Effects of Minimum Wage on ECE Centers

Transcription

1 Effects of Minimum Wage on ECE Centers F O R T H E A L A M E D A C O U N T Y E A R LY C A R E A N D E D U C AT I O N P L A N N I N G C O U N C I L B Y J E R E M Y W E L S H - L O V E M A N M A S T E R O F P U B L I C P O L I C Y U C B E R K E L E Y, G O L D M A N S C H O O L O F P U B L I C P O L I C Y

2 Overview Disconnect Labor policy determined at local level Localities are raising minimum wages significantly ECE policy determined at state level Why is this a challenge? ECE is a valuable public service with net positive impacts Many ECE centers pay low wages ECE provision is labor intensive ECE provision structure in some areas is highly regulated

3 Questions to Guide Project How many ECE workers have sub MW wages? How much will average wages for these workers increase? What % of total costs comes from these workers? How much will total costs increase with wage costs? How can centers adapt? What policy options does the state have to maintain service?

4 Why is ECE important? A strong body of evidence indicates that children s experiences early in life have large, lasting consequences The fact that costs are immediate while benefits are far in the future, in addition to credit constraints, mean that ECE services will be underprovided in private market. The consequences of stress and instability early in life are especially dangerous Many evaluations of preschool programs have shown significant and sometimes lasting effects. Evaluations of the Perry Preschool program showed long term effects worth $8 for every $1 of cost Childcare is also necessary for all parents to work, which is increasingly necessary due to rise of single parent families and stagnation of wages Research shows positive impacts of subsidized child care on female labor force participation

5 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Future and Proposed MW Increases in CA and 2014 CA Childcare Worker Median Wage $16 $16 $15 $15 $14 $14 $13 $12 $11 $10 $9 $8 $7 $13 $12 $11 $10 $9 $8 $7 Childcare workers defined as those who Attend to children at schools, businesses, private households, and child care institutions. Perform a variety of tasks, such as dressing, feeding, bathing, and overseeing play, excluded preschool teachers California-Proposed Berkeley Oakland San Francisco San Diego Los Angeles Median ECE Wage California Source: Occupational Employment Statistics, Bureau of Labor Statistics

6 Current CA Minimum Wage Landscape Locality Current MW Future (proposed) MW increases Oakland $12.25 Increase with inflation Emeryville $12.25 ($14.44 for large orgs) $13 on 7/16, $14 on 7/17, $15 on 7/18, $16 on 7/19 San Francisco $11.00 $12.25 on 5/15, $13 on 7/16, $14 on 7/17, $15 on 7/18 San Jose $10.30 Berkeley $10.00 (living wage $13.71) $11 on 10/15, $12.53 in 10/16 San Diego $9.75 $10.50 on 1/16, $11.50 on 1/17 California $9.00 $10 on 1/16 (Sen Leno proposal to increase to $11 on 1/16, $13 on 1/17) Los Angeles Use state MW $10.15 on 7/16, $12.00 on 7/17, $13.25 on 7/18, $14.25 on 7/19, $15 on 7/20

7 $14.00 Wages of Childcare workers in Alameda County, 2014 $13.00 $12.28 $12.25 $12.00 $11.00 $10.00 $9.00 $9.21 $10.51 $11.16 Information on wages difficult to find. Job classifications do not always align $8.00 $7.00 $6.00 $5.00 In California the mean wage for childcare workers was $11.95 and median $11.14 in 2014 $4.00 $3.00 $2.00 $1.00 Nationally, Teaching Assistants in Child Day Care Services made $21,700 annually, or $10.43 per hour $ th Percentile Median Mean 75th Percentile Oakland MW Source: Occupational Employment Statistics, Bureau of Labor Statistics

8 $15.00 Hourly Wage of Childcare Workers in Alameda County, $14.00 $13.00 $12.00 $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $ Mean 25th Percentile 50th Percentile 75th Percentile Source: Occupational Employment Statistics, Bureau of Labor Statistics. Note: BLS caustions using OES data to make comparisons over time

9 $20.00 $18.00 $16.00 Wages of Preschool Teachers in Alameda County, 2014 $15.92 $17.29 $18.75 $14.00 $12.00 $13.62 $12.25 $10.00 $8.00 $6.00 $4.00 $2.00 $ th Percentile Median Mean 75th Percentile Oakland MW Source: Occupational Employment Statistics, Bureau of Labor Statistics

10 ECE Wages in Alameda County Interviews with individual ECE center directors found similar wages Title 5 contractors paid lower wages than unsubsidized providers Average wage for Title 5 contractors Assistant teachers ~ $11.50 Teachers ~ $13.50 Average for other providers ~ $16.50 Range of benefit costs, mostly around $4,000 per year Vast majority of benefits are healthcare Caveat : Averages for a very small number of centers. Only centers interviewed

11 Median Hourly Wages of Center-Based Childhood Teachers, by Degree Level, 2012 Median Wage for Teachers Working with Ages 0-3, Nationally Bachelors : $11.40 Associate : $9.90 High School : $9.00 Source: Whitebook, M., Phillips, D., & Howes, C. (2014). Worthy work, STILL unlivable wages: The early childhood workforce 25 years after the National Child Care Staffing Study. Berkeley, CA: Center for the Study of Child Care Employment, University of California, Berkeley.

