Child Care Subsidy Policy Changes and Parental Employment and Earnings Outcomes

• In Event: Subsidized Child Care in Varying State Policy Contexts: Evidence from Administrative Data

Abstract

In October 2018, Virginia implemented two child care subsidy policy changes: 1) Continuous Eligibility such that recipients can receive the subsidy for 12 months, despite changes in work status or income, smoothing participation; and 2) Graduated Income Exit Thresholds, which raises the income threshold for continued eligibility above what is required for initial eligibility. In this project, we use administrative data from the state to examine the effects of these two policy changes that delayed and raised the income level for what is known as the “benefit cliff,” when households would lose subsidy eligibility. We compare subsidy participation, parental labor force participation patterns, household earnings growth, and net income after child care costs after the 2018 policy changes to subsidy participants before the 2018 policy changes and non-subsidy participants in other social service programs who are likely also eligible for the subsidy program but are not participating.

We investigate 4 research questions: 

1. To what extent  did subsidy participation change after the 2018 policy changes? We hypothesize increased participation.
2. To what extent did labor force participation patterns change after the 2018 policy changes? We expect higher levels and stable labor force participation.
3. To what extent did household earnings patterns change after the 2018 policy changes? We hypothesize greater parental earnings.
4. To what extent did household net earnings (earnings minus the cost of childcare) change in October 2018? We expect higher household earnings net of out-of-of-pocket childcare costs. 

We use linked administrative data from 2015-2022 from the Virginia Department of Social Services (DSS) and unemployment insurance (UI) wage records from the Virginia Longitudinal Data System (VLDS) which contains monthly subsidy participation, child care costs, and parental copay; quarterly earnings information; and basic demographic and household composition information on the universe of participants in the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance to Needy Families (TANF), or subsidy.  

Using difference-in-differences models, we examine how the discrete change in policies related to continued eligibility  (October 2018) impacted subsidy participation, labor force participation, observed household earnings, and net earnings of subsidy participants relative to subsidy participants before the policy changes and to eligible non-participants receiving other means tested social services (such as SNAP and TANF). 

Preliminary results indicate that subsidy participation and spell length among participants increased immediately after the 2018 policy changes went into effect. Participants following the policy changes were less likely to receive SNAP, TANF, and had higher incomes.  Earnings grew similarly for both CCDF and non-CCDF groups, however.  Findings have implications for federal and state policymakers and subsidy program administrators seeking to streamline participation and increase family economic self-sufficiency.

Authors

• Colleen M Heflin, Syracuse University
  Non-Presenting Co-Author

• Taryn W. Morrissey, American University
  Presenting Author

• Clay Fannin, University of Wisconsin-Madison
  Non-Presenting Co-Author

• Hyeryung Jo, Syracuse University
  Non-Presenting Co-Author