Understanding the Basics of Child Care in the United States

The child care and early learning workforce is a skilled and valuable workforce that, through their care for and education of young children, stimulate all other economic activity. However, despite their crucial role, early educators are vastly undervalued and chronically underpaid. Early educators are overwhelmingly women and disproportionately women of color, meaning that increases to compensation and investments in the workforce are a critical piece of racial and gender equity. The work of early childhood education requires a professionalized staff with the necessary knowledge of early childhood development to support the crucial early months and years of life that set the stage for all future growth and learning.

Even before the COVID-19 pandemic, low compensation drove an educator workforce shortage, and programs, which took longer than all other parts of the economy to recover from the pandemic, struggle with recruitment and retention. In 2023, child care teachers made a median hourly wage of $14.60 and preschool teachers made $17.85. Adjusting for inflation, median hourly wages increased by only $2.11 for child care teachers and by less than 30 cents for preschool teachers between 2015 and 2023. Most early educators also lack access to professional benefits, such as health insurance, retirement savings, and paid time off. In a handful of states, between 40 percent and 50 percent of child care centers offer health insurance as an employer benefit, but the percentages for family child care providers are even lower, and less than one-quarter of early educators in public school settings have employer-sponsored coverage. Moreover, approximately 43 percent of early educators rely on public safety net programs, such as SNAP or Medicaid, simply to cover basic needs and care for their own families. Child care workers access these public benefits at almost twice the rate of educators in elementary and middle school settings, only 21 percent of which rely on such programs. Despite their skilled work, early educators continue to earn less than other workers including animal caretakers, parking attendants, and retail workers, often forcing teachers to leave the field for other higher-paying positions.

Apart from the crucial public investments to increase compensation and benefits for early educators, there are a number of strategies to help grow the early educator workforce: Apprenticeship models; subsidized credentialing, including through the Child Development Associate credential and technical assistance; quality improvement grants; and commitments to supporting early childhood workforce organizing efforts are all crucial steps to help attract more qualified educators to the field, retain their talents, and address the supply side of the child care crisis that diminishes options for families.

In 2016, the Center for American Progress introduced a working definition of a child care desert: an area with an insufficient supply of licensed child care, measured as a census tract where there are at least 50 children under the age of 5 but either no child care options or more than three young children for every licensed child care spot. As defined, child care deserts focus exclusively on licensed care options due to the unavailability of comprehensive data on the license-exempt and unlicensed child care supply. However, families rely on a range of child care types, including FFN care, to supplement what is otherwise an unmet need. In 2018, CAP found that more than half—an estimated 51 percent—of the U.S. population lived in a child care desert. Child care deserts continue to disproportionately affect low-income communities, rural communities, Hispanic or Latino communities, and other communities of color. Families searching for licensed care for an infant, toddler, or child with a disability, or for care during nontraditional hours, often face additional challenges finding a program that meets their needs.

Unprecedented federal investments in the child care sector through stabilization grants during the COVID-19 pandemic were essential in helping the sector recover to prepandemic job levels and keeping hundreds of thousands of child care providers from permanently shutting their doors. However, these temporary investments were a short-term Band-Aid on the broken market, and therefore insufficient to address long-standing structural inequities, vulnerabilities, and unsustainable funding models. In many cases, the influx of temporary federal investments helped states make progress on addressing local child care challenges through supply-building efforts, increases to educator compensation, financing to bring down costs for families, and adjustments to streamline administrative processes. Some states have committed state dollars toward continuing this momentum, but others have seen backsliding since that federal funding expired, evident from increasingly restrictive eligibility thresholds, higher child care costs for families, and increased turnover for child care educators.

Tax credits including the earned income tax credit, the child and dependent care tax credit, and the child tax credit (CTC)can help support overall family economic security by reducing the taxes owed by qualifying families and offsetting some of the high costs associated with raising children. Notably, temporary expansions of these credits—especially the expansion of the CTC as a fully refundable tax credit through the American Rescue Plan Act of 2021—contributed to a historic decline in childhood poverty rates during 2021: Childhood poverty rates dropped from 10 percent in 2020 to 5.3 percent in 2021, according to the supplemental poverty measure. With the expiration of the expanded CTC in December 2021, the early childhood poverty rate more than doubled in 2022. Surveys indicate that many families with young children used CTC dollars to cover basic expenses and that the credit buffered many families from experiencing severe financial hardship.

Despite the positive impacts of tax credits on reducing family financial hardship, it is important to stress that they are not a solution to the child care crisis. Demand-side investments cannot address the chronic issues that perpetuate high costs for families and early educator workforce shortages driven by low compensation—and the credits themselves are neither directed as supply-side investments, nor are they sufficient to cover the full cost of care. Only robust, sustained investments in providers and early educators can expand child care supply, bring down costs for families, build a sustainable pipeline of qualified early educators, and elevate program quality to ensure children have access to the safe, high-quality learning environments they deserve.

