Can child care reforms help families overcome benefit cliffs?

Last week, Ohio House Representatives Desiree Tims and Crystal Lett introduced a bill to expand eligibility for publicly funded child care in the state of Ohio.

Ohio House Bill 827 would expand eligibility for the Publicly Funded Child Care program for families first enrolling in the program, and families staying on the program. In general, the bill would expand eligibility for child care for more low- and middle-income families that are above the federal poverty line.

Publicly funded child care is generally designed as a work support program. Much of the debate around how the program works in Ohio revolves around how it supports working families and how it impacts their ability to support themselves.

The topic has become a flashpoint in the debate around benefits cliffs. Many people worry about how benefit eligibility can create disincentives for workers to take raises, promotions, or otherwise advance in low-wage careers due to steep drop-offs in benefits eligibility.

Think of it this way: say you are working in a low-wage profession and you have an infant in a child care center who is covered by publicly funded child care. According to price research by Child Care Aware, this child care slot would cost nearly $14,000 on the private market.

Now say you get offered a $5 an hour raise. Sounds like a good deal, right? Well it is if you keep eligibility for your child care benefit. But $5 an hour only adds up to a little over $10,000 over the course of a year for a full-time worker. So taking the raise will actually end up putting you a few thousand dollars behind if you lose your child care benefit in the process.

Over the years, policymakers have been working to reduce these disincentives, making benefits taper off slowly as workers move from low to middle-income, rather than having strict income eligibility thresholds that make workers face these “cliffs.” H.B 827 aims to help with this by expanding eligibility for publicly funded child care for low- and middle-income families.

There is another justification for this reform: need. A large research project by the United Way has been arguing for years that the costs of a range of “basic” goods should lead policymakers to pay attention to low and middle-income families above the federal poverty threshold when designing policy. Elevated inflation rates over the past few years has made this pressure even more salient for families.

It’s worth noting, however, that this policy will primarily benefit households above the federal poverty line. This matters in a state where 1.5 million residents, including 400,000 children, are living on incomes below the federal poverty threshold. A reform like this could help some of these families by removing barriers to economic advancement.

This reform could also be a part of a continuing trend of shifting social spending from families that are in deep poverty to middle-income families. Large safety net programs like the Earned Income Tax Credit and the Child Tax Credit are designed for families that have higher incomes than the lowest-income families. They support families much more who are above the federal poverty threshold than who are below it.

In an ideal world, our safety net will help families who are in poverty while also supporting families to escape poverty. We still have a lot of work to do to realize this ideal.