Poster Paper: Low-Income Families and the Cost of Child Care: How State Child Care Subsidy Policies Affect Out-of-Pocket Expenses

Saturday, November 9, 2013
West End Ballroom A (Washington Marriott)

*Names in bold indicate Presenter

Sarah Minton and Christin Durham, Urban Institute
The Child Care and Development Fund (CCDF) provides support for low-income families who are working, seeking work, or participating in education or training activities, but the amount of assistance a family receives can vary greatly depending on where a family lives and how much income a family earns.  The program subsidizes the cost of child care, with families paying only a portion of the full cost.  The family’s share of the cost is often referred to as the family’s copayment.  By subsidizing the cost of the child care, CCDF can provide a key work support for low-income families with children so that they can afford child care while continuing or beginning work.

Using data from the CCDF Policies Database (an OPRE-funded project), we are able to look in detail at each state’s copayment policies – from the way copayments are calculated to the detailed fee schedules in each state.  We can use this information to select specific family structures and income amounts for more accurate comparisons across states.  Based on information available from the database, we know that copayments vary greatly across states, with families in some states paying a higher percentage of their income than families in other states.  For example, for a single parent earning approximately minimum wage and with two children in care, the monthly copayment could range from $0 to as much as 33 percent of the family’s monthly income, depending on where the family lives.  If this same family earned $5,000 more per year, the copayment could range from $0 to as much as 50 percent of the family’s monthly income.

In this presentation, we will use the detailed policy rules available from the CCDF Policies Database to examine the differences in copayments across states and across income ranges.  States’ copayment policies not only affect a family’s out-of-pocket costs for child care, but potential changes in those costs could also affect a family’s choices in terms of level of work participation.  We will examine the relative changes in copayments compared to increases in a family’s income, looking specifically at how much of the additional income must be contributed to higher child care copayments as income increases.  We will examine changes across several income levels, from families earning close to the minimum wage to families at the highest income levels allowed under the subsidy program.  We will also look at the “cliff effect”, comparing the copayment paid by the highest-income eligible families to the full cost of care for families who no longer qualify for subsidies.