate the true effect of child care subsidies on children. It is also important to include children in all types of child care in the counterfactual, including public preschool programs such as Head Start or public pre-kindergarten in addition to private child care, since all of these types of care are likely alternatives for children who are similar to child care subsidy recipients but do not receive a subsidy. We use several alternative estimation strategies to account for selection into subsidy use, using an extensive set of control variables that includes prior measures of child development and socio-demographic characteristics of children and families. The study addresses two questions:

  • 1.

    What is the relationship between child care subsidy use in preschool and children's early literacy skills at kindergarten entry?

  • 2.

    What is the relationship between child care subsidy use in preschool and children's early math skills at kindergarten entry?

Child care subsidies effectively make child care less costly to parents, so policymakers expect the subsidy to increase family economic resources, and possibly also induce parents to purchase child care that is more expensive, and presumably of better quality, than they otherwise would. As a result, one might expect positive effects on child developmental outcomes, either through better quality care or family resources used in other ways to benefit children. In fact, any expected benefits to child development are dependent upon the assumption that the children will receive better quality care than they otherwise would without the subsidy. However, it is not clear that use of child care subsidies leads to improvements in the quality of care children receive.

Several correlational studies on the quality of subsidized care find that child care subsidy recipients tend to receive relatively poor quality care, and the percentage of children using subsidies in a child care program is negatively related to measures of program quality (Adams et al., 2001, Antle et al., 2008, Jones-Branch et al., 2004, Mocan, 2007, Raikes et al., 2005). One recent study (Ryan, Johnson, Rigby, & Brooks-Gunn, 2011) tested the relationship between child care subsidy receipt and the quality of care received by individual children, and found that subsidy recipients choose higher quality child care than similar children who did not receive a subsidy when both home-based care and center-based care are included in the same model. However, the authors also found that subsidy recipients are more likely to used center-based care than non-recipients, and that the overall positive association of subsidy use with care quality is driven by more use of center-based care among subsidy recipients. This may be because center-based care tends to be of higher quality than home-based care in preschool, so that quality is higher overall for subsidy recipients because they use more center-based care. In subgroup analyses, Ryan and colleagues found that subsidy recipients in home-based care have higher quality child care than non-recipients in home based care, whereas subsidy recipients who use center based care actually have worse quality child care compared to non-recipients in center-based care.

It seems counterintuitive that parents would choose poorer quality care for their children when using a subsidy than otherwise, particularly in center-based arrangements. However, parents who receive subsidies may have insufficient information to judge program quality, and they are limited to the private care options that are available and able to accept subsidies. Parents who use child care subsidies might not have access to high-quality private child care, and alternative low-cost options (such as Head Start or other publicly funded programs) may be of better quality (Ryan et al., 2011). This is consistent with literature suggesting that the quality of private child care available to poor children, and especially the care that will accept subsidies as payment, tends to be of insufficient quality to lead to positive child outcomes (Adams and Rohacek, 2002, Brady-Smith et al., 2001).

Quality of care is important because researchers find that high-quality care is key in achieving positive developmental outcomes for young children (Barnett, 1995, Gilliam and Zigler, 2000, Love et al., 1996, Magnuson et al., 2007, Peisner-Feinberg et al., 2001, Phillips et al., 1994, Shonkoff and Phillips, 2000). A large correlational literature on non-parental care finds that child cognitive and social–emotional outcomes are predicted by program quality, particularly the quality of the educational environment and the closeness and positivity of teacher–child interactions (Belsky et al., 2007, Burchinal et al., 2000, Howes et al., 2008, Love et al., 1996, Mashburn et al., 2008, NICHD Early Child Care Research Network, 1999, NICHD Early Child Care Research Network, 2002, Peisner-Feinberg et al., 2001). The relatively low quality of care accessed by subsidy recipients in center-based care has worrisome implications for their cognitive outcomes (Adams & Rohacek, 2002). Yet, there is relatively little research on how child care subsidies affect child development (Brooks et al., 2002, Crosby et al., 2005, Herbst and Tekin, 2010a).

There is only limited evidence on the relationship between child care subsidy use and children's cognitive outcomes. A large body of research on comprehensive welfare packages, including child care subsidies along with various other work and family supports tied to welfare, suggests that child care subsidies in combination with the other comprehensive family supports can have positive effects on children's cognitive and social–emotional development (Duncan and Chase-Lansdale, 2001, Morris et al., 2001, National Forum on Early Childhood Program Evaluation, 2008). These studies all used experimental designs that provide strong causal evidence of the positive impacts of these comprehensive programs on children's development. However, this research does not allow one to disentangle the effects of child care subsidies from the effects of the other comprehensive supports (Blau & Tekin, 2007).

Moreover, although studies described above indicate that welfare receipt increases the likelihood of subsidy receipt and that states prioritize welfare recipients for subsidy receipt (Burstein and Layzar, 2007, Cohen and Lord, 2005, Government Accountability Office, 2005), recent estimates indicate that only about 18% of families using child care subsidies across the U.S. also receive cash assistance through the TANF program (Committee on Ways and Means, 2008). Thus, the experimental findings from the comprehensive welfare package studies are of limited use in understanding the effects of current child care subsidy policy, which is not directly linked to other welfare package supports.

