Addressing Child Care Market Failures Through Microsites

In 2021, Janet Yellen, current U.S. Secretary of the Treasury, declared that “child care is a textbook example of a broken market.” Yellen’s remarks summarized the Department of the Treasury’s findings on the state of the child care market, hoping to build the case for President Biden’s Build Back Better Act that was under negotiation in Congress at the time. The Build Back Better Act, which would have invested $390 billion in child care and pre-K, was ultimately defeated in the Senate and the last of the federal child care funding provided during the COVID-19 pandemic expired last September. Yet, in the absence of new federal investments, there are families who need access to child care and child care providers who need ways to keep their business open.

To make ends meet, child care providers often use tuition from three and four year olds to subsidize the higher costs of caring for infants and toddlers, which is an option as long as three and four year olds enroll in these programs. However, as states expand public pre-K options for three and four year olds, child care providers may struggle financially, potentially resulting in increased child care costs for parents, increased inspection violations and complaints, or closures. Even if states adopt a mixed-delivery approach, where child care providers can receive public dollars to operate pre-K programs, there are drawbacks. Child care providers may prioritize serving older children over infants and toddlers because it is less expensive and the funding is more stable. Early childhood educators may seek better-paying positions in pre-K settings, further straining the supply of infant and toddler care.

How can we build high-quality infant and toddler capacity that is affordable for families and sustainable for providers? In D.C., the Bainum Family Foundation (Bainum) has provided funding to explore a microsite model in partnership with D.C. Public Schools (DCPS) and United Planning Organization (UPO), a non-profit organization that operates a large number of early learning centers throughout D.C. A microsite or micro-center is a one or two classroom early learning program co-located with a public school where the early learning classrooms are run by the partnering child care provider and the space and facility costs are covered by the hosting school. There are currently 14 existing infant and toddler child development centers co-located on DCPS campuses, and participating microsite locations will receive additional support from UPO and funding from Bainum. The first microsite location, which is slated to open later this year, will be at Amidon-Bowen Elementary School.

Microsites are one of the solutions being tested and evaluated through Bainum’s Ideal Solutions Lab. The microsite model in D.C. will leverage the real estate capacity of DCPS and the administrative resources of UPO to support providers in applying for and operating high-quality infant and toddler child development centers. UPO will work with DCPS to review applications and provide technical assistance to the selected applicant on facilities preparation, licensing, and marketing. Funding from Bainum will allow providers to innovate on different aspects of their business, such as compensation and staffing schedules.

The draw of a rent-free space seems like it would attract many early learning providers who are looking to expand. In reality, when DCPS has put out requests for applications, noted Dr. Cheryl Ohlson, deputy chief of early childhood education at DCPS, it tends to be the same providers that apply—larger providers with the resources and capacity to navigate a complex application process and resulting legal agreements. Currently, UPO operates 11 out of the 14 total DCPS infant and toddler child development centers. Even if a smaller provider were to apply and be selected, it might not be financially viable. In interviews Bainum conducted to inform their WeVision Early Ed initiative, proximity experts cited regulations that require having a full-time director and four educators onsite for two classrooms that can deter providers with fewer resources and staff from applying. Through this work, Bainum hopes to bridge the disconnect between well-intended policy solutions and what the proximity experts want, with an overarching goal of understanding what it takes to make the ideal child care system a reality.

The rollout of this microsite model explores strategies to address some of the market failures that have resulted in a shortage of infant and toddler seats in D.C., including the high costs of real estate. It could also offer solutions to the enrollment challenges facing D.C.’s public school system. Would opening up infant and toddler child development centers on under-enrolled campuses increase familiarity with the school community and encourage families to enroll in neighborhood schools? Would co-location of infant and toddler programming, pre-K, and elementary grades enable alignment between early childhood educators and elementary school teachers? Would it result in a seamless educational experience for children and families, particularly benefiting families with children of multiple ages? As this work unfolds, we hope to provide answers to some of these questions and offer policy solutions that will enable true transformation in child care.

The Early & Elementary Education Policy program receives funding from the Bainum Family Foundation. New America is guided by principles of full transparency, independence, and accessibility in all its activities and partnerships.