Section 4: Estimating parents served

from Measuring the Regional Importance of Early Care and Education: The Cornell Methodology Guide, by Rosaria Ribeiro and Mildred Warner, Ph.D.

Parents are the customers of the child care sector, but the sector lacks comprehensive data on its customer market. A first step in measuring the parent market for child care is simply to count the total number of parents who use paid child care. Not all working parents use paid child care (some rely on unpaid relatives). Additionally, some parents who do not work still demand child care for its educational value. These parents also constitute part of child care demand. However, most states and CCR&R systems do not collect data on all parents using paid care. This chapter focuses on estimating the number of working parents who use paid care because this group is of particular interest to economic developers.

The number of working parents can be multiplied by the median wage to estimate the total employment income of parents who use paid child care. This gives an estimate of the purchasing power of the parent customer market.

ESTIMATING THE NUMBER OF WORKING PARENTS WITH CHILDREN IN PAID CARE

  Dependent and Child Care Tax Credit Worksheet (requires Microsoft Excel)

There is no national or state data source that measures the number of parents with children in paid care. Study teams used a variety of methods including US Census data and national surveys, to get an estimate of the number of working parents with children in paid care. The New York and Kansas study teams used state tax agency data on the number of working parents who claim the Dependent and Child Care Tax Credit (DCTC). There is no established method for counting the number of working parents using paid care. Some of these methods used by state teams are described below.

Census Data

The Tompkins County and Maine reports used US Census Bureau data on children under age 6, by employment status of parents, to estimate the ratio of working parents per child.¹ The ratio was then applied to the total number of children in paid child care to estimate the total number of working parents associated with children in paid care. Vermont and Rhode Island used data on adult labor force participation to estimate the total number of working parents with children in paid care. However, not all working parents have children in paid child care. The Current Population Reports: Who is Minding the Kids (US Census, Spring 2002) shows that only 42.3 percent of preschoolers are placed in non-relative care (see Appendix D). This number is even lower for school age children. Thus, this approach is likely to over count the number of parents with children in paid child care.

Survey Data

National surveys have been used to estimate the number of children in paid care (see Appendix D). Several county studies in California used the National Survey of America's Families (NSAF) estimates for children placed in paid care (48 percent of children under 5 years of age) multiplied by the number of parents in the labor force to get an estimate of the number of working parents with children in paid care. However, it is important to remember that the NSAF only covers 13 states and one cannot assume the NSAF averages are applicable for every state. Minnesota relied on statewide parent survey data to estimate the number of working parents with children in non-parental care.

Another study conducted a survey but differentiated parents using paid care for employment purposes from those who use paid care for educational enrichment. Although the child care sector provides both education and care, and all parents who purchase care are its customers, this approach discounts those who use child care primarily for educational purposes, and thus underestimates the true size of child care demand.

Dependent and Child Care Tax Credit Data

The Kansas and New York studies used state Dependent and Child Care Tax Credit (DCTC) claim data to count the number of working parents with children in paid child care.² Study teams using Dependent and Child Care Tax Credit data should make sure to count married couples that file jointly as two parents. The DCTC provides a conservative estimate of the number of working parents with children in paid care because low-income parents, who do not owe taxes, are unlikely to claim the credit. However, this method directly counts actual working parents who use paid care. Estimates relying on Census or national survey data require assumptions about actual use of paid care.

Table 5, from the New York report, shows how the number of working parents with children in care was calculated for that state. The number of parents with children in paid care in the New York report (745,435) is higher than the number of children served by New York State regulated care (623,000) because tax credit claims include parents who use informal (unregulated) child care and the New York State report only focused on regulated care.

Table 5. New York State Dependent and Child Care Tax Credit
	No. of filers	Amt ($1,000)
Total Filers	505,846	201,550
Single	9,328	5,429
Married Jointly	239,589	47,087
Head of Household	256,929	149,034
Additional Married Working Parent*	239,589
Total Working Parents	745,435	201,550
Source: NYS Office of Tax Policy Analysis, Tax Year 2000 *Married filing-jointly figure is doubled to account for both working parents that file under the same form.