Very few studies have tested the relationship between the use of stand-alone child care subsidies and children's development. One study comparing cognitive skills between child care subsidy recipients and children on the wait list found no differences in cognitive or social–emotional skills between recipients and non-recipients (Brooks et al., 2002). However, because the data are cross-sectional, the findings do not provide evidence on how subsidies affect children's subsequent development, such as their readiness for school.

An extensive review of the literature identified only one published study (Herbst & Tekin, 2010a) that examines the relationship between standalone child care subsidy use and subsequent cognitive skills, although the same authors also have a working paper available that uses a slightly different methodology to test similar questions (Herbst & Tekin, 2010b). For both papers, the authors use the Early Childhood Longitudinal Study – Kindergarten cohort (ECLS-K) data to study the relationship between subsidy receipt during preschool and school readiness at kindergarten entry across several outcome domains, controlling for a large number of child and family characteristics (but not prior measurements of child skills in the outcome domains of interest). Using instrumental variables methods to control for selection, with different instruments in each paper, Herbst and Tekin find that children who received child care subsidies had lower math and reading skills and worse social–emotional skills in kindergarten than non-recipients. When they use OLS regression models, however, the authors find no difference in cognitive outcomes and fewer significant differences in social–emotional skill areas.

The published paper (Herbst & Tekin, 2010a) uses dummies for the county the child lives in as the instrument, arguing that county-level rationing of child care subsidies predicts who receives a child care subsidy, affecting child outcomes via child care subsidy receipt only. However, there are many ways in which county-level differences in educational resources and social services might affect child cognitive outcomes apart from receiving a child care subsidy. The validity of an instrument relies on the assumption that the variable used as an instrument affects the outcome exclusively through the predictor of interest, also called the exclusion restriction (Reardon, 2011). The authors do include other early childhood policies in the model that might also be related to child outcomes, but the instrument could still be correlated with unobserved determinants of children's skills, such as unmeasured educational resources in the county. If this occurs, the authors’ choice of instrument may violate the exclusion restriction.

In the working paper, Herbst and Tekin (2010b) use distance from the county social service agency as the instrument. However, county social service agencies might be located closer to areas with high-risk populations who are at risk of low cognitive skills in kindergarten regardless of subsidy receipt. These concerns are particularly important since the results of the instrumental variables analyses have large effect sizes even while the study design may not adequately account for selection bias. Given these concerns and the conflicting findings using the different analytic strategies in the Herbst and Tekin papers, additional research is needed using a different analytic strategy to account for selection into subsidy receipt. Also, the authors restrict the analyses to single mothers, although this excludes about a third of child care subsidy recipients who have two-parent families. Future research on the effects of child care subsidies should represent the full population of child care subsidy recipients.

This paper tests the relationship between child care subsidy receipt during preschool and children's math and reading outcomes in kindergarten, using analytic methods to address previous gaps in the literature. Our analysis relies upon a completely different set of assumptions to estimate the association between subsidies and child outcomes, and we include child care subsidy recipients from two-parent families as well as single-parent families. We examine the relationship between subsidy receipt and child outcomes using variations of value-added models as well as propensity score matching methods. In addition to using a large number of child and family characteristics as covariates, we also include prior child cognitive scores at multiple time points to control for lagged parental inputs in the cognitive development process – a powerful set of covariates that was not available in the ECLS-K data set used by Herbst and Tekin. Given the conditional nature of causal findings using observational data, we also check the robustness of empirical findings using different methods and data sets.

Section snippets

Participants

To address the research questions presented above, this study used all waves of the Early Childhood Longitudinal Study – Birth cohort (ECLS-B) data. The ECLS-B is a large, longitudinal study of children's early experiences and development that was conducted by the National Center for Education Statistics (NCES). Importantly, given the aims of this study, the ECLS-B contains detailed information on early care experiences and child care subsidy receipt, child cognitive skills before and after

Descriptive statistics

Table 2 provides means or percentages and standard deviations for the variables used in the analyses for all children and by subsidy receipt status, both for the full ECLS-B sample and for the subsample of children with family incomes under 185% of poverty (referred to as low-income children in this study). The table indicates whether mean differences between subsidy recipients and non-recipients are statistically significant, and also presents the standardized mean differences.

The cognitive

Discussion

Researchers have stressed that cognitive skills at early ages are related to both educational and labor market outcomes (Currie & Thomas, 1999). To the extent that this relationship is causal, it is especially important that public policies, such as child care subsidies, do not have adverse effects on the cognitive development of children. Low-income children who are eligible for child care subsidies are among the most vulnerable in the U.S. and, as a group, enter kindergarten significantly

Conclusions

As with any study using observational data, the causal validity of our results is dependent on strong and untestable assumptions. We recommend a randomized control trial, the “gold standard” of causal research, to determine the impact of child care subsidies on children's development. Moreover, many states’ subsidy programs are oversubscribed, so an experimental evaluation could be done without affecting the number of program recipients. This research is not experimental and therefore does not

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    The research reported here was supported by the Institute of Education Sciences, U.S. Department of Education, through Grant R305C050041-05 to the University of Pennsylvania. All opinions expressed in this paper represent those of the authors and do not represent the views of the institutions with which they are affiliated or the U.S. Department of Education. All errors in this paper are solely the responsibility of the authors.

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