Differentiating between price and cost in the poorly functioning child care market

The Minneapolis Fed has released a brief detailing how early child care in the states is severely underfunded and how it affects children under the age of 5. See excerpt below-

“Understanding the child care market is critical for policymakers with an interest in supporting early childhood development. Data on child care providers reveal significant variation in child care prices and availability depending on a family’s location, the ages of its children, and the hours of the day those children need a caregiver. Demand for providers that speak the family’s language and offer culturally reflective care practices can also have important implications for price and supply.”

According to Aaron Sojourner, a professor at the Carlson School of Management at the University of Minnesota, “We need to differentiate between the cost and the price of child care.” In Sojourner’s view, focusing solely on the current market price for high-quality care neglects important issues that affect how much it costs providers to create a high-quality care environment that promotes children’s healthy development.

The brief was originally published on May 21st, 2019 by Rob Grunewald, regional economic analyst, and Ben Horowitz.

Click here for the full read.

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