‘Governing the Market: Childcare Policy and Provision in the US and UK’
Paper prepared for Stream 12 ‘Transforming Family Policies and the Work-Family Relationship in Cross-National Perspective’ of the 10th Annual ESPAnet Conference, Edinburgh, 6-8 September 2012
Caitlin McLean
School of Social and Political Science
University of Edinburgh
**DRAFT**
*Please do not cite without author’s permission.
Comments are welcome: *
Abstract: Recent work has increased attention to the role of markets in early childhood education and care (ECEC) as well as welfare services more broadly. State involvement in childcare markets such as subsidisation and regulation of services is common, but the extent and means by which states engage in these policies can vary substantially. Using policy documents and national data, this paper compares the US and UK approaches to ECEC policy and discusses these findings in relation to their overall structure of ECEC provision. The paper argues that while both governments are actively involved in shaping the market for childcare, the UK approach is explicit in its ‘managerial’ role whereas the US approach appears more conflicted, attempting to combine a basically non-interventionist approach with limitations on the market.
Introduction
Cross-national comparisons of family policies, typically situated in welfare regime theory, have sought to explain empirical variations in family and parental, but particularly maternal, welfare by analysing variations in countries’ cultural and institutional arrangements. Scholars have shown that access to childcare is a crucial factor in supporting mothers’ employment cross-nationally (Jaumotte 2003), but that countries vary widely in their approaches to childcare provision (De Henau et al. 2006).
Recent work has increased attention to the role of markets in early childhood education and care (ECEC)[1] (Lloyd & Penn 2012) as well as welfare services more broadly (Gingrich 2011). Market-based care is an essential avenue for parents' access to care services in many countries such as the US, the UK, the Netherlands and Australia, and with strained government budgets may play an increasingly important role in other nations where state-based care has been the norm. Yet we know very little empirically about the market for childcare and the way policies impact upon the effectiveness of a market-based delivery system across countries. State involvement in childcare markets such as subsidisation and regulation of services is common, but the extent and means by which states engage in these policies can vary substantially (Lloyd & Penn 2012).
This paper compares childcare policy approaches in the US and UK, two countries distinguished by their emphasis on market provision of childcare. These countries are theoretically interesting cases to compare given their similar construction as liberal welfare regimes but their differences in patterns of maternal working hours. Although British and American mothers have similar overall employment rates (OECD 2011), American mothers are less likely to make a transition to part-time work due to childbirth, suggesting that the structure of childcare provision may be a key factor (Tomlinson 2008). Indeed scholars have suggested that high rates of part-time work among British mothers are at least partly due to the high costs of childcare in the UK (Penn 2007). A systematic comparison of the policy approaches and structure of ECEC in these countries is an important step in evaluating the extent to which these employment differences are a result of structural constraints in access to childcare services, rather than some other factor, such as preferences for maternal care.
Using policy documents and aggregate data[2], this paper outlines the similarities and differences in US and UK policy approaches and discusses these findings in relation to their overall structure of ECEC provision. Given recent attention to the public/private mix in welfare services, theoretical implications for the role of the state as ‘market-manager’ are also discussed. The paper argues that while both governments are actively involved in shaping the market for childcare through regulation and subsidies, the UK approach is explicit in its ‘managerial’ role whereas the US approach appears more conflicted, attempting to combine a basically non-interventionist approach with limitations on the market.
The market-based approach: childcare policy in liberal welfare regimes
Research on family policy across countries frequently employs the conceptual tools and methodology of regime typologies as a way of simplifying the complex process of comparing nations and their assorted social policies. While this perspective recognises both heterogeneity within regime types and dynamism within particular cases, the main focus has been on identifying broad patterns and similarities among certain groups of countries. With respect to childcare, scholars have distinguished regimes by their variation in the locus of service provision, or the extent to which childcare is provided by the state, the market, or the family (Del Boca & Wetzels 2007). This perspective categorises the US and UK similarly as liberal regimes and ‘family policy laggards’ (Kamerman and Kahn 1997) due to their historic lack of an explicit family policy as well as their market-focused service provision.
