Ideas and Evidence
States Offer Supplemental Wages to Retain Childcare Workers
This commentary was originally published by Route Fifty.
Communities nationwide are contending with the need to retain childcare workers in the middle of widespread staffing shortages. One way states have attempted to address this is by supplementing the wages for childcare workers, which are among the lowest of all occupations. For example, Michigan, Illinois, and Iowa are distributing one-time $1,000 retention bonuses, while others like Washington, DC, and Louisiana are giving more than $10,000 to childcare workers. Other states, including New Hampshire, Alabama, and Rhode Island, are considering or have just announced similar retention bonuses. And Maine just passed a bill to provide monthly increases to childcare workers’ wages.
But making sure all eligible childcare workers get these wage supplements is no easy feat. Incomplete take-up is a constant issue across public benefit programs. Even the federal Earned Income Tax Credit, one of the most highly effective antipoverty programs, is not used by all eligible households. For example, 22 percent of eligible earners do not claim the EITC (and about two-thirds of those earners do not even file taxes), missing out on a refund of up to several thousand dollars. Research suggests that lack of awareness of the benefit and confusion about eligibility rules are key factors deterring full participation.
So how can state and local governments ensure that childcare workers leverage these kinds of benefits? Here’s what the research says:
Simplify the message. Many eligible workers may erroneously think that they do not qualify for these benefits. Rigorous studies show that complexity in messaging and in eligibility rules can create confusion on the part of eligible participants, leading many to not apply, even when the economic benefits are so large.
Simple marketing materials that include clear explanations of how the supports translate into direct boosts in income can enhance participation. For example, our research organization evaluated Paycheck Plus, which tested the effects of an expanded tax credit for workers without dependent children. Along with our partner, the Food Bank of New York City, we redesigned and streamlined information on postcards, so that eligible participants would know about an information session that explained the requirements and financial incentives. This boosted attendance at the sessions by 38 percent.
Simplify the application process. Maximizing the take-up of any initiative means making it easy for people to participate. Behavioral science shows that every additional form that needs to be filled out can discourage individuals from following through.
New Mexico’s Early Childhood Education and Care Department has taken important steps to streamline, align and centralize application processes for the childcare workforce. When an individual applies for one program, the information is automatically used to verify eligibility for other programs, minimizing the burden placed on the individual.
State and local governments can also streamline the wage supplement application process by using existing databases, like workforce registries or licensing systems. This allows the databases to use information individuals have already provided to pre-populate application forms and verify eligibility, saving time and energy.
State and local governments can even go a step further by automatically enrolling eligible participants. Virginia’s Department of Education, in collaboration with the Virginia Early Childhood Foundation and the University of Virginia, automatically provided all workers in eligible childcare centers retention bonuses of up to $1,500, eliminating the need to apply and verify eligibility.
Consider disbursing the money in installments rather than in a lump-sum payment. While some workers may appreciate a large one-time payment, there may be benefits to distributing the wage supplements in installments. A lump sum may not align well with childcare workers’ regular ebb and flow of expenses. Many studies show that the financial and psychological benefits associated with a single payment fade as time passes. Stretching a single bonus can be logistically challenging for individuals who are navigating bills and other payments.
One strategy is to front-load the bonus payments into individual escrow savings accounts that vest monthly to help smooth economic resources.
Recent evidence in Virginia suggests that the $1,500 retention bonuses—whether paid out in installments or a lump sum—yielded dramatic drops in turnover, although the installments had a somewhat larger effect.
If these compensation initiatives are executed well, they will inform how best to support and retain childcare workers in other localities and nationally. When coupled with additional supports that can address the other challenges that childcare workers face, states and localities can begin to build a stronger, more stable and qualified labor force, which we rely on to care for our children.