Child Care Quality: Does It Matter and Does It Need to be Improved? (Full Report). Assessment of the Cost of Improving Quality

05/24/2000

As we suggested, analyses that shed light on the developmental benefits of child care characteristics for children is an important element of the answer to our question. A related task involves determining the levels of investment necessary to achieve improved quality. Although this topic has not received the same level of attention in the literature as the overall relationship between quality of care and child outcomes, several studies consider the financial costs of increasing structural measures of quality. Though subject to limitations that affect the extent to which one may apply these findings to the current system of child care, this research provides useful information on the relationship between the quality of child care and cost.

The U.S. General Accounting Office (GAO, 1990) report and Powell and Cosgrove’s (1992) summary of and addendum to this GAO research include estimated cost functions for the provision of child care as well as a model of the factors that affect wages of care providers. The modeled cost function allows the authors to examine the direct influences of input prices; center characteristics, including structural measures of quality; and geographical location on center total variable cost. This use of multiple regression analysis allows the authors to estimate the effect of changing such factors as the child-adult ratio on center total costs, after controlling for other relevant factors such as group size, location, and average education of providers. By also modeling the elements of wage determination, the authors capture the indirect effect of changes in child care characteristics on the wages of providers. The results from both models are then combined to examine direct and indirect effects of quality changes on total variable costs.

Data on child care centers from a 1989 GAO survey of 265 early childhood education centers accredited by the National Associate for the Education of Young Children (NAEYC) were used in both studies.4  The survey, administered to program directors via questionnaire, included questions of center characteristics, costs, value of in-kind donations received, staff characteristics and compensation. The survey includes several structural measures that allow the authors to estimate the costs associated with changing the following quality measures: the average number of children per teaching staff member; average number of children in groups of four-year-olds; average education of staff in years; average experience of staff in years; and the staff turnover rate.5

The authors find statistically significant relationships between center total cost and structural measures of child care quality. For the adult-child ratio, they find that an improvement in the quality of care achieved by decreasing the average ratio by one, for example from 11:1 to 10:1, is associated with increased costs of roughly 4.5 percent. The authors note that the average center in their data, one with 50 children and an annual per child cost of $6,500, which reduces the child-to-staff ratio from 11:1 to 10:1, faces an increase in annual cost per child of $306.6  A related measure, average group size, had a small but statistically insignificant effect on total costs.

Changes in cost resulting from improving staff education and experience are estimated using the estimated cost and wage functions to capture total direct and indirect effects. The authors find that a one-year increase in average education of the teaching staff is statistically significantly associated with a 3.4 percent increase in total costs, which includes a 5.8 percent increase in wages. Similarly, increasing average teacher experience by one year is significantly associated with a reduction in center total costs of 0.6 percent, including an estimated increase in wages of 2.3 percent. This implies that increasing staff experience is associated with an increase in quality as well as a slight reduction in average center total costs. There is also evidence of a relationship between turnover rates and total costs—the departure of an additional 10 percent of the center’s teaching staff increases costs by 6.8 percent.

These studies have several limitations. First, they rely on data that are more than ten years old. If the relationships estimated in their model have changed since 1989, these estimates will differ from what we would expect to find using current data. Changes in quality made now may affect total costs in a different manner.

Also, the data include only accredited centers. If these centers have cost functions that systematically differ from unaccredited centers, the estimated results will not apply to those centers. If, for example, one is most concerned with improving poor quality child care, and such care is more likely to be found in unaccredited centers, these estimates may not provide an accurate depiction of the costs of doing so. The sample also only includes data for care of 4- and 5-year-old children. Because of differences in providing care for other age groups, the relationship between improving quality and costs for centers that provide care for other age groups may vary.7  Finally although the sample includes data from many states, 70 percent of the centers surveyed were in the South and the Midwest. The results therefore may not be nationally representative.

Helburn (1995) estimates a similar cost function using data collected as a part of the Cost, Quality, and Child Outcomes in Care Centers (CQO) study. The CQO study, conducted in 1993–1994, included data from 401 child care centers (749 classrooms) in four states. The data, collected through classroom observation and interviews with program directors, include information on center characteristics, program quality and staff qualifications, compensation, and turnover. Helburn estimates center total costs as a function of staff wages at different education levels, hours of child care provided, physical size of the center, volunteer hours, region of the country, for-profit status, and quality measures.8

This research also indicates statistically significant relationships between cost and quality. Increasing center quality by 25 percent (from mediocre to good) is associated with increases in total variable costs of approximately 10 percent, or $346 per child per year. The authors define quality using an index similar to the ECERS measure of quality of care. Using the ECERS 7-point scale, the mean value of this index in their sample is 4.0, which ranks between fair and good. They estimate that the increase in total variable costs associated with increasing the measure of quality by 25 percent to 5.0, a rating of good quality, will be approximately 10 percent. Given an average size of 60 children per center, the increase in quality is expected to result in an increase in costs of approximately $20,700 per year.9

Helburn notes that this analysis assumes that wages are held constant during the quality-changing process. The model specifically implies that wages for particular quality-levels of staff (here measured by years of education) are set in the labor market and centers pay the going wage. If, however, high-quality centers pay higher than market wages to attract the most qualified providers, or to increase productivity and/or lessen the chance of turnover among existing workers, then estimated costs will understate true costs.

Although this study considers all types of centers, not accredited centers only, it has similar limitations to the GAO and Powell and Cosgrove studies. That is, the data used are not as recent as would be desired, and the results from the four-state sample are not nationally representative.

Although all three studies have limitations, the estimates do provide information on the nature of the relationship between child care costs and quality. As such this research serves as a useful starting point for further consideration of this topic. The importance of developing cost estimates suggests that future work incorporating current and nationally representative data will serve as an important source of information for evaluating public policy strategies designed to improve the quality of child care. We have discovered one likely source of such estimates in research currently being conducted by Richard Brandon at the University of Washington and Lynn Kagan at Yale University. The authors are developing a detailed simulation model to estimate costs of improving child care using varied measures of quality. This research, which the authors estimate will be completed by the fall of 2000, will provide valuable additional information

None of these studies include the investment that is likely to be the least expensive approach to improving quality: caregiver training, including in-service training. There are a variety of training programs that have been offered to formal and informal caregivers. The evidence above suggests that better-trained caregivers give higher-quality care. We do not know enough about the content or length of these programs to be able to definitively discuss their cost. Curriculum and materials are readily available (see for example the materials available from Teaching Strategies, Inc.) One program suggests that a 12-workshop series would enhance caregiver’s skills in areas that range from safety through cognitive development and communication skills.

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