Conceptually, the market-based approach favoured by liberal regimes can be contrasted with the state-based approach favoured by social democratic regimes, although in practice childcare is a highly complex mix of provision by public and private actors across countries. The market model is based on an exchange relationship between consumers and providers whereas the social democratic or ‘universal’ model is based on social rights between citizens and the state (Naumann 2011). The market model of childcare provision is expected to deliver innovation, flexibility and individual choice while the universal model is expected to provide equity and stability.
Under the market model, consumers (in this case parents rather than children) exchange voluntarily with providers in order to choose the form of childcare which best suits their family’s needs, with minimal constraint by the political process. The process of market competition offers incentives for providers to look for innovative ways to improve the quality of their service at a lower cost to parents. However, this process necessarily creates variation in service provision, which may increase inequality of access. Similarly the very dynamism which spurs progress can be de-stabilising for individual families who rely on care. The ability to pay for good quality care may be particularly difficult for those on low incomes. These issues are at the heart of the rationale for the universal model where ECEC is provided through the state and funded by taxation. However, the universal model necessitates high public spending and political control over service provision, while the market model, in principle, requires less state action and lower public spending.
In practice, states do not fully adopt a pure market approach, but tend to combine the market approach with pockets of universalism (Naumann 2011) or to attempt a ‘third way’ between the two in the form of ‘managed markets’ (Johnson 1999). This mixed approach is an effort to achieve the efficiency and flexibility of the market with political control over social outcomes such as child development and parental employment. Thus where states ostensibly rely on the market to provide services, they nevertheless are involved in shaping this provision through subsidisation and regulation.
Subsidisation
When providing public funding for the private provision of services, states may choose a supply- or demand-side stategy. Supply-side funding is delivered directly to providers in order to decrease start-up costs and manage quality. It also allows for control over where public money is spent and increased influence over the type of provision available. Direct public provision by the state is the extreme version of supply-side funding. By contrast, demand-side funding is delivered to the purchasers of care, often indirectly through tax credits, but might also be delivered directly through vouchers or something similar. Demand-side funding is intended to give consumers more control over the type of provision they purchase in order to increase provider responsiveness to consumer interests. This type of funding relies more heavily on market mechanisms and therefore decreases control over spending. Consumers may purchase whatever form of provision is available, which may not be in line with policy goals.
Regulation
Regulation may be defined as a particular policy instrument distinct from other types, such as direct service provision or subsidisation. Regulation in this sense may take the form of proscriptions, mandates or information requirements formulated by legislatures or regulatory bodies (Stiglitz 2010). In a broader sense, the state may use its fiscal powers through ‘regulation by contract’ or regulation by tax/subsidy in which the state does not issue a mandatory, explicit rule, but attaches requirements to funding sources (Baldwin et. al. 1998: 27).
Within the realm of childcare, states frequently attach stipulations with regard to who may receive subsidies and providers usually work within a general framework of statutory requirements for their sector, although these requirements are not necessarily uniform across provider types. Childcare workers are also subject to broader labour market regulations.
Sector- or occupation-specific statutory requirements address a variety of areas such as health and safety, child-staff ratios and group size, staff education and training and child activities or curriculum. Such regulation is intended, at a minimum, to protect children from serious harm, but also as a signal to parents to help them choose higher quality care (Heeb & Kilburn 2004).
The rationale for such state regulation usually relies on ‘market failure’ assumptions (Blau 2001). The argument is that the disciplining nature of market competition may work with regard to pushing down costs, but not with regard to pushing up quality, due to externalities and information asymmetries. Parents are assumed to purchase lower quality care than they otherwise would because they do not internalise the social costs of using such care and/or they lack sufficient information about the quality of services their children receive.
