‘Governing the Market: Childcare Policy and Provision in the US and UK’

Paper prepared for Stream 12 ‘Transforming Family Policies and the Work-Family Relationship in Cross-National Perspective’ of the 10th Annual ESPAnet Conference,

Edinburgh, 6-8 September 2012

Caitlin McLeanSchool of Social and Political Science

University of Edinburgh

**DRAFT***Please do not cite without author’s permission.

Comments are welcome: c.c.mclean@sms.ed.ac.uk*

Abstract: Recent work has increased attention to the role of markets in early childhood education and care (ECEC) as well as welfare services more broadly. State involvement in childcare markets such as subsidisation and regulation of services is common, but the extent and means by which states engage in these policies can vary substantially. Using policy documents and national data, this paper compares the US and UK approaches to ECEC policy and discusses these findings in relation to their overall structure of ECEC provision. The paper argues that while both governments are actively involved in shaping the market for childcare, the UK approach is explicit in its ‘managerial’ role whereas the US approach appears more conflicted, attempting to combine a basically non-interventionist approach with limitations on the market.

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Introduction

Cross-national comparisons of family policies, typically situated in welfare regime theory, have sought to explain empirical variations in family and parental, but particularly maternal, welfare by analysing variations in countries’ cultural and institutional arrangements. Scholars have shown that access to childcare is a crucial factor in supporting mothers’ employment cross-nationally (Jaumotte 2003), but that countries vary widely in their approaches to childcare provision (De Henau et al. 2006).

Recent work has increased attention to the role of markets in early childhood education and care (ECEC)1 (Lloyd & Penn 2012) as well as welfare services more broadly (Gingrich 2011). Market-based care is an essential avenue for parents' access to care services in many countries such as the US, the UK, the Netherlands and Australia, and with strained government budgets may play an increasingly important role in other nations where state-based care has been the norm. Yet we know very little empirically about the market for childcare and the way policies impact upon the effectiveness of a market-based delivery system across countries. State involvement in childcare markets such as subsidisation and regulation of services is common, but the extent and means by which states engage in these policies can vary substantially (Lloyd & Penn 2012).

This paper compares childcare policy approaches in the US and UK, two countries distinguished by their emphasis on market provision of childcare. These countries are theoretically interesting cases to compare given their similar construction as liberal welfare regimes but their differences in patterns of maternal working hours. Although British and American mothers have similar overall employment rates (OECD 2011), American mothers are less likely to make a transition to part-time work due to childbirth, suggesting that the structure of childcare provision may be a key factor (Tomlinson 2008). Indeed scholars have suggested that high rates of part-time work among British mothers are at least partly due to the high costs of childcare in the UK (Penn 2007). A systematic comparison of the policy approaches and structure of ECEC in these countries is an important step in evaluating the extent to which these employment differences are a result of structural constraints in access to childcare services, rather than some other factor, such as preferences for maternal care.

Using policy documents and aggregate data2, this paper outlines the similarities and differences in US and UK policy approaches and discusses these findings in relation to their overall structure of ECEC provision. Given recent attention to the public/private mix in welfare services, theoretical implications for the role of the state as ‘market-manager’ are also discussed. The paper argues that while both governments are actively involved in shaping the market for childcare through regulation and subsidies, the UK approach is explicit in its ‘managerial’ role whereas the US approach appears more conflicted, attempting to combine a basically non-interventionist approach with limitations on the market.

The market-based approach: childcare policy in liberal welfare regimes

1 This paper focuses on service provision for children below school-age (5 years) and thus includes both ‘care’ and ‘education,’ given considerable overlap.2 One reason that market-based care has not been studied in much depth is the lack of quality empirical data. Even where data exists it is difficult to compare across time periods within countries, much less cross-nationally, due to differences in measurement (such as how providers are categorised). A variety of sources have been used for this paper, including international data from the OECD where available, as well as national data and policy documents from relevant government agencies.

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Research on family policy across countries frequently employs the conceptual tools and methodology of regime typologies as a way of simplifying the complex process of comparing nations and their assorted social policies. While this perspective recognises both heterogeneity within regime types and dynamism within particular cases, the main focus has been on identifying broad patterns and similarities among certain groups of countries. With respect to childcare, scholars have distinguished regimes by their variation in the locus of service provision, or the extent to which childcare is provided by the state, the market, or the family (Del Boca & Wetzels 2007). This perspective categorises the US and UK similarly as liberal regimes and ‘family policy laggards’ (Kamerman and Kahn 1997) due to their historic lack of an explicit family policy as well as their market-focused service provision.

