Minimum quality regulations and the demand for childcare labor

Abstract

Minimum quality regulations are often justified in the childcare market because of the presence of information frictions between parents and providers. However, regulations can also have unintended consequences for the quantity and quality of services provided. In this paper, we merge new data on states’ childcare regulations for maximum classroom group sizes and child-to-staff ratios with the universe of online job postings to study the impact of regulations on the demand for and characteristics of childcare labor. Our identification strategy exploits the unprecedented variation in regulatory reform during the COVID-19 pandemic, relying on changes both within states over time and across children's age groups. We find evidence that these regulations reduce the number of childcare job postings and encourage providers to substitute away from higher-skilled postings, thereby increasing the number of positions that are out-of-compliance with states’ teacher education requirements. In sum, the results imply that childcare regulations may reduce the demand for childcare labor, while simultaneously altering the composition of the workforce.