A new study conducted by Ball State University's Center for Business and Economic Research (CBER) highlights the significant impact of childcare availability and costs on women's participation in the workforce in Indiana.

The study, authored by CBER researchers Drs. Dagney Faulk and Michael Hicks and Madelyn Ponsier, a 2024 Ball State graduate and former CBER student research assistant, provides in-depth analysis of the economic factors that influence the demand for childcare services and the supply of childcare workers.

The report, which is available on the CBER website, also emphasizes the intricate relationship between childcare accessibility and women's labor force participation, revealing that the lack of affordable and available childcare options continues to be a substantial barrier for many families.

Among the key takeaways from the study:

  • Economic decision-making: The study identifies that for many families with children, the decision for both parents to work is often financially impractical. "The choice not to work is rational for many families with children. Childcare is expensive. For many families, after taxes and market-rate childcare costs are considered, it does not make financial sense for both parents to work," said Dr. Faulk, CBER’s director of research.

    According to the study, the 2022 median wage for a woman in Indiana was $21.53 per hour, which translates to less than $4 per hour in take-home pay after taxes and childcare costs for a parent with two children and a spouse earning $57,000 annually.

    This financial strain is exacerbated by the high income thresholds required for a parent to achieve a modest take-home pay. For instance, a parent would need to earn more than $32 per hour to bring home $400 per week after taxes and childcare costs, highlighting the substantial economic pressure on working families.

  • Childcare workforce and women's employment: The study finds that an increase in childcare workers correlates with higher female workforce participation. Specifically, a 10-percent increase in the number of childcare workers is associated with a 0.4-percent increase in the female workforce for ages 25-34 and a 1-percent increase for ages 35-44. "Related to that, our estimates show that a fairly substantial increase in the number of childcare workers would increase the number of women in the workforce, particularly for families with school-aged children,” said Dr. Hicks, CBER director and George and Frances Ball Distinguished Professor of Economics at Ball State.

  • Wage considerations: Recruiting additional childcare workers is critical but challenging due to wage disparities. "Attracting more workers into the childcare sector will take substantial wage increases for both new and existing childcare workers given that labor markets are tight and workers often have better paying options," Dr. Faulk explained.

    Expanding the childcare workforce by 10 percent would necessitate approximately an 8 percent across-the-board wage increase. This reflects the competitive nature of labor markets and the need for significant financial incentives to attract and retain childcare workers.

Policy implications
The study highlights the need for targeted public policies to address these challenges. Indiana offers childcare vouchers through the Child Care and Development Fund and the On My Way Pre-K program for low-income families, aiming to alleviate some financial burdens. However, researchers say more comprehensive strategies are required to create sustainable solutions for childcare affordability and accessibility.

"Policymakers must recognize the critical role of childcare in supporting the labor force expansion," Dr. Hicks said. "Effective policies need to focus on reducing the financial burden of childcare for families and ensuring higher wages for childcare workers."

Dr. Faulk explained, “In many ways, this study should be unsurprising. Access to childcare affects the labor force participation of women with children, and the primary impediment to access is the price of childcare for families.

“The primary constraint on supply is higher wages for workers, which together represent the fundamental challenge in providing more childcare,” she continued.

Researchers say possible strategies could include increasing subsidies for childcare costs, providing tax incentives for families, and implementing programs to boost wages for childcare workers. These measures could help alleviate the financial strain on working families and ensure that childcare services are both accessible and high-quality.

Since its inception in 1970, Ball State’s Center for Business and Economic Research has been a trusted source for high-quality, nonpartisan, data-focused research, analysis, and visualization.

For more information, visit the CBER website, call 765-285-5926, or email cber@bsu.edu.