Minimum Wage, Worker Quality, and Consumer Well-Being: Evidence from the Child Care Market

47 Pages Posted: 24 Jun 2023

See all articles by Jessica H. Brown

Jessica H. Brown

University of South Carolina

Chris M. Herbst

Arizona State University (ASU) - School of Public Affairs

Abstract

This paper combines multiple data sources to study the impact of the minimum wage on service quality and consumer well-being within the child care market. Although child care firms increase teacher pay in response to minimum wage reforms, we find no impact on employment levels. Instead, providers respond by implementing a range of other revenue-enhancing and cost-saving practices, such as raising prices, increasing child-to-staff ratios, and serving fewer children in the child care subsidy system. We also find evidence that service quality increases: staff turnover declines, teachers are more likely to make human capital investments, and teacher-child interactions improve. Despite the increase in quality, parents report that they are less satisfied with their child care provider, a result we attribute to the increase in prices.

Keywords: child care, child care quality, minimum wage

JEL Classification: J13, J15, J21, K39

Suggested Citation

Brown, Jessica and Herbst, Chris M., Minimum Wage, Worker Quality, and Consumer Well-Being: Evidence from the Child Care Market. IZA Discussion Paper No. 16257, Available at SSRN: https://ssrn.com/abstract=4490167 or http://dx.doi.org/10.2139/ssrn.4490167

Jessica Brown (Contact Author)

University of South Carolina ( email )

Darla Moore School of Business
1014 Greene Street
Columbia, SC 29208
United States

HOME PAGE: http://www.jessicahbrown.com

Chris M. Herbst

Arizona State University (ASU) - School of Public Affairs ( email )

Box 870603
Tempe, AZ 85287
United States

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