Welfare Reform and Child Care Options for Low-Income Families

Beginning of article

SUMMARY

For the changes under welfare reform to positively affect children, the gains that mothers make from employment must lead to improvements in children's daily settings at home, in child care, at school, or in the community. This article focuses on the role child care can play in promoting the development of, and life opportunities for, low-income children. Key observations include:

* Total federal and state funding for child care for welfare and working poor families has increased dramatically since welfare reform, from $2.8 billion in 1995 to $8.0 billion in 2000.

* The majority of welfare mothers tend to rely on informal child care arrangements when first participating in welfare-to-work programs, but as they move off welfare and into more stable jobs, they are more likely to choose a center or a family child care home.

* Although children from poor households stand to benefit the most from high-quality care, they are less likely to be enrolled in high-quality programs than are children from affluent families, partly due to uneven access to high-quality options in their neighborhoods.

* Less than one-quarter of all eligible families use child care subsidies, and usage varies widely across states and local areas reflecting various barriers to access and scarcity of quality center-based care.

The authors conclude that to achieve welfare reform's ultimate goal of breaking the cycle of intergenerational poverty and dependence on government benefits, welfare-to-work programs should promote learning and development among children in welfare and working poor families by increasing access to high-quality child care in low-income neighborhoods.

**********

A central goal of the welfare reforms undertaken in the 1990s was to increase parents' self-sufficiency and end dependence on government benefits. (1) For this goal to be realized, not just for the current generation but also for the next, attention must be paid to the early development and long-term advancement of children in welfare and working poor families. Mothers' employment gains are of little consequence to children's development unless such gains lead to improvements in children's daily environments at home, in child care, at school, or in the community.

This article focuses on the effects of welfare reform on how and where low-income children spend their days, and on the role child care can play in improving their lives. The first section reviews the history of public interest and support for child care. The second section examines patterns of child care use among low-income families, changes in family life spurred by welfare reform, and factors affecting parents' choice of care. The third section summarizes what is known about the quality of care in various settings and how the quality of care affects children's development. The fourth section discusses strategies for crafting more effective policies to advance child care options for low-income families. Finally, the article concludes with some thoughts about steps needed to help achieve the policy aim of ending the inheritance of family poverty.

The Public Interest in Child Care

Society has a stake in families' child care choices, both because child care enables parents to work and because it can influence children's development. Separate strategies and funding streams have evolved over the past century in response to each of these concerns.

The settlement house movement, which began in the late 1800s, included a push to expand child care centers for single mothers who had to work. Congress redoubled this effort during World War II, rapidly expanding center-based programs for female factory workers when the labor power of young mothers was sorely needed. (2) A parallel effort focused on providing a wholesome environment for children in poverty. This movement first emerged in the 1930s, when federally funded nursery schools were established to create jobs for unemployed teachers, nurses, and others. (3) State-funded preschools emphasizing early education and school readiness evolved out of this tradition, most notably Head Start, a child development program created in 1965 to serve low-income children and their families. Then in 1988, Congress enacted three welfare-related child care programs to subsidize care as a support for parents who were engaged in work preparation activities or work itself, and who were on welfare, leaving welfare, or at ri sk of becoming dependent on welfare. In 1990, Congress also created the Child Care and Development Block Grant to subsidize child care for a wider range of low-income working parents.

The welfare reform law of 1996 enacted further changes to federal child care programs. Growing out of an interest in enabling work, but touching on concerns for children's development, the Child Care and Development Block Grant was expanded and consolidated with the other welfare-related funding streams described above. (See the article by Greenberg and cob leagues in this journal issue.) The new goals established for the expanded block grant, referred to in federal regulations as the Child Care and Development Fund (CCDF), are summarized in Box 1. In addition to increasing funds for child care, the law also allows states to spend funds allocated to the new welfare program, Temporary Assistance for Needy Families (TANF), directly for child care, and to transfer up to 30% of their TANF funds into the CCDF.

Meanwhile, spending on preschools and early education programs also increased. Federal spending on Head Start preschools, for example, grew from $1.2 billion in 1990 to $5.3 billion in 2000 ($3.8 billion in constant 1990 dollars). (4) The Early Head Start program was established in 1994, and preschool support from Title I of the Elementary and Secondary Education Act began to grow rapidly in the mid-1990s as well.