Data Limitations

The methods described in this section represent initial attempts of several study teams to estimate number of working parents with children in paid care. The variation in methods illustrates the need to build better data systems on parents served by the child care sector. The number of working parents with children in paid care and the number of parents in the workforce are both important elements that shape the demand for child care.

ESTIMATING PARENT PURCHASING POWER

Market demand includes both an estimate of the number of working parents using paid care as well as their purchasing power. Wage income provides a reasonable estimate of purchasing power and can be roughly calculated by multiplying the number of working parents, with children in paid care, by the median income for the area.³ The following calculation from the Kansas report simply provides an estimate of working parent purchasing power:

Some studies have limited their focus to single parents and mothers in dual-earner households. We have found that business leaders reject this approach because it under counts true market demand and fails to recognize that child care supports workers regardless of gender and family structure. This is one reason why employers make work/life and child care programs available to all employees.

Other studies adjusted total earnings by a discount factor for lower earnings of the woman worker. Such methods underestimate the aggregate purchasing power of parents and carry the implicit assumption that child care only supports women workers.⁴

PARENT TUITION: A LARGE PROPORTION OF FAMILY EXPENDITURES

Unlike higher education where tuition represents only 35% of total costs (Mitchell et al., 2001), parent tuition costs represent the largest portion of the gross receipts of the child care sector. Estimates for New York (see Figure 3) show that parent tuition accounts for 63 percent of the gross receipts of the child care sector, and government investment in quality early education, and subsidies for low-income parents account for the rest.⁵

The price of care can be used to assess the affordability of care across income brackets and regions. As shown in Figure 4 below, child care comprises a significant portion of total family expenditures. The goal of the Tompkins County study team was to create a community fund so all families could gain access to affordable child care. To illustrate demand for the fund, the study team used the average weekly charges for a 3 year-old in a child care center, and then estimated the percentage paid by parents after accounting for government subsidies and sliding fee scales.

The graph below (Figure 4) shows the cliff effect. Moderate-income working families pay the highest percentage of family income for child care and receive little support. This group was the primary target of the Tompkins County team and they have initiated a campaign to increase utilization of tax credits, employer sponsored flexible spending accounts, and public subsidies, enlisting employer support in educating workers about these programs.

Child care costs are high for most parents, but child care providers are among the lowest paid workers in the economy. The current average price of full-time child care is $6,600 - $11,000 per child in NYS, and many families have multiple children in care. The Vermont study found child care expenses to be larger than expenditures on housing.

Policy makers in the child care field face the challenge of making child care affordable for parents, while improving the profitability of the sector and providing living wages for child care workers. Most studies find that increased government support is the best way to address these challenges. The importance of government investment in child care will be discussed in Section 6 of this report.

¹ These two studies defined working parents needing paid care as single parents that work and dual-parent families with both parents working. These studies assumed that dual-parent families with only one parent working would not demand paid care.
² To claim the credit, both parents in a two-parent household must be working and each earning more than is spent on child care. The Federal tax credit can be used for eldercare as well, however, Internal Revenue Services data for tax year 2000 show that 97.6 percent of returns claim the Dependent and Child Care Tax Credit for a child and 98.8 percent of the dollar amount is for child care credit (IRS, Statistics of Income Bulletin, 2003).
³ If it is possible to get more detailed information on income distribution of families using paid care, then this should be used. For example, when focusing specifically on families using subsidies, use income estimates for that population group, not the population as a whole.
⁴ The national report (M.Cubed, 2002) only counted the total earnings of the mother in the dual-parent household, plus the earnings of single working parents. This approach assumes there is no investment/education/consumption value to child care – e.g. that child care’s only value is to support working parents. Child care has an educational investment value in its own right which is likely to be the most important economic contribution of the sector.
⁵ New York State spent $874 million on subsidies in 2002, of which $674 went to licensed providers. This sum was subtracted from the $3.64 billion in provider fees to reflect the actual level of parent contributions. (Total Gross Receipts in NYS: $2.9 billion parent fees, $874 million subsidies, $828 million quality and education investments = $4.7 billion.