Do Child Care Subsidies Increase Employment Among Low-Income Parents?

Abstract

State child care subsidy programs are intended to support the employment of low-income parents, particularly for families receiving or likely to receive Temporary Assistance for Needy Families. To study the impact of child care subsidies on employment, this study used detailed data from a survey of low-income parents in Minnesota, linked with administrative data on subsidy receipt, to estimate endogenous switching models of subsidy receipt and parent work status. Parental preferences about the child development-related characteristics of child care settings were the basis for an instrumental variable used to predict subsidy receipt. Receiving a subsidy significantly increased the probability of employment and especially of full-time employment. The findings suggest that expansion of the child care subsidy program could lead to increased employment among low-income parents with young children.