How California’s New Minimum Wage Impacts Child Care

Download our full analysis on how the minimum wage impacts child care.

When Does the Law Go Into Effect, and for Whom?

  1. The law phases-in increases over time. SB 3 outlines a schedule of automatic increases in the state minimum wage, which would raise it to $15 per hour by January 1, 2022. Small businesses with 25 or fewer employees have an extra year to comply with each increase.
  1. To benefit from minimum wage laws, including SB 3, a worker must meet the law’s definition of employee, which excludes family members. SB 3 expands the definition of a “family member” to whom minimum wage law does not apply to include registered domestic partners, grandparents and grandchildren, and siblings, in addition to parent, spouse, or children.

How Does the Law Affect Child Care Centers, Family Child Care Homes, and License-Exempt Care?

  1. The primary, direct beneficiaries of SB 3 will be teachers and staff in licensed child care centers, and assistants employed in large family child care homes.
  1. In-home child care providers or nannies should benefit from SB 3, but may find it difficult to do
  1. SB 3 will not directly increase the income of most family child care home providers.

How Will the Law Affect Parent Eligibility for Subsidized Child Care?

  1. SB 3 may make some families ineligible for child care but not economically self-sufficient, if they involve two wage earners, or one who earns overtime. A family of four loses eligibility for services if its income exceeds $46,896. The average California Self-Sufficiency Standard for two adults with one preschooler and one school-age child was $63,979 in 2014.  A family of four that includes two, full-time workers earning the $15 per hour will earn $62,400, well over current income limits for child care, but still short of the self-sufficiency standard.

How Can and Can’t the Minimum Wage Help Parents and Providers Who Care for Our Children?

  1. The minimum wage increase can help ease economic burdens for some low-income California families, which itself has been shown to improve child outcomes.
  1. The minimum wage increase cannot solve the statewide crisis of unaffordable and yet underpaid child care, because of an inherent structural problem in the economics of child care: a transfer of wages for the same period of time, often from one minimum wage earner to another minimum wage earner. This is true even at lower minimum wage levels.

What Are Some Potential Consequences That The State Should Address?

  1. An increase in minimum wage may exacerbate wage compression. There has been an enormous push in child care and early education policy to raise qualifications, with no comparable rise in compensation. Administrators report that the difference between an early education teacher with 15 years’ experiences and a higher degree, and an entering child care provider, is only a few dollars an hour.
  1. Because child care costs are largely labor driven, and cannot be spread across families through “economies of scale,” wage increases may increase the costs charged to parents, who cannot afford to pay. A family child care home cannot choose to accept fifty, instead of twelve, two-olds into her home. Because the cost cannot be spread across families by accepting more children, then child care providers cannot increase pay for themselves or, where applicable, their employees, without increasing the rates they charge to parents.

 

Recommendations:

The Child Care Law Center recommends the following measures as necessary to conform California’s public child care programs to the intent of SB 3 to help minimum wage workers, although not sufficient to address all highlighted, systemic child care issues:

  • Increase income eligibility ceilings for state subsidized child care programs
  • Increase rates for both contracted (SRR) and voucher-based (RMR) child care

In addition, the Child Care Law Center recommends exploration of the following measures:

  • Increase use of child care contracts in depressed child care markets
  • Explore regulatory reforms to reduce burdens of child care licensing and subsidy participation.
  • Statewide expansion of local child care funding initiatives, and state technical assistance to localities to identify community development measures to support child care.

The Child Care Law Center further recommends that the state create a task force, including people both in and outside the field of child care expertise, to examine and make recommendations for addressing the impact of SB 3 on child care availability, affordability, and salary structures.