III. Preferences

But perhaps parents are not getting what they want (or children what they need). Parents report themselves satisfied, by and large. In a 1988 survey (USA Today, 1988) only 4 percent reported themselves to be not very satisfied or not satisfied at all with their current child care. On the other hand, almost 1 in 5 would like to change arrangements. Of these, the majority wish to switch to a day care center or nursery school program. When we examine the reasons for wanting to change, the most important are quality-related. Parents are very aware of and concerned about the quality of their child care, and this is highest on the list. Convenience concerns are next, and cost is third or lower on the list.

IV. Potential Indirect Effects of Changing the Price of Care

What would be the impact of reducing the price of child care by increasing the amount of subsidy and by making it refundable? Table 1 shows average estimated expenditures on care by income level. First, families who already take the tax credit would benefit from a higher level of credit. Second, families with no current tax liability but who pay for care and who now file will benefit. The important question is whether families who do not now pay for care will start paying for care or whether those who now pay some will spend more. What do we know about this important issue?

Many low income families have no employed members and those who do often use non-paid care. Table 2 shows employment and child care use by income level. Many families would have to change their mode of care to benefit (since most day care home and center care is paid, but only about half of relative care is paid). Research also shows that use of the Federal Child and Dependent Care Credit increases with dollar expenditures on care.

We know that reducing the price of care will change behavior. We are currently working to determine the extent to which families (particularly low income families) might change the mode of care they use as a result of changes in price. Two studies have addressed this issue. Both show a substantial increase in use of purchased care as a result of a reduction in price of about $10 per week, or $500 per year (Yaeger, 1978: Blau and Robins, 1988).

I should caution that even if child care costs were fully subsidized, not all working parents would use purchased care. Recent work suggests that 60 to 80 percent of working mothers would use purchased day care center or home care if the cost were fully subsidized (Yaeger, 1978: Blau and Robins, 1988). This is because the cost of care is not the only factor families use in making their decision. They also use their own preferences, and the availability and quality of care, to cite the most important. Reducing the price of care may also increase the proportion of mothers who work outside the home. Two recent studies have found price of care effects on employment (Connelly, 1989: Blau and Robins, 1988). As expected, the higher the price, the lower the proportion employed.

Of course, if families don't know about the tax credit or the reverse withholding provision, it won't do any good. The behavioral impact will depend on how well-publicized it is, and whether families are encouraged or helped to use it.

V. The Impact of an Increase in Income

but

Increased income will also result in a small increase in expenditures on care, it is not very large, on the order of 10 percent or less (Hofferth, 1988; Connelly, 1989). Research has found that the type of child care arrangement chosen is not responsive to level of income, other things equal (Yaeger, 1978).

V. Conclusions

In general, the problem with child care is not one of availability of slots. Children are being cared for. There are a number of factors that suggest that availability per se is not a problem. First, few children are caring for themselves; second, supply has increased enormously; third, parental expenditures have not increased much. These three suggest very elastic market response to increase in demand. Parental preferences show overall satisfaction with their children's care arrangements. However, there are a number of possible problem areas, such as care for infants, care for children of low income working parents, and the information families have, that may need attention. Finally, a reduction in the price of care will affect behavior, and the indirect effects should be taken into consideration. In particular, it may lead to a continued increase in the use of paid care, particularly center and family day care.

REFERENCES

Blau, D. and P. Robins. 1988. "Child Care Costs and Family Labor Supply." The Review of Economics and Statistics 70 (August): 374-381.

Connelly, R. 1989. The Effect of Child Care Costs on Married Women's Labor Force Participation. Paper presented at the Annual Meeting of the Population Association of America, April 1989.

Hofferth, S. 1987. "Child Care in the U.S." Statement before the Select Committee on Children, Youth, and Families, July 1.

Hofferth, S. 1988. The Current Child Care Debate in Context. Revised Version of Paper Presented at the Annual Meeting of the American Sociological Association, August 1987.

Hofferth, S. 1989. “What is the Demand for and Supply of Child Care in the U.S.” Testimony presented before the House Committee on Education and Labor, February 9.

Hofferth, S. and D. Phillips. 1987. "Child Care in the United States, 1970 to 1995." Journal of Marriage and the Family 49(August):559–571.