Governments may prefer regulation to public funding because it allows them to pass much of the cost of policy onto providers (Blau 2001) while existing providers may support regulation as a way of reducing competition (e.g. PriceWaterhouseCoopers 2006: 25). However, strict regulation can have perverse effects by pushing up costs and/or reducing supply. If the price of care increases beyond what parents can afford then they may switch to unregulated care, which may be lower quality (Blau & Currie 2006: 1217). For the US, Heeb & Kilburn (2004) find that regulations influence parents’ childcare decisions primarily through a price effect (increased price lowers use of care) rather than a quality assurance effect (increased quality increases use of care).
American and British approaches to ECEC policy
Governance
In both the US and the UK responsibility for ECEC policy is split among different levels of government. In the UK, devolution formally places education (including pre-primary) and a host of other social services in the hands of the devolved governments in Scotland, Wales and Northern Ireland. Therefore most of the Westminster government’s policies for childcare provision only directly apply to childcare in England. Similarly, the regulation of childcare is carried out by separate regulatory bodies in each region. However, other aspects of British childcare policy, such as tax credits, are operated UK-wide. As the UK government is simultaneously responsible for both UK-wide fiscal policy and England-specific education and social services, where applicable this paper will focus on policy and provision for England only.
In England, both pre-primary education and care services are integrated under the national Department for Education, but administration is decentralised among local governments (English Local Authorities). The central UK government legislates and provides funding to the Local Authorities who are responsible for distributing funds to providers, overseeing the delivery of services and in some cases, direct provision of services.
The US is a federal system and education and childcare policy is largely the responsibility of each US state. Accordingly, there is no national ECEC policy as such. Nevertheless, the US government is involved in funding ECEC in various ways. At the federal level, administrative responsibility is divided between the Department of Education and the Department of Health and Human Services (which includes a sub-department called the Office of Child Care). State governments are responsible for spending the funds received through the federal government, enacting their own childcare legislation and programs, and regulating private provision of services. As a result, ECEC policies and provision vary widely across the 50 states.
Policies & Programs
England has had a national ELCC agenda since the election of New Labour in 1997, which asserted an active role for the state in promoting formal early learning and care services for young children. Prior to this time, how children below school-age were cared for was largely a private matter left up to parents and communities, other than in exceptional circumstances where children were deemed to be ‘at-risk.’[3]
In order to promote the policy goals of increased maternal employment, lower child poverty and school-readiness, ELCC policy since New Labour has actively encouraged the expansion of formal market-based care through direct and indirect government subsidies (see Table 1). The emphasis on market care is viewed as a way of preserving flexibility and individual choice for parents. At the same time, there has been an emphasis on the educational dimension of ELCC, particularly with the Early Years Foundation Stage curriculum which prioritises specific learning goals and achievement by pre-school aged children (DfES 2006).
Table 1: UK ECEC Policies & Programs
Program / DescriptionChildren’s Centres / Provides funding for a wide range of support services to children and their families, including childcare
Early Years Entitlement / Guarantees access to part-time nursery education for 3 and 4 year olds and some disadvantaged 2-year olds
Working Families Tax Credit - childcare element / Parents may claim a tax credit of up to 70% of childcare expenses for a maximum £175 per week for one child (up to £122.50), and £300 per week for two or more children, (up to £210)
Employer voucher scheme / Employers may help workers pay for childcare in exchange for a reduction in tax liability through Income Tax and National Insurance contributions exemptions
Sources: HMRC 2011a; HMRC 2011b; Penn 2007
The US, in relation to its federal structure, has no comprehensive national agenda regarding ECEC. Nevertheless, the federal government is involved in funding ECEC provision through various programs (see Table 2), such as the Child Care Development Fund, which takes the form of a block grant to the states to make care more affordable. Instead, much childcare policy is enacted or administered at the state level. Federal funding is spent by individual states and is matched by each state’s own spending. States set their own provisions for subsidy eligibility, regulate childcare provision, and in some cases, provide public preschool programs. Some states also provide state-level tax credits or deductions for childcare, in addition to the federal tax credit (Maag 2005).