Home-based Child Care: How Does it Fit in the Early Childhood Ecosystem

In February 2019, the Committee for Economic Development (CED) released a report about the economic impact of the child care industry, Child Care in State Economies: 2019 Update. The report reviews the market-based child care industry (which includes centers and home-based child care providers) and estimates that child care has an overall economic impact on the economy of $99.3 billion—supporting over 2 million jobs, with 1.5 million of those within the child care industry and another 507,089 in spillover jobs.

The report findings are important because they show that child care not only helps parents to obtain and retain employment, but also that the industry itself plays a role in state and local economic growth. The report links the use of paid child care with labor force participation noting that increased labor force participation plays a role in regional economic growth and parents with young children need child care to work. States with high workforce participation rates have much lower poverty rates. For example, there is about a 15 percent range in poverty rates across the states, from just below 10 percent in many of the states with the highest workforce participation rates compared to more than 20 percent in the states with the lowest participation rates.

Beyond the overall economic impact of child care discussed in the report, is key information related to home-based child care throughout the country. CED’s review is an analysis of market-based child care–in other words, paid child care in centers and homes. The report shows the decline throughout the country in home-based providers from 752,212 in 2010 to 599,018 in 2016, a decline of 20.4 percent.

The prevalence of home-based child care is difficult to determine accurately. There is wide variance among national surveys and state regulatory lists. For example, the National Association of Regulatory Administration’s last survey shows about 266,017 regulated family child care homes whereas the National Survey for Early Care and Education (NSECE) survey shows about 118,000 regulated home-based providers.

What is clear is that there is a wide gap between state lists of regulated child care facilities and those who report business income related to the provision of home-based child care in the U.S. Census Bureau Economic Census. The discrepancy exists because state regulatory lists are related to state licensing thresholds, which require home-based providers to obtain a license when they care for a certain number of children. For example, some states license home-based providers as soon as one unrelated child is in care and others do not license family child care until six or more children are in care. Some states don’t license family child care at all, such as in Louisiana, New Jersey, and South Dakota. The CED report is based on the Census Bureau Economic Survey, which includes data from employers and sole-proprietors who report business income related to providing child care.

While in some cases this could involve nannies, who are not regulated by most states, it’s more likely related to the number of individuals who operate a home-based program despite state regulatory requirements. For example, in Oklahoma, where home-based providers are required to obtain a license as soon as they care for one unrelated child, state regulatory lists show 1,899 providers. However, the Census Bureau Economic Census data shows 5,049. This potentially means that thousands of home-based providers are operating outside the licensing system in Oklahoma. In Georgia, regulatory lists show 1,511 home-based providers but Census data shows 20,758. Because Georgia requires a license for home-based providers when three unrelated children are cared for, some of the difference could be those with fewer than three unrelated children.

The data is disconcerting for several reasons. Many families seek home-based providers because the costs are typically less. Others are looking for a more home-like setting for infants and toddlers. If we support parent choice, home-based child care is critical for working families, and a decline in this care means fewer choices for families. This is true whether one looks at the data for regulated care or unregulated care.

What conclusion we draw from this report is important. We can look at it two ways. One is negative and implies that there are many home-based providers that are simply and intentionally operating illegally. The other is to think about our ECE systems that support home-based providers. Do we have systems in place to support them or do our systems place barriers in front of them?

The answer probably lies somewhere in the middle. State and local efforts are likely to focus on the quality of center-base care, however, innovative models and partnerships exist that support home-based child care providers. These community-based models can support operational functions and shared services, and include record keeping, training, curricula, and technical assistance. It is often difficult for individual home-based providers to access and pay for these resources on their own, so continued investments in community-based networking supports are essential to helping home-based providers thrive.

Home-based child care is an important part of our nation’s economic growth, and this report should spur a more important discussion about the place of home-based care in our early childhood ecosystem and how we support families and children.