Figure 1 summarizes the growth in federal appropriations for major child care and early childhood programs over the past decade. Only the federal Dependent Care Tax Credit, a nonrefundable tax credit for taxpayers who pay out-of-pocket for child care, declined during this period. (5) The use and significance of this tax credit are likely to increase, however, as the Bush administration has agreed to make the credit refundable beginning in 2002.

In addition, with their added flexibility under TANF, some states have aggressively reallocated welfare dollars to child care and after-school programs. Total federal and state expenditures for child care under the CCDF and welfare-related programs grew from $2.8 billion in 1995 to $8.0 billion in 2000, including $2 billion in funds transferred from TANF. (6)

States have also stepped up their funding for early education. At least 43 states now support preschool programs for low-income families, enrolling more than 750,000 children. State funding for early education programs for children ages 3 to 6 grew from just $180 million in 1987 to over $2 billion in 1999. Georgia is the only state to provide universal access for all four-year-olds whose parents seek preschool programs, but state-funded programs serve sizeable shares of low-income children in California, Maryland, Massachusetts, New York, and North Carolina. (7) According to a recent report from the National Center for Children in Poverty, total state funding for early childhood initiatives, including infant and toddler programs and an array of child development and family support efforts, exceeded $3.7 billion in 2000. (8)

Child care funding at both the state and federal level has risen significantly, and children are spending increasing amounts of time in care, but the role child care plays in the lives of children and parents is not well understood. The remaining sections of this article examine the implications of welfare reform's changes to child care as an increasing number of low-income mothers move into jobs.

Patterns of Child Care Use among Low-Income Families

At the dawn of welfare reform in the mid-1990s, a fair amount of research had examined the type of child care relied upon by low-income families. As illustrated in Figure 2, national data indicate that families living below the poverty level relied heavily on relatives to care for both their preschoolers and school-age children in 1995, as did families living above poverty. However, families who were better off used nonrelative care almost as frequently as relative care for their preschoolers, interspersing different types of care. (9) Research shows, for example, that more than 70% of four-year-olds from affluent families were enrolled in a center or preschool in 1995, compared with 45% of those from low-income households. (10) Affluent families were also much more likely to provide multiple types of enrichment activities for their children in grade school. School-age children in households earning more than $55,000 a year were almost three times as likely to participate in sports, and more than twice as lik ely to take lessons after school, than were children from families earning under $18,000 annually. (11)

Studies show that the types of care families select also vary widely across states. To illustrate these between-state differences, Figure 3 shows the share of preschool children who attended a center-based program or family child care home in 1997 among families with a working mother in four different states, by poverty level. The share of children from households earning less than twice the poverty line who attended centers ranged from 17% in California to 38% in Massachusetts. (12)

Changes in Child Care Spurred by Welfare Reform

Before welfare reform, a significant number of mothers living in poverty cared for their children themselves, as they could usually rely on welfare without working. Caseload data from 1995 indicate that only about 20% of families receiving welfare were either engaged in work activities or employed, and 4.9 million families (monthly average) were on the rolls. (13) But the 1996 federal welfare law required for the first time almost all parents, including those with preschool-age children and younger, to participate in work activities. (14) By 1998, the percentage of families engaged in work activities or employed had grown to 35%, and only 3.2 million families were on the rolls. (13) As welfare mothers moved into jobs, their children--especially preschool-age children--moved into nonmaternal child care arrangements. Many welfare mothers did not have a child care provider prior to the welfare-to-work requirements, and even for mothers who did, the number of hours their children spent in nonmaternal care likely increased. (15)

A Berkeley-Yale research team estimated that at least one million preschool-age children moved into new child care settings between 1996 and 1998, following changes under welfare reform. (16) This estimate may be conservative, as it includes only families who were enrolled in work activities and those employed about a year after leaving welfare. Also, the estimate did not include the increasing number of older children who began spending time at home alone after school while their mothers were still at work.

Data on the types of child care selected by welfare parents are emerging from a number of studies in several states and cities across the country. The majority of welfare families rely on informal arrangements when they begin to participate in work activities. For example, in Vermont, most of the growth in use of nonmaternal child care following welfare reform involved relatives and informal providers, up 26% in the early years of the state's welfare-to-work demonstration program, whereas use of licensed centers and family child care homes increased by only 5%. (17) But in some cities and counties across the country, more than 40% of welfare families with preschool-age children select center-based care as they move into work activities. (18)

The Growing Up in Poverty (GUP) Project is detailing the wide variability in child care histories of young children in California, Connecticut, and Florida. (See Box 2.) The first wave of maternal interviews and child care observations, collected …