Marital Status and Full-time/Part-time Work Status in Child Care Choices: Changing the Rules of the Game

Marital Status and Full-time/Part-time Work Status in Child Care Choices: Changing the Rules of the Game In an industrialized economy, it is nearly impossible to engage in market work while simultaneously caring for young children. Thus, if a mother is to engage in such work, someone else must care for her children during work hours. However, non-maternal child care is often expensive or of poor quality, making it difficult for low income mothers, especially those making the welfare-to-work transition to successfully move into financial independence. Our research provides new detailed information to policy makers who are interested in facilitating the welfare-to-work transition, and in encouraging efforts towards financial independence for the working poor. We fill several critical gaps in the existing child care literature by focusing on differences across marital status and between full-time versus part-time work status. Because child care utilization and expenditure patterns vary across these factors, detailed information broken down in this way will help inform the policy debate. This project serves as a direct response to the call for new child care research issued recently by the Council of Economic Advisors (December 1997). Much of the previous literature either focused strictly on married mothers or simply controlled for marital status with a dichotomous variable. We include both married and unmarried mothers in our analyses by stratifying our sample by marital status throughout the empirical work. In addition to the descriptive analyses, we estimate two distinct econometric models to study the differences in the effect of child care costs on employment status by marital status and differences in mode of child care use by marital status and employment status. First, using predicted measures for child care prices and wages, we estimate an ordered probit model of employment status in which the possible categories are full-time employment, part-time employment and not employed. This estimation produces separate child care price elasticities of employment for full-time employment and for part-time employment. We find that for married women the elasticity of full-time employment with respect to changes in the price of child care is much larger (in absolute value) than the elasticity of part-time employment with respect to the price of child care. On the other hand, for single mothers part-time employment has a larger elasticity with respect to the price of child care than full-time employment. Second, we estimate a multinomial logit model to explain the determinants of the choice of child care mode, while controlling for the probability of full-time employment given than one is employed. Here we find some evidence that an increased probability of full-time employment is associated with an increase in the use of center care and a reduction in the use of relative care. For single mothers, the effect of the price of care seems to move together for home-based care and center-based care. Marital Status and Full-time/Part-time Work Status in Child Care Choices: Changing the Rules of the Game Introduction: Policy-makers at the Federal and State levels are focusing currently on child care policy with an eye towards facilitating the welfare-to-work transition of single mothers, while also improving the availability, quality, and affordability of child care for families from all income brackets. In 1998, President Clinton outlined a package of child care proposals that included: increased funding for the Child Care and Development Block Grant; increased funding for the Child and Dependent Care Tax Credit; increased funding for Head Start / Early Head Start Programs; Early Learning Challenge Grants; funding for After School Programs; Employer Child Care Tax Credits; Child Care Provider Scholarship Fund; and Health, Safety and Research Initiatives. This grab bag of programs are designed to influence the supply of and demand for quality child care services and to reduce the cost of child care for low and middle income families. Congress countered with numerous proposals of its own. This discussion about child care come on the heels of welfare reform which fundamentally changes the choices low income single mothers can make and substantially changes the costs of their child care options. State legislators are far from finished working out the details of the welfare reform plan which calls for getting almost all former welfare recipients into the private labor market. State legislators also need to decide how to direct Federal child care dollars that come to the states in the form of block grants either linked with welfare or separately. Despite this legislative interest in child care spending, much remains uncertain regarding the types of responses families will make to these proposed changes in the child care market. This is not to say that economists have not engaged this topic. In the last fifteen years, economists and policy analysts have learned a great deal about the “economics of child care.” Several researchers, including the authors of this paper separately, have estimated the effect of the price of child care on labor supply decisions and on the choice of child care mode. See Connelly (1992) and Kimmel (1995 and 1998) among others. Blau’s 1996 paper and Anderson and Levine (1999) each summarize the estimates of the elasticity of labor force participation with respect to the price of child care from a large number of studies. Hofferth and Wissoker (1992) and Chaplin, et al (1996) present thorough studies of the effect of the price of child care on the type of child care chosen by young women. Despite this research, we believe that the scope of the legislative changes being proposed is sufficiently broad, and the holes in the literature are large enough to justify further work. This view was echoed recently by the Council of Economic Advisors, which presented a list of needed research on child care in their December 1997 report. That list includes among other topics, this paper's focus on single women. Our goals for this study include an updating of estimates of the effect of price of child care on family choices using the most recent data available from the Survey of Income and Program Participation (SIPP); a thorough look at differences in the effect of child care prices on employment and child care mode choice across marital status; and an analysis of how the full-time/part-time employment choice interacts with child care utilization patterns by marital status. The updating of estimates of the effect of the price of child care on family choices is necessary because most of the research in this area has used data from the United States from the 1980's. Connelly (1989,1991,1992), Ribar( 1992, 1995), and Michalopoulos, Robins, and Garfinkel (1992) all used the 1984 panel of SIPP. Leibowitz, Klerman, and Waite (1992) and Hofferth and Wissoker (1992) used the NLSY, with Hofferth and Wissoker’s data coming from the 1985 wave and Leibowitz, Klerman,