Childcare Regulation and Quality

David Boaz blogged today on the Washington Post story about a lawsuit regarding DC childcare regulations. DC is set to require directors of child-care facilities to obtain a bachelor’s degree in early childhood development, and assistant teachers and home-care providers to have Child Development Associate (CDA) certificates in the same subject.

The WaPo write-up follows the usual boilerplate for these discussions: on the one hand, providers say complying with the regulations will be burdensome and increase costs; on the other hand, the government talks up the educational benefits of the new regulations. This all implies there is a trade-off between quality and cost.

But is there? Actually, this is a classic example of the government’s argument not considering the market for childcare as a whole.

Yes, requiring child-care workers to achieve higher qualification levels could result in more highly trained formal caregivers, who can help children to develop from an educational perspective. Such a regulation might also provide a “quality assurance” effect for some particularly conscientious parents.

But the effect on the quality of care faced by the whole population of children is ambiguous. By restraining the supply of formal care via regulation, the price of formal care will rise. If the price of formal childcare rises, then some parents will decide to substitute to more informal forms of care or even have to stay home to care for their own children. According to the government’s definitions of “quality” (which may be quite different from parents’ own perception) there will be substitution into lower quality settings as a result of childcare becoming more expensive.

Previous academic work suggests the price effects of these types of regulations are large. Diana Thomas and Devon Gorry estimated that even the more modest requirement for lead teachers to have a high school diploma increases childcare prices by between 25 and 46 percent. Hotz and Xiao likewise find that increasing the average required years of education of center directors by one year reduces the number of child care centers in the average market by between 3.2% and 3.8%. This effect manifests itself overwhelmingly in low income areas, with quality improvements (proxied here by accreditation for the center) occurring in high-income areas.

In other words, the real trade off is not quality vs. cost, but better quality for those rich enough to still be able to use formal care vs. less accessibility to care and higher prices for the poor. And that means lower quality and fewer options for the least well off – widening, rather than narrowing, supposed educational inequalities. Given average annual full time infant care in DC already costs $23,000 plus per year, one would think the government would be sensitive to these concerns about affordability.