Section 1: Linking economic development and child care
from Measuring the Regional Importance of Early Care and Education: The Cornell
Methodology Guide, by Rosaria Ribeiro and Mildred Warner, Ph.D.
Increasingly, states, counties, and municipalities are recognizing the value
of child care to the regional economy. As part of this effort, policymakers and
researchers are using economic development methods to broaden public support and
develop innovative financing solutions for the child care sector.
| In this report, the term child care refers to the full range of
non-profit and for-profit early education and child care programs. |
The economic importance of child care has three components: its effect on the
regional economy, its effect on parents (social infrastructure supporting
workers and their employers), and its effect on children (investing in human
development and education). These three effects are represented by the trillium
flower above. The educational impact on children has been the primary focus of
most child care policy. This is probably the most important effect of the child
care industry, in the long term, by helping children prepare for school and lead
healthier, more productive lives. Long-term studies have found high societal
returns from investments in early education (Rolnick and Grunewald, 2003;
Barnett, 1995; Committee for Economic Development, 2002). However, these
long-term effects have not been measured in regional economic impact models nor
have they substantially influenced state economic development policy. Economic
studies of the child care sector primarily have focused on market challenges
affecting parental choice, quality, and labor force issues (Helburn and
Bergmann, 2002; Blau, 2001; Burton et. al, 2002).
Economists
and planners are beginning to recognize the important contributions the child
care sector makes to the regional economy in both the short and long term.
Across the country, states and localities are using regional economic analysis
to estimate the size of the child care sector and its linkage effects in the
regional economy. This methodology guide is designed to help state and local
teams conduct such studies. The focus is on the short term regional economic
effects of the child care sector – the regions petal in the trillium flower
above.
The child care industry is composed of many small businesses that directly
contribute to growth in jobs and income. The majority of US parents seek care
and education for their children through a private system composed of
non-profit, for-profit and family providers. These providers are small
businesses that form an integral part of the regional economy, although they are
typically not viewed as such. The sector also stimulates linkage effects in the
broader regional economy. Calculating the size and linkages of the child care
sector is the primary focus of this methodology guide.
| Child care is an integral part of the regional economy. |
Parents and providers have traditionally been considered the primary
beneficiaries of child care policy. An economic development framing extends the
beneficiaries to all community members, especially economic development
interests. New partners are crucial to opening up new ideas for public policy,
as well as new approaches to financing child care.
| A high quality child care system, just like roads and bridges, is part
of the infrastructure for economic development. |
Economic development is typically measured in terms of jobs and income.
However, research in the last 20 years has pointed to the importance of a
broader definition of economic development. Economists now acknowledge the
importance of human development and environmental sustainability for economic
development (Sen, 1999; United Nations, 2003). Business and economic developers
in the US are increasingly recognizing the importance of “quality of life,”
which includes environmental, educational, and recreational amenities, in
attracting and retaining businesses in a community (Florida, 2002).
The growth in importance of service sectors, such as child care, has raised
new challenges and opportunities for economic development policy beyond the
traditional focus on export demand (Pendall et al., 2004). The child care sector
reflects these broader conceptions of economic development. Its primary function
is to promote human development of young children and a secondary role is to
enhance choice for parents who need child care in order to work. Women’s labor
force participation has increased markedly in the last four decades along with
the growth of the paid child care sector (US House of Representatives Committee
on Ways & Means, 2000). Child care is critical to community sustainability and
improves quality of life. Where the child care sector has been remiss, is in
measuring the basic jobs and income effects of the sector itself. This guide is
designed to help state and local teams measure the size of child care as an
economic sector.
Across the US, communities are forming teams to conduct regional economic
analyses of the child care sector to help strengthen the awareness of child care
as an important component of the social infrastructure that supports economic
development.
These teams represent a growing social movement to promote investments in
quality, affordable child care. More than two-dozen studies have been completed
(9 states and 21 counties), and more than a dozen additional studies are
underway (7 more states and 6 counties) (See Appendix A for detailed information
on all of the completed studies). The Cornell University Linking Economic
Development and Child Care Research Project helped review many of these studies.
This methodology guide is designed to help study teams answer basic questions
about how to conduct a regional economic analysis of the child care sector.