12 Impact of MW on ECE Wages $14.00 $13.00 $12.00 $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $- Projected Childcare Worker Wages Before and After Oakland 3/15 $12.25 Min Wage Increase $10.71 $12.73 $9.65 $12.25 Before After Before After Mean childcare workers wages increase 19% Full-time, full-year increases in annual salary of ~ $4,200 Increase in teacher wages difficult to project Depends on how centers adjust pay scale Current uncertainty amongst center directors Other staff salaries (cook, admin, custodian) could increase as well, though harder to model, lacking accurate wage data Around 1 cook per 60 children Average Median Note: Wage is a constructed variable. Source: American Community Survey

13 Cost Structure of ECE Centers Other 30% Personnel 70% Non-officer personnel costs are ~ 65-75% of total costs Most of which is teaching staff costs, but also support staff (cooks, custodian, administrative) Assistant teachers account for ~ 40-50% of total costs Variation and uncertainty in estimate. One estimate as low as 50% Substantial non-personnel costs include: Rent/maintenance Food Workers compensation General liability Utilities Contract services (ex: accounting) Source: Tax Form 990 (from Guidestar), Interviews with ECE Centers

14 This center serves: 18 Toddlers 50 PreK This center has lower wages and is low cost, with a low % taken up by personnel cost

15 Effects of MW on ECE Centers A hypothetical center example Open 9 hours per day, 250 days per year 10 days of substitute per teacher per year Serves 16 Toddlers and 48 PreK Mean Teacher wage stays at $15 Mean Assistant Teacher wage increase from $10.71 to $12.73 Benefits of $4000 per year for teaching staff Assume teaching costs are 65% of total costs Total costs will increase ~7% from $530,00 to $562,000. SRR funding is $661,000 Switch one classroom to Infant, so 18 Infant, 16 Toddlers, 24 PreK Total costs increase ~8% from $669,000 to $720,000. SRR funding is $723,000

16 $60,000 Cost Increase Projections if Teaching Costs are 65% of Total, by Center Type $50,000 $40,000 $30,000 $20,000 $10,000 $- Only PreK Mostly PreK Some Infant No PreK Child age makeup scenarios Only Prek 72 PreK Mostly Prek 48 PreK 16 Toddler Some Infant 18 Infant 16 Toddler 24 PreK No prek 18 Infant 32 Toddler

17 9% Projections of Percentage Cost Increases, Teaching Staff Costs 65% of Total 8% 7.6% 7.8% 7% 6% 5% 6.4% 6.8% ECE centers which serve infants will be hardest hit ECE centers should enroll a higher percentage of PreK children to spread costs 4% 3% 2% 1% If we assume assistant teacher salaries are currently $11.16 Center costs increase ~ 5-6% 0% Only PreK Mostly PreK Some Infant No PreK

18 10.0% Increase in costs for centers in Some Infant Scenario, by percentage of costs from teaching staff 9.0% 8.0% 7.0% 6.0% 7.0% 7.6% 8.2% 8.8% Assumptions about what percent of total costs are made up of teaching staffing costs is very important to determining operating margin 5.0% 4.0% 3.0% 2.0% The higher the percentage of costs which come from teaching staff the larger the impact of minimum wage increase 1.0% 0.0% 60% 65% 70% 75%

19 Effects of Minimum Wage on ECE Centers Impact on those whose wages are currently above new MW, ripple effect, though uncertain as Oakland s one step 36% increase unprecedented A large ripple effect will boost 6-8% effect to 10% Less wage differential between Assistant Teachers and Teachers reduces incentive to increase education Shift classroom space from toddlers and infants to PreK Shift staff from full to part-time to reduce benefits costs Reduce hours per day or days per year

20 Paths forward for ECE Policy Increase Standard Reimbursement Rate No COLA between and means SRR is $4.69 less today Beyond 1.54% COLA increase in Governor s Budget 5% increase = $58.7 million, build on 5% in increase in Potentially only in high cost counties Shift from SRR to RRR (RRR is a ceiling) Specific aide to counties with high MW targeted to wage augmentation Tie SRR to function of difference in MW and state median wage Rates, full-time per day 0-18 months months 3-5 years Standard Reimbursement Rate 0-24 months 2-5 years Regional Reimbursement rate for Alameda

21 Paths forward for ECE Policy Number of Children Number of Fulltime MW Earners Family Income under Old MW Family Income under New MW Income Ceiling Fulltime Fees Under Old MW Fulltime Fees Under New MW 1 2 $37,440 $50,960 $42,216 $3,156 Ineligible 1 1 $18,720 $25,480 $39,396 0 $1, $37,440 $50,960 $46,896 $2,340 Ineligible 2 1 $18,720 $25,480 $42,216 0 $ $37,440 $50,960 $54,408 $1,332 $4, $18,720 $25,480 $46, Increased funding paid for by government savings due to increased wages Higher wages will mean more fees and fewer families eligible Less spent on public assistance for child care workers Nationally 46% of child care works on public assistance

22 Paths forward for ECE Policy Focus on efforts to reduce cost Reduce reporting burdens Move to annual family eligibility and fee determination Create a centralized intake option, central waitlist Pooling of back office resources Caveat: Difficult to reduce costs significantly as teaching costs are large % Stability in service provision and service quality are important for wellbeing of children and should be the focus of policy makers Turmoil in ECE industry would be a dangerous outcome

23 Policy Recommendation Policy Recommendation Increase SRR by 5% immediately and increase annually with inflation More broad based support than targeted increase Will still require centers to find efficiencies to accommodate MW Will make ECE throughout CA ready for further MW increases Provide stability for children The state should reduce administrative burden, but administrative efficiencies cannot close budget gap