States Offer Supplemental Wages to Retain Child Care Workers

Communities nationwide are struggling with the need to retain childcare workers amid widespread staffing shortages. One way states have tried to address this is by supplementing wages for child care workers, which are among the lowest of all occupations. For example, Michigan, Illinois, and Iowa hand out one-time $1,000 retention bonuses, while others like Washington, DC, and Louisiana give child care workers more than $10,000. 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 raises to child care workers’ wages.

But making sure all eligible childcare workers get these wage supplements is not easy. Incomplete enrollment is a constant issue with public welfare programs. Even the federal Earned Income Tax Credit, one of the most effective anti-poverty programs, is not used by all eligible households. For example, 22% of eligible earners don’t claim the EITC (and about two-thirds of those earners don’t 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 child care workers take advantage of these kinds of benefits? Here’s what the research says:

Simplify the message. Many eligible workers may mistakenly think that they do not qualify for these benefits. Rigorous studies show that complexity in messaging and in eligibility rules can cause confusion among eligible participants, leading many not to apply, even when the economic benefits are so great.

Simple marketing materials that include clear explanations of how the supports translate into direct revenue increases can improve participation. For example, our research organization evaluated Paycheck Plus, which tested the effects of an expanded tax credit for workers without dependent children. Together with our partner, the Food Bank of New York City, we redesigned and streamlined postcard information 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%.

Simplify the application process. Maximizing the use of any initiative means making it easy for people to participate. Behavioral science shows that each additional form that must be filled out can discourage individuals from going through.

New Mexico’s Early Childhood Education and Care Department has taken significant steps to streamline, align and centralize application processes for child care workers. 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. using existing databases, such as labor force registers or licensing systems. This allows the databases to use information that individuals have already provided to pre-fill 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 partnership with the Virginia Early Childhood Foundation and the University of Virginia, automatically provided all workers in eligible child care centers with retention bonuses of up to $1,500, eliminating the need to apply and verify eligibility.

Consider paying the money out in installments rather than a lump sum payment. While some workers may appreciate a large one-time payment, there can be benefits to paying out 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 over time. Stretching a single bonus can be logistically challenging for individuals navigating bills and other payments.

One strategy is to front-load the bonus payments into individual sponsor savings accounts that are established monthly to smooth economic resources.

Recent evidence in Virginia suggests that the $1,500 retention bonuses—whether paid in installments or a lump sum—produced dramatic declines in turnover, although the installments were somewhat bigger effect.

If these compensation initiatives are well executed, they will inform how best to support and retain childcare workers elsewhere and nationally. When coupled with additional supports that can address the other challenges child care workers face, states and territories can begin to build a stronger, more stable and qualified workforce that we rely on to care for our children.

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