Child care subsidies

Child care subsidy programs provide financial assistance to working parents or, in some cases, parents attending school, to cover the costs of certified in-home or center-based child care. Child care subsidies are usually available to low income families; eligibility criteria vary by state.

Expected Beneficial Outcomes (Rated)

  • Increased employment

  • Increased earnings

Other Potential Beneficial Outcomes

  • Increased access to child care

Evidence of Effectiveness

There is strong evidence that child care subsidies increase employment (Ahn 2012*, NCCP-Schaefer 2006, Tekin 2005*, Kimmel 1995*) and earnings for low income families (Ahn 2012*, NCCP-Schaefer 2006, Kimmel 1995*). Such subsidies have also been shown to increase low income children’s enrollment in center-based care, which is often higher quality than non-family home-based care (Weber 2014*, Ertas 2012, Michalopolous 2010).

Child care subsidies increase employment for single mothers (Ahn 2012*, NCCP-Schaefer 2006, Tekin 2005*, Kimmel 1995*) especially those with low income (Ahn 2012*NCCP-Schaefer 2006, Kimmel 1995*) and those without a high school education (NCCP-Schaefer 2006). Single mothers who receive subsidies work more hours, have more standard work schedules, stay in jobs longer, and earn more than mothers who do not receive subsidies (NCCP-Schaefer 2006).

Subsidy receipt may increase the likelihood that a single mother enrolls in school or job training (Herbst 2011*). Sliding scale subsidies, including subsidies requiring co-payments, may be nearly as effective as full subsidies in increasing employment of single mothers (Kimmel 1995*).

Child care subsidies can allow employed parents to access child care centers (Michalopolous 2010) and center-based preschool programs (Ertas 2012) that they may not have been able to afford without subsidies, and may increase use of center-based care (Johnson 2013*). More generous subsidies may increase the use of center-based care more than less generous subsidies (Weber 2014*). Norway-based research indicates that subsidies that move children from informal, non-parental care to more formal care settings can have positive long-term effects on children’s future educational attainment and labor market participation (Havnes 2011*).

A recent report projects that expanding the child care subsidy to all eligible families below 150% of the poverty line would reduce child poverty by 3% (300,000 children). This change would nearly double the number of families receiving subsidies, and cost approximately $5.3 billion (CDF 2015).

Impact on Disparities

Likely to decrease disparities

Implementation Examples

The federal Child Care and Development Fund provides funding to states, territories, and tribes to help low income families, families receiving temporary public assistance, and those transitioning from public assistance obtain child care so parents can work or attend education/training programs (US DHHS-CCDF). 

Like many other public benefits, qualification for child care subsidies is based on income. The federal income threshold is set at or below 85% of state median income, but states can set lower thresholds (US DHHS-CCDF). More than two-thirds of states have child care subsidy eligibility limits under 200% FPL (NCCP-Fass 2008), which is $48,600 for a family of four in 2015 (US DHHS-Poverty). States with more stringent Temporary Assistance for Needy Families (TANF) work requirements often have lower income eligibility limits and less generous child care subsidies than states with less stringent work requirements (Ha 2013*).

Implementation Resources

NCSL-CCEELD - National Conference of State Legislatures (NCSL). Child care and early education legislation database.

Citations - Evidence

* Journal subscription may be required for access.

Ahn 2012* - Ahn H. Child care subsidy, child care costs, and employment of low-income single mothers. Children and Youth Services Review. 2012;34(2):379-87.

NCCP-Schaefer 2006 - Schaefer SA, Kreader JL, Collins AM, Lawrence S. Parent employment and the use of child care subsidies. New York: National Center for Children in Poverty (NCCP); 2006.

Tekin 2005* - Tekin E. Child care subsidy receipt, employment, and child care choices of single mothers. Economics Letters. 2005;89(1):1–6.

Kimmel 1995* - Kimmel J. The effectiveness of child-care subsidies in encouraging the welfare-to-work transition of low-income single mothers. American Economic Review. 1995;85(2):271-5.

Weber 2014* - Weber RB, Grobe D, Davis EE. Does policy matter: The effect of increasing child care subsidy policy generosity on program outcomes. Children and Youth Services Review. 2014;44:135-144.

Ertas 2012 - Ertas N, Shields S. Child care subsidies and care arrangements of low-income parents. Children and Youth Services Review. 2012;34(1):179-85.

Michalopolous 2010 - Michalopoulos C, Lundquist E, Castells N. The effects of child care subsidies for moderate-income families in Cook County, Illinois: Final report. Washington, DC: Office of Planning, Research and Evaluation (OPRE), Administration for Children and Families (ACF), US Department of Health and Human Services (US DHHS); 2010.

Herbst 2011* - Herbst CM, Tekin E. Do child care subsidies influence single mothers’ decision to invest in human capital? Economics of Education Review. 2011;30(5):901-12.

Johnson 2013* - Johnson AD, Martin A, Brooks-Gunn J. Child-care subsidies and school readiness in kindergarten. Child Development. 2013;84(5):1806-1822.

Havnes 2011* - Havnes T, Mogstad M. No child left behind: Subsidized child care and children’s long-run outcomes. American Economic Journal. 2011;3(2):97-129.

CDF 2015 - Ending child poverty now. Washington, DC: Children's Defense Fund (CDF); 2015.

Citations - Implementation Examples

* Journal subscription may be required for access.

US DHHS-CCDF - US Department of Health and Human Services (US DHHS): Office of Child Care: An Office of the Administration for Children & Families (OCC). Child Care and Development Fund (CCDF) re-authorization frequently asked questions.

NCCP-Fass 2008 - Fass S, Briggs J, Cauthen NK. Staying afloat in tough times: What states are and aren’t doing to promote family economic security. New York: National Center for Children in Poverty (NCCP); 2008.

US DHHS-Poverty - Office of the Assistant Secretary for Planning and Evaluation (ASPE). 2020 HHS poverty guidelines: One version of the [US] federal poverty measure. US Department of Health and Human Services (US DHHS).

Ha 2013* - Ha Y, Ybarra M. Are strong work-first welfare policies aligned with generous child care provisions? What states are doing and the implications for social work. Families in Society. 2013;94(1):5-13.

Date Last Updated