Kisker, E,. R. Maynard, A. Gordon, and M. Strain. The Child Care Challenge: What Parents Need and What is Available in Three Metropolitan Areas. Final Report to DHHS. Princeton, NJ.:Mathematica Policy Research.

U.S. Today. 1988. Unpublished statistics from a national Child Care Survey. U.S. Bureau of the Census. 1987. "Who's Minding the Kids? Child Care Arrangements: Winter 1984-85. Current Population Reports, Series P-20, No 9. Washington, DC: U.S. Government Printing Office.

Yaeger, K. 1978. Modal Choice in the Demand for Child Care by Working Women: A Multinomial Logit Analysis with Quality Adjustment. Unpublished doctoral dissertation. Princeton. NJ: Department of Economics.

Enclosure.

Family Income

<$15,000

$15,000 24,999

$25,000+

628

598

45%

6

4

7

18

21

30

PREPARED STATEMENT OF CLYDE C. HOLLOWAY

Mr. Chairman and distinguished Members of the Committee: As sponsor of the Holloway-Schulze Toddler Tax Credit Bill, I have strong feelings about child care and appreciate this opportunity to testify about legislation which is under consideration by Congress. I wish to address the need we face to pass legislation which best serves the needs of all of our nation's children and their families, and not to discriminate against the majority of families because of the conscientious choices parents make regarding their children's care.

A first aspect of discrimination which I wish to bring to your attention is one which is central to the ABC Bill, and any other legislation which is built on the model of directing grants to child care centers, instead of to families.

The only children who can benefit from a policy such as this are those enrolled in non-religious licensed day care centers. Yet this amounts to only seven percent of all the preschool children in our country. Why should we discriminate against the other 93 percent?

More than half of our country's preschool children receive full time care at home by their parents. These parents are making financial sacrifices, in the form of foregone income, in order to provide the best quality care for their children. It is unfair to penalize these families by excluding them from any form of assistance. On the contrary, their decision to provide full-time parental care for their children is one which deserves the same level of support as the decisions of other families to hire substitute care.

Another seven percent of pre-school children are in families in which the parents juggle working hours so that at least one parent will be available to care for the children. These families, too, would be penalized by ABC-style legislation because they care for their own children. An additional four percent of children are cared for by their parents while those parents are working, many of them in their own homes.

Only a minority of children receive non-parental care on a regular basis, but even among this minority, most are not in settings which would receive any form of assistance under ABC-type legislation. Eleven percent are cared for by other family members, such as aunts or grandparents, while their parents are at work. Thus, the family is the main child care agency for three-fourths of the young children in our country. And most people would agree that the family is the highest quality child care agency possible.

Only one child in four receives primary care by a non-relative. Yet even among these children, whose parents have hired a substitute caregiver, the majority are in informal, non-licensed family settings in the homes of neighbors or friends.

And finally, among the organized, formal day care centers, which provide primary care for about one child in ten in our country, at least one-third are sponsored by or based in churches. Yet these church based child care centers would be eligible for assistance under the ABC Bill only if they forfeit any trace of their religious mission and conduct strictly secularized programs-all the way down to preventing children from saying "milk and cookie" prayers or having a picture of the Good Shepherd on the wall.

The ABC-type approach not only penalizes those families who make sacrifices to care for their own children, but it also penalizes those who, by their free choice, decide that the best substitute care for their children would be in an informal family setting or in a religious child care center. American families have made considered judgments about how their children should be cared for, and Congress has a duty to respect those parental judgments, not to reward the few at the expense of the many.

Some have suggested that the reason why more parents have not freely chosen formal, licensed day care centers for their children is that they cannot afford to make that choice. Yet the evidence does not support this. Comparative studies have not shown that large, formal day care centers offer better care than smaller, informal settings-and they are certainly not better than families. Nor are formal day care centers significantly more expensive, in general than the other child care options parents may prefer. We have no business subsidizing one type of care to the exclusion of other types, and we especially should not be excluding from benefits those families who choose full-time parental care for their children.

Furthermore, to those who see an ABC-type approach as a means of making center-based care more affordable, I ask, how do you intend to cope with the skyrocketing cost of center-based care which will be the inevitable result of such a policy. One of the key elements of this approach is the implementation of nationwide licensing standards, and this will increase the cost of center-based child care