Child Care Finance as Economic Development

1
Child Care Finance as Economic Development

• Presented to
• State Child Care Administrators Meeting
• August 1, 2002
• Washington, DC
• Mildred Warner, Ph.D.
• mew15_at_cornell.edu
• Department of City and Regional Planning
• Cornell University
• with analytical support from David Kay, Amy Erica
  Smith and Rosaria Ribeiro

2
Child Care Finance as Economic Development

• What is economic development?
• How can we count the contributions of the child
  care sector?
• How can we use an economic development frame to
  increase public and private support for child
  care?

3
What is Economic Development?

• Growth in jobs and income
• Human development (literacy, health)
• Choice and freedom
• Sustainability

4
Where Does Child Care Fit In?

• Child care is a critical part of the social
  infrastructure for economic development
• It enables parents to work
• It improves the quality of life in our
  communities
• It promotes brain development and prepares
  children for school and future work

5
Care Work is An Economic Sector

• Employment growth in services is high, especially
  for care work
• quality requires low ratios of clients to
  providers
• limited potential for substitution of technology
  or capital for labor

6
Valuing Care Work

• In the US we primarily see care as a private
  responsibility
• The Census quit counting unpaid care work as
  productive around the turn of the century
• As parents purchase care in the market place - we
  can count its economic contribution again
• Business recognizes the care burden of its
  workers - e.g. Work/Family policies

7
Broadening Public Support

• Economic development arguments can help us to
  broaden the collective responsibility for care.
• Be careful in framing this argument not to
  undermine the educational and social values of
  care.
• Remember, economic development itself is now
  being framed in broader terms - sustainability,
  human development, choice and freedom.

8
How to Move Forward?

• Define the Child Care Sector as an Industry
• businesses, employees
• Calculate its economic impact
• Direct effect on spending and employment
• Indirect effects
• Become part of the economic development debate

9
Counting the Economic Impact of Child Care
Direct Effects (gross receipts, employment)
Impact of Parents Earnings (infrastructure)
Indirect and Induced Impacts (economic
multipliers)
Total Value of Local Economic Linkages (output,
employment, linkage)
10
Basic Data is Critical
Direct Effects - gross receipts and number of
workers - give size and scale of industry Gross
Receipts capacitychargesgovernment
revenue (Includes private and publicly funded
programs) Other Useful Data establishments,
children served, parents served Must know these
to calculate economic impact and compare child
care to other sectors
11
Good National Data Are Hard to Get

• Number of Workers
• 0.65 million, Implan (1998)
• 1.1 million, Econ Census (1997)
• 4.6 million, Ctr for Child Care Workforce (1999)
• Gross Receipts
• 18.9 billion, Econ Census (1997)
• 24.2 billion, Implan (1998)
• 35.6 billion, SIPP est. consumer spending (1995)
• 14.4 billion, Government Funds (UPK, Head Start,
  CCDF, TANF 2000-01)

12
Standard Economic Data Undercount Child Care
13
Direct Effects Allow Comparison to Other
Industries

• Output in Tompkins County in 1998
• Total Economy 4.2 Billion, 60,000 jobs
• Colleges, Universities, and Schools
• 759 Million, 18,000 jobs
• Child Care 15.2 million, 700 jobs
• Local Transportation 11.9 Million, 248 jobs
• Hotels 23.8 Million, 560 jobs

From IMPLAN Database, 1998, CCRR data 2001
14
Counting the Economic Impact of Child Care
Direct Effects (gross receipts) 15.2 million,
700 jobs
Impact of Parents Earnings (infrastructure)
Indirect and Induced Impacts (economic
multipliers)
Total Impact on the Economy
15
Multiplier EffectsInput-Output analysis
calculates the ripple effects of an industrys
spending in the local economy.
Direct Effects Child care centers take in
revenue.
Total Value of Local Economic Linkages
1
?
Indirect Effects Centers make purchases.
?
Induced Effects Centers pay worker wages.
16
Every 1.00 spent on child care generates 1.50 -
3.50 in the larger economy.
Output Multipliers Increase with the Size of the
Economy
17
Impact of the Child Care Sectors Spending in
Tompkins County, 1998
1.0
0.28
0.32

• Calculated using IMPLAN
• 8 million 1.60 12.7 million
• Calculated with CCRR data
• 15.2 million 1.60 24.2 million

18
Employment Multipliers
Every child care job generates 1 1/3 to 2 jobs in
the wider economy
Tompkins 1.27 San Antonio 1.54 County (regio
n) New York 1.42 California 1.68 (state) (st
ate) Vermont 1.46 U.S. 1.8-2.0
19
Counting the Economic Impact of Child Care
Direct Effects (gross receipts) 15.2 million,
700 jobs
Indirect and Induced Impacts (economic
multipliers) 9 million, 200 jobs
Impact of Parents Earnings (infrastructure)
Total Value of Local Economic Linkages 24.2
million, 900 jobs
20
Economic Infrastructure

• Roads, airports, and buses enable people to get
  to work and businesses to get their supplies.
• Child care enables parents to work.

