Child care industry vital to Iowa's business climate, future workforce

AMES, Iowa -- Researchers at Iowa State University have, for the first time, studied and documented the impact of Iowa's $402.5 million child care industry on the state's economy -- today and in the future.

"Child care plays three distinct yet inter-related roles in the Iowa economy," said Kathlene Larson, a researcher with Iowa State's Community Development--Data Information and Analysis Laboratory. "It impacts the productivity of parents in the workforce. It affects the development of the next generation of Iowa's workforce. And, as an industry, it affects the state as a consumer of goods and as an income-generating, tax-paying service industry."

Results of the study, "Child Care, Parents, and Work: The Economic Role of Child Care in Iowa" are available at

The number of Iowa women in the workforce with pre-school aged children increased by 35 percent from 1990 to 2000, from 56.3 percent to 75.9 percent. Data from the 2000 census shows that Iowa ranked third in the nation for the percentage of children under the age of six (71.4) with all parents working. Only North and South Dakota ranked higher. More recent statistics now have Iowa as high as first place in this category.

Today, more than 67 percent of the 517,000 children in Iowa age 12 and younger are in some type of child care while their parents work. Iowa's communities and businesses must have a stable, safe and cost effective child care system to function, Larson said.

However, the dependence on privately paid child care has resulted in low wages, low quality of care and high staff turnover, Larson said. This is important because research has shown that children must have stable and high quality relationships in order to thrive and meet their potential as future members of Iowa's communities and workforce. Yet, the average child care provider earns less than convenience store workers.

"Sensitive and responsive adult/child interaction is critical for brain development in children younger than 5," said Susan Hegland, associate professor of human development and family studies. "And, parents tell us that the most frequent reason for changing child care arrangements is because of the caring nature of the provider. For lower income parents, that is the chief reason for changing child care providers."

In 2003, the Iowa child care industry employed more than 17,200 persons in the state, while an additional 1,500 jobs were created by related support industries (services and supplies). The industry generated $402.5 million in annual receipts and another $144.4 million in indirect effects (supplies, food, salaries spent in the local communities, etc.). In addition, another $121.9 million was generated in both corporate and personal taxes.

"What those statistics show is that for every $1 spent on child care in the state, an additional 66 cents is added to Iowa's economy," Larson said.

Hegland said the study shows that in Iowa families with a child younger than 5, the father typically works more than 40 hours a week and the mother more than 25 hours a week. For parents with the youngest child between the ages of 5 and 12, the father typically works more than 44 hours a week and the mothers work more than 30 hours a week.

"The majority of those parents say they need child care that is flexible; nearly half indicate that they would have to stop working if child care were not available," Larson said. "Many parents of children between 5 and 12 years rely on before/after-school and summer care for their children to accommodate their work schedules."

Lower-income parents are more likely to use more than one provider in order to maintain coverage while they work. They also are less likely to have recently eaten a meal, read a book or played a learning game with their youngest child.

"These three activities are proxy measures for the quality of time parents spend with their children," Hegland said. "In households where those activities do not regularly occur, children are less likely to be ready for school when they arrive at kindergarten."

The study also found that when parents are forced to change a child care provider, that search can take from two to four weeks -- much of that search away from the job.

"Parents who spent time looking for new arrangements or coping with and replacing unsatisfactory arrangements are likely to be less productive in the workplace and less effective at fostering a home environment that encourages a quality workforce in the future," Hegland said.

Some Iowa parents use only center-based care, Hegland said, because parents believe that the regulation of those programs assures them of trained staff, planned activities, safety and adequate supervision. Other parents believe that the regulation of programs is not adequate, and rely on their personal relationship with a family child care provider to ensure high-quality care.

The study also shows that parents living in rural areas are more likely than their urban counterparts to say there are not good choices for child care in their communities.

"Bottom line, the study shows that child care in Iowa is an important industry that often is not understood in the areas of parent productivity and outcomes for children," Larson said. "Business groups such as the Iowa Business Council are beginning to see the importance of quality child care to the future economic growth of the state."