Upjohn Institute for Employment Research
To aid the design of workforce policies in the childcare sector by estimating the responsiveness of the labor supply to changes in wages, child-staff ratios, and other job characteristics
Suppose you want to address the critical shortage of caregivers for children. According to the U.S. Bureau of Labor Statistics, childcare workers currently earn hourly wages ($14.22 on average) that are even lower than those of pet caretakers or parking attendants (over $15 each). So part of almost any strategy would be to increase their salaries. But by how much? To formulate an appropriate policy, you would want to know more about the market for childcare workers—especially about the responsiveness of labor supply to changes in wage rates. To measure such responsiveness, economists like to talk about “elasticity.” Formally, it is the percentage change of one variable per percent change in the other. Assuming, for simplicity, that the labor supply curve looks like a line as a function of wage rate, it is easy to compute the elasticity we need from the slope of that line. And to determine that slope, all we need are two points on the line. One of those can be the current market equilibrium, i.e., where supply equals demand. In fact, the only points you ever get to observe are where the supply curve and the demand curve intersect. So to find a second point on the line, you would have to look for a situation that causes employers’ demand for childcare workers to shift. The big problem, though, is that anything that shifts demand is likely to shift supply as well. Then the new equilibrium will not even lie on the original line whose slope you wanted to find. The upshot is that elasticities, though marvelously useful, can be devilishly hard to estimate. That is why, facing proposed legislation it must evaluate, the Congressional Budget Office specifically published a call to researchers for help with estimating the elasticity of labor supply among childcare workers. Aaron Sojourner is stepping up to meet this challenge. Sojourner is organizing three different teams, methods, and data sources that will each help estimate elasticities in different settings he has identified where demand has shifted without necessarily changing the supply curve by much. These include places where: 1) a large new plant or facility opened that attracts jobseekers who were previously minding their children at home instead; 2) a state (e.g., New York or Massachusetts) offered extra COVID relief funds to childcare facilities with more than a certain number of caregivers; 3) a state or city (e.g., New York) rolled out universal Pre-Kindergarten programs that must be staffed quickly. The labor market in each such setting has its own intricacies, interactions, and idiosyncrasies—such as job requirements and quality—that the research teams will also take into account. But the three studies, taken together, will provide much better and more useful estimates of how the supply of caregivers responds to wage changes. As the saying goes, “Economists agree on everything but the elasticities.” Empirical evidence about those numbers in the context of caregiving is precisely what this project will supply.