Specific examples are drawn from a local study, Tompkins County, NY, and two
state studies, Kansas and New York, which the Cornell team conducted. Other
state and local studies are also highlighted in this report: Vermont (Windham
Child Care Association & Peace and Justice Center, 2002), Maine (Hildebrand,
2003), California (Moss, 2001), Minnesota (Traill & Wohl, 2003), Milwaukee
(Levine and Fendt, 2002), Florida (Florida’s Children Forum, 2003), and Rhode
Island (Quigley and Notarantonio, 2003). This guide describes some of the unique
challenges of analyzing child care as an economic sector, as well as some of the
opportunities a regional economic development framing can bring to the child
care policy debate.
CHALLENGES AND OPPORTUNITIES
Framing child care as economic development is an entirely new approach for
most child care professionals, who typically do not think of child care as an
economic sector. Child care experts involved in these studies report that their
work has resulted in a new awareness of the sector’s importance to local and
state economies. State teams also now recognize the necessity of consistent,
economically-oriented child care data and the need to address the business
challenges of the sector, such as management and marketing.
Service sectors, such as child care, present analytical challenges from a
regional economic stand point. Regional economic analysis, such as input-output
models were originally built to study the backward linkages (i.e. purchases) of
export-based sectors like agriculture, forestry and manufacturing, and there is
a limit to how well input-output models can measure the forward linkages (i.e.
sales which enable other industries to produce) of service sector industries
(Warner et al., 2003). With the growth in service sector employment (which now
comprises 80 percent of all employment nationally), more attention is being
focused on how to measure the regional economic importance of service
industries.1
| “Business and the economy as a whole gain a more productive work force
when employees feel confident that their children are secure and learning.
And society as a whole benefits when more families are self-sufficient and
the next generation of citizens is well prepared for its adult
responsibilities.” (Committee for Economic Development, 1993) |
An economic development framing offers new opportunities for the child care
field. The Cornell Linking Economic Development and Child Care Research Project
is conducting research to develop a better theoretical and empirical
understanding of how the child care sector contributes to the broader regional
economy, and to help build a new policy framework for child care that addresses
the sector’s importance from an economic development perspective.
REPORT OVERVIEW
The purpose of this report is to provide a basic set of tools for states and
localities interested in conducting a regional economic analysis of the child
care sector. This guide discusses:
- the key steps of a regional economic analysis,
- guidelines for data collection and analysis using examples from previous
studies, and
- policy applications that an economic development frame offers.
Discusses the importance of building a team of data experts, economic
developers and policy makers to oversee the study process. It also raises
questions that must be answered before an analysis can begin, such as: what to
include in the child care sector and what geography to include in your regional
analysis.
Describes how to measure the size of the child care sector by the number of
establishments, employees, children served, and gross receipts. This is the most
important part of a regional economic analysis. Obtaining accurate, up-to-date
data is a crucial first step in any analysis. There are serious challenges in
reconciling data from different sources (US Census, County Business Patterns,
state child care licensing data, and national surveys). This section provides a
thorough description of data sources and methods used.
The child care sector has two sets of direct customers: children served and
parents who purchase child care. Section 4 presents methods for measuring the
number of working parents served by child care and estimating working parent
purchasing power.
Describes input-output analysis, a form of regional economic modeling that
economic development analysts typically use to assess the linkage effects of
different sectors in the regional economy. Input-output analysis shows how the
spending of any industry “ripples” through the economy. This section shows how
multipliers can be used to measure the strength of economic linkages of the
child care sector.
Discusses the role of government investment in promoting access to child care
and improving the quality of early care and education programs. This section
provides examples of how regional economic analysis can be used to show the
economic development impact of public spending on child care.
Discusses the potential of an economic development framing for child care to
increase public and private support for the field. It describes several policy
and implementation strategies that could serve as guides for early care and
education leaders. This section also describes the importance of involving
stakeholders in the process and developing resource materials for specific
policy audiences.
The needs and goals of the child care sector vary across states and
localities. Study teams should carefully consider why they are conducting a
study and use these goals to help guide the analysis and presentation of
results. A regional economic analysis of the child care sector requires a
considerable investment of organizational time and resources. This is why most
state teams work collaboratively with a broad range of government, business and
education stakeholders. We hope this methodology guide will help facilitate that
process.
1 The Cornell research team is working on developing new methods to measure both forward and backward linkages. This guide however, includes a discussion of traditional input-output multipliers that measure only backward linkages.