In California, infant care expenses consume up to 25% of household income, prompting many mothers to exit the workforce to provide childcare. This shift results in an estimated $23 billion annual loss in economic output, according to a new policy analysis by the Stanford Institute for Economic Policy Research (SIEPR), led by Policy Fellow Chloe Gibbs and a team of researchers.
“Our analysis builds a strong economic case,” Gibbs explains. “Each dollar invested in high-quality early childhood care and education generates at least three dollars in returns through greater workforce participation, improved child development, and broader economic gains.”
The study presents one of the most detailed cost assessments of a universal child care program for children aged 0 to 3 in California. Depending on eligibility criteria and uptake rates, annual costs could range from $4 billion to $21 billion. Targeting low- and middle-income families would limit expenditures to $4–8 billion, while universal access would raise the figure to $12–21 billion.
The effectiveness of public spending hinges on implementation. To support this, SIEPR researchers collaborated with peers at UC Irvine and UC Berkeley to release a companion report outlining practical delivery models for statewide child care expansion.
These findings emerge as U.S. policymakers confront rising affordability challenges. Cities such as New York and San Francisco are advancing toward universal programs, while states like New Mexico and Vermont have already launched statewide initiatives.
“The question is whether California—the world’s fourth-largest economy—can keep pace,” Gibbs notes.
Key findings include:
– Child care expenses represent 20–25% of median household income across the state.
– Structural shortcomings in the early childhood care and education (ECE) sector limit access to quality options, leading many parents to rely on informal arrangements or reduce employment.
– Significant public investment could enable over 100,000 mothers of young children to re-enter or join the labor force, potentially adding $23 billion to the state’s GDP.
– A well-structured ECE program would yield societal benefits exceeding its costs, even under conservative estimates.
— news from Stanford Institute for Economic Policy Research (SIEPR)
— News Original —
How to fix California’s child care crunch
In California, families are spending up to a quarter of household income on infant care. Mothers are leaving the workforce, forfeiting earnings, to take care of their toddlers. n nThe toll amounts to a $23 billion annual loss in economic output, according to a new policy brief by the Stanford Institute for Economic Policy Research (SIEPR), authored by Policy Fellow Chloe Gibbs and a team of SIEPR researchers. n n“Our examination of the child care market makes the investment case,” Gibbs says. “Every dollar invested in quality early childhood care and education (ECE) returns three dollars or more through increased parental labor supply, improved child outcomes, more productive businesses, and the resulting economic growth.” n nIn one of the most comprehensive analyses of what a universal child care program would cost in California, the authors model a program for universal coverage for children ages 0 to 3 and estimate the cost would range from $4 billion to $21 billion, depending on levels of take-up and income eligibility. n nHow those government resources are deployed matters. That’s why Gibbs and her collaborators at SIEPR teamed up with researchers at the University of California at Irvine and the University of California at Berkeley to synchronize the release of a sibling policy brief, which delves into ways California can deliver universal child care for 0-3 year olds. n nThe insights from both these papers, released on January 30, come as policymakers across the U.S. are grappling with the issue of affordability and access in child care. Major cities like New York and San Francisco are driving toward universal child care, and states like New Mexico and Vermont are blazing a trail as the first to offer universal child care at the state-level. n n“The question is whether California — the world’s 4th largest economy — can keep up,” says Gibbs. n nTakeaways from the SIEPR policy brief include: n nAnnual child care costs across California consume a sizable portion of household budgets, up to 20 – 25 percent of median income. n nChallenges in the market for early childhood care and education (ECE) contribute to an inadequate supply of high-quality slots and less-than-optimal rates of participation, with many parents forgoing formal care and relying on informal arrangements or reducing their own labor market participation to provide care themselves. n nRobust public investment in child care in California could allow more than 100,000 mothers of young children to join the workforce, contributing as much as $23 billion to the state’s GDP. n nA California ECE program, aimed at improving affordability and access for families with infants and toddlers, would cost between $4 billion and $8 billion annually when targeted to low- and middle-income families and $12 billion and $21 billion annually with universal income eligibility, and would likely generate substantial societal returns in excess of the public investment.