Low wages are common in the child care workforce. In 2020, median hourly wages were $12.24 per hour for child care workers (in all settings) and $15.35 per hour for preschool teachers (in all settings).i Further, child care workers serving infants and toddlers tend to have lower pay (in the second percentile of all occupations) than teachers of children ages 3 to 5 and not yet in kindergarten, and this wage penalty by age of children served persists regardless of workers’ levels of educational attainment.1,32 Low and inequitable compensation can be considered a result of a market failure wherein parents face financial constraints that force child care providers to keep costs low to remain in the market – staff compensation representing a large portion of the costs. The low and/or unpredictable wages and lack of benefits may be a contributing factor to the decline in home-based providers in recent years (between 2012 and 2019, the share of children under age 3 served in homebased care declined from 33.3% to 28.5% and the share in center-based care increased from 17.7% to 21.5%).2,42 Low pay among the child care workforce contributes to high levels of stress, depression, and burnout, and the economic insecurity of these workers – some falling below the federal poverty level (FPL) and many relying on public services for economic needs.39,51
A variety of state policies can address the compensation of the child care workforce, although currently few are implemented. States can establish compensation standards, whether required or as guidelines, as part of state licensing, participation in public programs, or participation in quality rating and improvement systems (QRIS),ii and states can include salary schedules and benefits as rating components of their QRIS. A state can also increase its minimum wage, which may impact the wages paid to the child care workforce if the new minimum is higher than child care workforce wages in that state.3,4
Additionally, states may implement financial relief policies intended to augment annual compensation of the child care workforce. Examples of financial relief policies include: (a) stipend programs providing cash awards to teachers based on educational attainment and retention, such as the WAGE$ program;1,5 (b) refundable tax credits providing wage supplements through the tax system to child care staff (directors and teachers) who work in facilities participating in the state QRIS, with the value of the credit scaled by educational attainment;1 and (c) one-time bonuses to child care workers, typically offered as educational scholarship funds, bonuses for participating in and completing higher education and training in the child care field (including professional development), or bonuses for retention within a program, such as T.E.A.C.H. Early Childhood scholarships.1,6
The level of state subsidy reimbursement rates to providers serving low-income families, particularly home-based providers, may be important in boosting staff compensation.7 Currently, most states rely on market rate surveys, or the price charged by providers, to set provider reimbursement rates, which often results in low and inequitable compensation for early educators. Cost estimation models are an alternative approach to setting reimbursement rates that are more representative of the true cost of providing high-quality care.48 This can allow reimbursement to account for providing living wages to caregivers that are similar to elementary school educators with similar qualifications.
Who Is Affected by Child Care Workforce Compensation?
In the US, the child care workforce includes approximately 932,010 preschool teachers, caregivers, and preschool/child care center administrators.8,32,iii One in every 110 workers and one in every 55 female workers make a living in early childhood education and care.39,iv Workforce estimations include teachers serving students outside the birth-to-age 3 group of focus due to the lack of available data on those serving infants and toddlers. Teachers serving infants and toddlers, and teachers in home-based settings tend to have lower pay compared with teachers serving higher age groups and teachers in center-based settings, respectively. The lower pay is particularly problematic for Black staff who disproportionately work with infants and toddlers in center-based settings and have lower wages than other groups of child care workers by race/ethnicity, and particularly problematic for Black, Latino, and immigrant staff who disproportionately work with infants and toddlers in home-based settings.1 To the extent that the quality of care, and by extension outcomes of children in care, are impacted by child care workforce compensation, the millions of children in nonparental care (about half of children in the US under age 3 receive nonparental care) may also be affected by policies targeting compensation of child care workers.42
What Are the Funding Options for Child Care Workforce Compensation Increases?
Funding for financial relief policies can come from both public and private sources, including Child Care and Development Fund quality funds, state general funds, state pre-K funds, state funds from tobacco taxes or lotteries, local government funds, foundations, nonprofits, and corporations.5,6,9
Effective March 11, 2021, the American Rescue Plan (Public Law 117-2) provided an unprecedented $39 billion (for FFY 2021) federal investment in child care and recommendations to use funds to increase child care workforce compensation.35,36 Funding included $24 billion for child care stabilization grants to providers and $15 billion for the Child Care and Development Block Grant (CCDBG), however funding is time constrained.35,36 Guidance provided by the US Department of Health & Human Services Office of Child Care (OCC) outlines increasing compensation for child care workers as central to stabilizing the industry, and strongly encourages use of funds to increase wages and benefits (i.e., retention and recruitment allowances, and resources for staff to assist with health insurance premiums).37,38,44,49,50
Federal Preschool Development Grant Birth Through Five (PDG-5) awards may also be used by states to assess and address child care workforce compensation issues. Established in 2015, PDG B-5 provides competitive grants to states and territories to strengthen collaboration and coordination among existing early care systems and improve transitions from early care programs into elementary school. Funding can come in the form of (a) initial grants which support states in comprehensive statewide birth through five needs assessments and strategic planning, and (b) renewal grants which support states in carrying out strategic plans.10
- Wages are from the May 2020 Occupational Employment Statistics (Bureau of Labor Statistics).
- For example, setting a wage floor/minimum compensation standard or identifying living wages, by education level and/or staff position.
- Early childhood workforce is calculated here by adding the 2020 employment estimates of the US Bureau of Labor Statistics Occupation Profiles for (i) Childcare Workers, (ii) Preschool Teachers, Except Special Education, (iii) Special Education Teachers, Preschool, and (iv) Education and Childcare Administrators, Preschool and Daycare.
- Statistics are from the US Department of the Treasury, and childhood education and care is defined as all nonparental care of infants to children 5 years of age.