The Economic Rationale for Investing in Children: A Focus on Child Care, Final Report

The use of child care has expanded dramatically as maternal employment has increased. Recent estimates of children age 5 or younger in regular child care arrangements range from 60 to 75 percent (Hofferth et al. 1998; and Smith 2000). With the implementation of new welfare regulations, such as work requirements and time limits on cash assistance, the proportion of young children in out-of-home care, especially among low-income families, is likely to continue rising. Child care arrangements for these children encompass a broad spectrum of settings, including regulated center-based child care, Early Head Start and Head Start, public prekindergarten programs, early intervention programs, regulated family child care homes, after-school programs, and unregulated care by family and friends. As more mothers of young children enter the workforce, concern about the availability, cost, and quality of child care has become an increasing focus of public policy debate. Discussion about the extent to which the government could and should invest in the child care market has increased among policymakers. To further discussion of these issues, the Assistant Secretary for Planning and Evaluation (ASPE) of the U.S. Department of Health and Human Services (DHHS) sponsored an invitational conference on May 3, 2001, entitled " The Economic Rationale for Investing in Children: A Focus on Child Care. " The primary purpose of the conference was to engage a multidisciplinary group of economists, developmental psychologists, child care researchers, and policy analysts in a dialogue about the rationale for public investment in quality child care. 1 ASPE officials hoped that such a dialogue would generate fresh and innovative ideas and help ASPE set its future child care research agenda. The conference built on a paper commissioned by ASPE— " Child Care Quality: Does It Matter and Does It Need to Be Improved? " —by Deborah Vandell and Barbara Wolfe. 2 The paper reviews evidence on the effects of quality child care on children's health and development and sets out an economic rationale for public investment that emerges from that evidence. To explore further the arguments discussed in the paper and to identify other potential arguments, the conference addressed the following questions: N What are the current economic arguments for investing in quality child care, and what are the strengths and weaknesses of these arguments? N What are the current economic arguments for public investment in other markets (labor, education, and health care)? To what extent could these be …