• Riders only pay a token amount toward the cost
  of public transit (26 of cost of urban public
  transit)
• Parents pay 87 of the costs in child care centers

The Urban Transit Fact Book, http//www.publicpur
pose.com/
21
Child Care Enables Parents to Work
Average Wage in Tompkins County 31,575
Number of Parents using Paid Child Care 3500
Total Impact of Parents Earnings 112.3 million


How much can child care count as its contribution
to the parent wage impact?
22
Counting the Economic Impact of Child Care
23
How Will We Use this Economic Development Frame?
For more information visit Mildred Warners
Local Government Restructuring Web
Site www.cce.cornell.edu/restructuring
24
Become Part of the Economic Development Debate

• Direct Effects - Show size and scale of child
  care industry
• Multipliers - Show the strength of the sectors
  economic linkage in the local economy
• Caution - linkage effects for one industry are
  direct effects for another - avoid double
  counting
• Use multipliers to assess the impact of changes
  in the sector
• meeting the supply/demand gap
• expanding subsidies to serve all eligible
  children
• Use multipliers to compare child care to other
  sectors

25
Tompkins Co. Early Education Partnership

• Led by Chamber of Commerce
• Includes CCRR, banks, employers, foundations,
  government
• New voice for child care, new solutions
• Goal Community Fund for Child Care
• Universal access to affordable quality care for
  all families

26
Give a Positive Message - Claim your place in the
economic development debate

• Tompkins County Chamber of Commerce sent an
  economic impact fact sheet to all businesses
• Our largest employer, Cornell University,
  introduced a new child care benefit for its
  employees - 600,000
• Employers see child care as their issue
• Quality child care reduces employee turnover and
  absenteeism

27

• Build Coalitions with Business
• FL Child Care Partnership Act
• Public /Private match
• Grew from 2 million in 1996 to 10 million in
  1999
• Business helped lobby for it
• Identify Industries Where Parents Work
• 65-85 of workers with child care subsidies work
  in services and retail
• Child care subsidies are employer subsidies -
  reduce the cost of labor

28
Use an Economic Development Frame instead of a
Welfare Approach

• Tompkins County used impact analysis to look at
  child care subsidies.
• Showed a positive return on subsidies as an
  economic development investment (1.60), and a
  parent wage impact (2.00).
• Is asking businesses to assist with an outreach
  campaign to parents, and to encourage government
  to expand subsidy coverage.

29
National Economic Impact of Child Care Subsidies
1.00
Value of National Economic Linkages of Child Care
Subsidies 16.1 Billion
Direct Impact of Subsidies 4.6 Billion (CCDF
2001)
Multiplier Effects 11.5 Billion
2.50
Every dollar spent on child care generates 3.50
in the national economy. (Based on SAM all govt
multiplier, IMPLAN 1998)
30
Subsidies Enable Parents to Work
US Families Receiving Subsidies 1.05
million (1999)
Direct Economic Impact of Parent Wages 14.5
Billion
Estimated Annual Earnings 13,800 Avr retail
wage/ 30 hr wk
Parents who join the labor force with the help of
child care subsidies earn 3.15 in new income for
every 1.00 invested in child care subsidies.
31
Build a broader base of political support

• In Tompkins County only 1 in 8 eligible children
  receive child care subsidies.
• The Partnership determined if government funded
  all eligible children in Tompkins County it would
  return
• 9 million in federal and state taxes to the
  local economy
• stimulate 5 million in local economic impact.
• The Chamber of Commerce is sponsoring an employer
  outreach campaign to Fill the Gap!

32
What if we funded all eligible children
nationally?
Example If nationally only 30 of eligible
children are served, at current funding levels of
4.8 billion (Fed CCDF), it would take about 16
billion to serve all eligible children.
Potential national economic impact of increased
child care subsides 56 Billion
Direct Impact of Meeting Subsidy Gap 16 Billion
Multiplier Effects of Subsidies 40 Billion
Every dollar spent on child care generates 3.50
in the national economy.
33
Claim Your Share of State Policy Support

• In New York State, Child Care has economic
  impacts (1.94) similar to
• -local interurban passenger transit (1.85),
• -job training (1.95),
• -elementary and secondary schools (2.01),
• - colleges and universities (1.95).
• NYS SAM Type II output multipliers, Implan
  1998
• Is child care getting a similar level of subsidy?

34
Build a Community Subsidy Fund

• Goal of Tompkins Co. Early Education Partnership
• Every family should have access to quality
  affordable child care.
• Child care staff should not have to subsidize the
  cost of care through unacceptably low wages.
• The Partnership will help all families pay for
  child care through a universal system which
  combines public, private, and charitable funds.

35
Universal Subsidy FundTompkins County Early
Education Partnership
Quality child care affordable to all
36
Adopt economic development strategies for child
care

• Industrial recruitment strategies
• infrastructure improvements, zoning
  assistance, tax abatements, tax increment
  financing
• Small Business Development
• Managerial assistance, financing, scale
• Business Retention and Expansion
• High turnover means child care needs a
  retention strategy

37
Partner with Community Economic Developers

• National Community Capital Association sponsored
  an RFP for 11.7 million to support child care
  finance in 2001 (with Providian Financial)
• Community Development Corporations and Community
  Development Financial Institutions support child
  care
• Coastal Enterprises, ME
• Self-Help, NC

38
Be Part of the Solution

• Be part of a new definition of economic
  development
• Quantify the economic contributions of the child
  care sector
• Get child care in your county/state economic
  development plan
• Build partnerships with the business community,
  providers, foundations and government

39
Be Part of the Solution

• Change zoning laws
• Create new subsidy and incentive streams
• Redefine welfare as economic development to
  increase level and utilization of subsidies
• Use new policy tools and strategies
• Make care a community responsibility