Poster Paper: “Cliff Effects” in Massachusetts Subsidized Child Care

Friday, November 8, 2013
West End Ballroom A (Washington Marriott)

*Names in bold indicate Presenter

Graham W. Wright, Brandeis University
Massachusetts provides low income families with subsidized child care using funding from the national Child Care Development Fund (CCDF). Eligible families receive vouchers for child care while paying a weekly co-payment that rises with income. However, the state specified co-payment schedule does not increase gradually as income rises. At a certain income level there is a dramatic increase in co-payments for families that are still struggling to work their way out of poverty. This dramatic increase contributes to a “cliff effect” whereby certain families would be significantly worse off financially at higher earnings levels. Qualitative research has suggested that some individuals in Massachusetts have chosen to quit their jobs when their incomes rose in order to avoid paying hundreds of dollars more per month in child care co-payments. This feature of the subsidized child care program in Massachusetts is a serious barrier to economic self-sufficiency for low income families in the state.

This paper will make use of publicly available data from the department of Early Education and Care (EEC) which administers the CCDF child care program in Massachusetts, and highlight the specific elements of EEC policy that most directly contribute to cliff effects. The Massachusetts CCDF co-payment schedule will be compared to the co-payment schedules of other states, including Wisconsin and Connecticut, which do not contain such cliff effects. The paper will propose several alternative co-payment schedule for Massachusetts, based on those of other states, which eliminate cliff effects for low income families, while remaining cost-neutral with respect to current policy. This paper will argue that the reforms described should be a high priority for Massachusetts, and could dramatically improve the economic self-sufficiently of low income families in the state.