Op ed

Let’s Not Throw Out Market Rate Surveys Just Yet: Funding Child Care in Today’s World

February 2023 | Dr. Theresa Hawley | Tags: Funding Strategy


The child care market in the U.S. is broken. Despite rising prices for care, child care workers continue to make close to minimum wage, and most child care settings struggle to provide the quality features—like small group sizes and enriching curriculum—that support children’s learning and development.

When the price of care for an infant and a preschool typically exceeds 20% of median family income and one in three parents across the country is having serious problems finding child care, we are in deep crisis.

States have primarily tried to solve for child care affordability through subsidies for individual children and families. The subsidy system we rely on now was developed in the 1990s on the premise that the market was providing adequate options, and low-income parents just needed a subsidy that would let them purchase in the market what middle- and higher-income families were buying on their own. The Market Rate Survey was required to help states understand how much of the child care market they were allowing subsidy recipients to access. States were encouraged (but not required) to set subsidy reimbursement rates at the 75th percentile of private-pay prices to ensure low-income families were able to access most of the child care market.

Recently, the field has become wary of ensuring subsidies match the “market rate.” Critics rightly point to the fact that the price that parents pay for child care—while too often unaffordable—still falls far short of the “true cost” of care. Cost studies reveal that a child care program operating according to best practices, with appropriate teacher-to-child ratios and paying competitive wages, costs far more to operate than most parents are currently paying. Further, focusing solely on market rates may lead to important inequities in rates over time, as prices rise more slowly in economically depressed regions than they do in higher-income parts of the state. For these reasons, many advocates have called for states to begin setting reimbursement rates based on cost modeling, and some have even called for doing away with Market Rate Surveys altogether.

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