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Upjohn Institute Working Paper No. 99-58
In an industrialized economy, it is nearly impossible to engage in market work while simultaneously caring for young children. Thus, if a mother is to engage in such work, someone else must care for her children during work hours. However, non-maternal child care is often expensive or of poor quality, making it difficult for low income mothers, (especially those making the welfare-to-work transition) to move successfully into financial independence. Our research provides new detailed information to policy makers who are interested in facilitating the welfare-to-work transition, and in encouraging efforts towards financial independence for the working poor. We fill several critical gaps in the existing child care literature by focusing on differences across marital status and between full-time versus part-time work status. Because child care utilization and expenditure patterns vary across these factors, detailed information broken down in this way will help inform the policy debate. This project serves as a direct response to the call for new child care research issued recently by the Council of Economic Advisers (1997). Much of the previous literature either focused strictly on married mothers or simply controlled for marital status with a dichotomous variable. We include both married and unmarried mothers in our analyses by stratifying our sample by marital status throughout the empirical work. In addition to the descriptive analyses, we estimate two distinct econometric models to study the differences in the effect of child care costs on employment status (by marital status) and differences in mode of child care use (by marital status and employment status). First, using predicted measures for child care prices and wages, we estimate an ordered probit model of employment status in which the possible categories are full-time employment, part-time employment, and not employed. This estimation produces separate child care price elasticities of employment for full-time employment and for part-time employment. We find that for married women, the elasticity of full-time employment, with respect to changes in the price of child care, is much larger (in absolute value) than the elasticity of part-time employment, with respect to the price of child care. On the other hand, for single mothers, part-time employment has a larger elasticity with respect to the price of child care than full-time employment. Second, we estimate a multinomial logit model to explain the determinants of the choice of child care mode, while controlling for the probability of full-time employment, given that one is employed. Here we find some evidence that an increased probability of full-time employment is associated with an increase in the use of center care and a reduction in the use of relative care. For single mothers, the effect of the price of care seems to move together for home-based care and center-based care.
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