A mixed-delivery child care and early learning system is one that administers funds to, and allows the choice of, a range of care types including center- and home-based child care programs, Head Start preschool and Early Head Start, public preschools, and community- and faith-based organizations. Mixed-delivery models also involve a degree of coordinationbetween participating entities to help ensure a continuous model of care for young children; support state and local coordination to leverage federal, state, and local funding for operations; invest in quality-improvement initiatives; and promote the growth and professionalization of the workforce. As a system that promotes families’ choices of high-quality options, a mixed-delivery model is the most efficient and equitable solution to a range of policy issues that plague the sector.

Licensed child care: Child care and early learning programs that operate within the formal, regulatory system of a state or community and its regulations.

License-exempt child care: Some child care and early learning programs are not required by the state or territory to be licensed and can operate legally, though with conditions on their operation, without a license. License-exempt programs may include those that are overseen by another regulatory agency, such as a state department of education, or programs that care for a small number of children, that only operate for a few hours a day, or that care for children while parents or guardians of the children are present.

Registered child care: Child care programs can be registered with the state if they are regulated or monitored by a state or territory agency, but this does not necessarily mean that they are licensed. The difference is typically thought to relate to the amount of oversight exercised by the state or territory agency. While regulated—but unlicensed—providers may be required to meet minimum health and safety requirements, though they may not be required to participate in the state’s quality rating and improvement  system or to accept state or federal funds through subsidy-eligible child enrollment to support their operations.

Quality rating and improvement system (QRIS): A state-administered system used to monitor the quality of the state’s child care programs, communicate those characteristics publicly to providers participating in the system and parents seeking care, and provide pathways to improve the quality of the care children receive. Most QRISs offer a set of standards providers are expected to meet, should they participate in the system, and benefits for achieving different tiers of quality, including grants for classroom materials, staff scholarships, and outreach services. 

Center-based child care: Center-based child care is offered in a nonresidential setting, usually for less than 24 hours per day per child. Child care centers are typically managed by a center director who oversees the program and its educators, with children learning in classroom settings, typically grouped by age. Child care centers may be operated by individual owners, for-profit chains, government agencies, public schools, or nonprofit entities such as faith-based or community organizations. These programs are often required to be licensed, but states and territories may exempt some child care centers, such as early childhood programs regulated and operated by public schools or faith-based child care programs, from the requirement.

Home-based, family child care: Home-based family child care and early learning services are offered to one or more unrelated children in a provider’s home. These services may offer more flexible hours compared with center-based programs, such as evening and weekend care, and are often operated by individual small-business owners. These providers also frequently provide culturally relevant care and often also offer care in a family’s native language. Home-based family child care programs may be licensed, registered, or legally license-exempt. State and territory licensing requirements may distinguish between large and small child care homes and regulate these settings differently. For instance, some states and territories may exempt from licensing requirements those programs that care for less than a certain number of unrelated children.

Family, friend, and neighbor (FFN) care: A broad term referring to an informal care arrangement in which children are cared for by a relative, friend, or neighbor, or a nanny or au pair. FFN caregivers typically care for a small number of children with whom they have a prior relationship and may be paid or unpaid. Most states and territories allow FFN providers to be legally exempt from licensing requirements because they care for so few children. States may also have varying requirements for FFN providers to access public financial support, though these providers are frequently excluded from access to state or federal funding.

Child care desert: A child care desert is an area with an insufficient supply of licensed child care, measured as a census tract where there are at least 50 children under the age of 5 but either no child care options or more than three young children for every licensed child care spot. As defined, child care deserts focus exclusively on licensed care options due to the unavailability of comprehensive data on the license-exempt and unlicensed child care supply. Child care deserts continue to disproportionately affect low-income communities, rural communities, Hispanic or Latino communities, and other communities of color. Families searching for care for an infant, toddler, or a child with a disability, or for care during nontraditional hours, often face additional challenges finding a program that meets their needs.

Supply-side child care investments: Supply-side child care Investments increase the availability of high-quality child care, including through grants and funding to establish new child care programs; renovate child care program facilities; offset operational costs; and invest in workforce compensation, training, and retention. They are essential for addressing key vulnerabilities in the child care sector—including the undersupply of child care and workforce shortages—that drive long waitlists, high costs, and low availability for families seeking care.

Demand-side child care investments: Investments that attempt to reduce high child care costs for families through tax credits, subsidies, and other financial support. While demand-side investments can be an important part of reducing costs for families, supply-side investments are needed to sustainably build the supply of high-quality child care options and a pipeline of qualified early educators.

Child care federal affordability benchmark: The child care federal affordability benchmark was established by the U.S. Department of Health and Human Services in the 2016 Child Care and Development Fund (CCDF) final rule. This rule determined that an affordable copayment for families receiving CCDF subsidies was 7 percent of family income and interpreted copayments above 7 percent to be a barrier to child care access and affordability. This 7 percent threshold has been used as a benchmark for estimating child care affordability and proposed as a payment cap in multiple child care policy proposals. The vast majority of American families pay more than 7 percent of household income on child care: Married couples often spend 10 percent of their household income, while many single-earner households pay more than one-third of their annual income on child care.