Funding Child Rearing: Child Allowance and Parental Leave

Future of Children

Volumn 6, Issue 2, 1996, Pages 122-136

  Walker, James R ^a  

^a UNIVERSITY OF WISCONSIN MADISON   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; CHILD CARE; CHILD REARING; ECONOMICS; FAMILY LEAVE; FINANCIAL MANAGEMENT; HUMAN; INFANT; NEWBORN; ORGANIZATION AND MANAGEMENT; POVERTY; PRESCHOOL CHILD; SOCIAL CARE; UNITED STATES;

CHILD REARING; CHILD, PRESCHOOL; FINANCING, GOVERNMENT; HUMANS; INFANT; INFANT CARE; INFANT, NEWBORN; PARENTAL LEAVE; POVERTY; PUBLIC ASSISTANCE; UNITED STATES;

EID: 0030155842     PISSN: 10548289     EISSN: None     Source Type: Journal    
DOI: 10.2307/1602423     Document Type: Article

References (29)

1. Phillips, D.A., ed. Child care for low-income families. Washington, DC: National Academy Press, 1995, p. 1.
2. The Cost, Quality, and Child Outcomes in Child Care Centers study reports that full-time infant care costs $450 per month while care for a preschooler costs $372 per month. Helburn, S., ed. Cost, quality, and child outcomes in child care centers: Technical report. Denver, CO: Department of Economics, Center for Research in Economic and Social Policy, University of Colorado, 1995. See also the article by Helburn and Howes in this journal issue.
3. Hayes, C.D., Palmer, J.L., and Zaslow, M.J., eds. Who cares for America's children? Child care policy for the 1990s. Washington, DC: National Academy Press, 1990, p. 60. The recent report from the National Institute of Child Health and Development is slightly more reassuring, but still indicates that poor-quality child care can be deleterious for some infants, and, unfortunately, as Helburn and Howes report in their article in this journal issue, infant care is often of very poor quality.
4. U.S. Department of Commerce, Bureau of the Census. Employment status of women, by marital status and presence and age of children. Statistical abstract of the United States: 1994. 114th ed. Washington, DC: U.S. Government Printing Office, 1994, p. 402, Table 626.
5. The rules regarding the recognition of income are less severe during the first year on welfare. After the first year, the income threshold equals $90 per month for work expenses plus monthly child care expenses up to $175 ($200 for a child under the age of two).
6. For a discussion of the "trilemma," see Culkin, M.L., Helburn, S.W., and Morris, J.R. Current price versus full cost: An economic perspective. In Reaching the full cost of quality in early childhood programs. B. Willer, ed. Washington, DC: National Association for the Education of Young Children, 1990.
7. Carnegie Corporation of New York. Starting points: Meeting the needs of our youngest children. New York: Carnegie Corporation of New York, 1994.
8. For a thorough discussion of adjusting income by family type and size, see Citro, C., and Michael, R.T., eds. Measuring poverty: A new approach. Washington, DC: National Academy Press, 1995, pp. 159-81.
9. Author's calculation from information in 1994 green book, Table 10-12. U.S. House of Representatives, Ways and Means Committee. Overview of entitlement programs: 1994 green book. 103rd Cong. Washington, DC: U.S. Government Printing Office, July 15, 1994.
10. See note no. 9, 1994 green book, Table 10-22.
11. In 1993, federal and state Medicaid expenditures were $75.8 billion and $56.2 billion, respectively, for a total of $132 billion. See note no. 9, 1994 green book.
12. Calculated using data on number of children in households by income level derived from the March 1990 Current Population Survey. U.S. Department of Commerce, Bureau of the Census. Current Population Survey. Washington, DC: U.S. Government Printing Office, March 1990.
13. The child allowance program's simple eligibility and benefit rules will be less costly to administer than is the AFDC program. Likely administrative savings are not listed in Table 2 because they are too difficult to estimate precisely, but the AFDC program cost $3 billion to administer in 1993.
14. For a discussion of the legislation, see Trzcinski, E., and Albert, W. Pregnancy and parental benefits in the United States and Canada. Journal of Human Resources (Spring 1994) 29:535-54.
15. Under current law, the employer and the employee each pay 7.65% (for a total of 15.3%) of the individual's first $60,600 in earnings to the Social Security system.
16. This estimate assumes that the individual is earning the average amount for the current system and that there are no changes in the structure of Social Security benefits in the coming years. Calculations are available from the author upon request.
17. The PLA balance is converted into a 10-year annuity. In addition, it is assumed that Social Security will continue to replace about 40% of the average worker's earnings. See U.S. House of Representatives, Ways and Means Committee. Overview of entitlement programs: 1994 green book. 103rd Cong. Washington, DC: U.S. Government Printing Office, July 15, 1994, p. 1266, Table J-15.
18. Opting out would be possible with one qualification that concerns a well-known problem of all insurance markets: The individuals who are least costly to insure (for example, non-smokers and defensive drivers) attempt to separate themselves from more costly individuals, and insurance companies seek to identify and serve the best risks. Permitting individuals to opt out of the Social Security system may leave only the most costly in the public system. The costs of this adverse selection must be balanced against the cost of inefficiencies generated by a government monopoly.
19. Evidence that AFDC benefits encourage births, especially out-of-wedlock births, is elusive. If AFDC benefits did stimulate out-of-wedlock births, illegitimate birthrates should have risen the most during the late 1960s and early 1970s when AFDC benefits were high. In fact, during the past 25 years, illegitimate birth rates have risen and the real value of AFDC benefits has fallen by more than one-third. For additional evidence see Jencks, C., and Mayer, S. War on Poverty: No apologies, please. New York Times. November 9, 1995, at Op-Ed;
20. Acs, G. Do welfare benefits promote out-of-wedlock childbearing? In Welfare reform: An analysis of the issues. I.V. Sawhill, ed. Washington, DC: Urban Institute Press, 1995, pp. 51-54.
21. State regulations for family day care and center care. In Who cares for America's children? Child care policy for the 1990s. C.D. Hayes, J.L. Palmer, and M.J. Zaslow, eds. Washington, DC: National Academy Press, 1990, Appendix A. See also the articles by Helburn and Howes and by Hofferth in this journal issue.
22. Other data, including that reported in the article by Helburn and Howes in this journal issue, indicate average child care quality is higher in states that have more stringent regulation.
23. Walker, J.R. Public policy and the supply of child care services. In The economics of child care. D. Blau, ed. New York: Russell Sage Foundation, 1991.
24. Currently, relatives may receive subsidies but generally must comply with some licensing or regulatory requirements. Providers not required to be regulated usually must be registered with the state to receive funding.
25. Frank, M. Cost, financing, and implementation mechanisms of parental leave policies. In The parental leave crisis. E. Zigler and M. Frank, eds. New Haven, CT: Yale University Press, 1988, pp. 315-25.
26. The parental leave accounts are not necessarily a great savings mechanism for most individuals because the rate of interest is low and severe penalties are imposed for nonrepayment. However, young couples and others with little collateral can use these accounts as a guaranteed loan program and thereby get access to credit they cannot obtain through private lenders.
27. Layard, R., Mincer, J. Trends in women's work, education, and family building. Journal of Labor Economics (January 1985) 3,1:PR1-R2.
28. Gustafsson, S.S., and Stafford, F.P. Links between early childhood programs and maternal employment in three countries. The Future of Children (Winter 1995) 5,3: 161-74.
29. For example, an individual who prefers, in the absence of the program, to save 5% of his income will, upon enactment of the parental leave, still save 5% of income but will adjust his asset portfolio knowing that 3.5% of his income will be held in a risk-free low-interest (2.5%) bond.