Conceptually, the market-based approach favoured by liberal regimes can be contrasted with the state-based approach favoured by social democratic regimes, although in practice childcare is a highly complex mix of provision by public and private actors across countries. The market model is based on an exchange relationship between consumers and providers whereas the social democratic or ‘universal’ model is based on social rights between citizens and the state (Naumann 2011). The market model of childcare provision is expected to deliver innovation, flexibility and individual choice while the universal model is expected to provide equity and stability.

Under the market model, consumers (in this case parents rather than children) exchange voluntarily with providers in order to choose the form of childcare which best suits their family’s needs, with minimal constraint by the political process. The process of market competition offers incentives for providers to look for innovative ways to improve the quality of their service at a lower cost to parents. However, this process necessarily creates variation in service provision, which may increase inequality of access. Similarly the very dynamism which spurs progress can be de-stabilising for individual families who rely on care. The ability to pay for good quality care may be particularly difficult for those on low incomes. These issues are at the heart of the rationale for the universal model where ECEC is provided through the state and funded by taxation. However, the universal model necessitates high public spending and political control over service provision, while the market model, in principle, requires less state action and lower public spending.

In practice, states do not fully adopt a pure market approach, but tend to combine the market approach with pockets of universalism (Naumann 2011) or to attempt a ‘third way’ between the two in the form of ‘managed markets’ (Johnson 1999). This mixed approach is an effort to achieve the efficiency and flexibility of the market with political control over social outcomes such as child development and parental employment. Thus where states ostensibly rely on the market to provide services, they nevertheless are involved in shaping this provision through subsidisation and regulation.

Subsidisation

When providing public funding for the private provision of services, states may choose a supply- or demand-side stategy. Supply-side funding is delivered directly to providers in order to decrease start-up costs and manage quality. It also allows for control over where public money is spent and increased influence over the type of provision available. Direct public provision by the state is the extreme version of supply-side funding. By contrast, demand-side funding is delivered to the purchasers of care, often indirectly

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through tax credits, but might also be delivered directly through vouchers or something similar. Demand-side funding is intended to give consumers more control over the type of provision they purchase in order to increase provider responsiveness to consumer interests. This type of funding relies more heavily on market mechanisms and therefore decreases control over spending. Consumers may purchase whatever form of provision is available, which may not be in line with policy goals.

Regulation

Regulation may be defined as a particular policy instrument distinct from other types, such as direct service provision or subsidisation. Regulation in this sense may take the form of proscriptions, mandates or information requirements formulated by legislatures or regulatory bodies (Stiglitz 2010). In a broader sense, the state may use its fiscal powers through ‘regulation by contract’ or regulation by tax/subsidy in which the state does not issue a mandatory, explicit rule, but attaches requirements to funding sources (Baldwin et. al. 1998: 27).

Within the realm of childcare, states frequently attach stipulations with regard to who may receive subsidies and providers usually work within a general framework of statutory requirements for their sector, although these requirements are not necessarily uniform across provider types. Childcare workers are also subject to broader labour market regulations.

Sector- or occupation-specific statutory requirements address a variety of areas such as health and safety, child-staff ratios and group size, staff education and training and child activities or curriculum. Such regulation is intended, at a minimum, to protect children from serious harm, but also as a signal to parents to help them choose higher quality care (Heeb & Kilburn 2004).

The rationale for such state regulation usually relies on ‘market failure’ assumptions (Blau 2001). The argument is that the disciplining nature of market competition may work with regard to pushing down costs, but not with regard to pushing up quality, due to externalities and information asymmetries. Parents are assumed to purchase lower quality care than they otherwise would because they do not internalise the social costs of using such care and/or they lack sufficient information about the quality of services their children receive.

Governments may prefer regulation to public funding because it allows them to pass much of the cost of policy onto providers (Blau 2001) while existing providers may support regulation as a way of reducing competition (e.g. PriceWaterhouseCoopers 2006: 25). However, strict regulation can have perverse effects by pushing up costs and/or reducing supply. If the price of care increases beyond what parents can afford then they may switch to unregulated care, which may be lower quality (Blau & Currie 2006: 1217). For the US, Heeb & Kilburn (2004) find that regulations influence parents’ childcare decisions primarily through a price effect (increased price lowers use of care) rather than a quality assurance effect (increased quality increases use of care).

American and British approaches to ECEC policy

Governance

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In both the US and the UK responsibility for ECEC policy is split among different levels of government. In the UK, devolution formally places education (including pre-primary) and a host of other social services in the hands of the devolved governments in Scotland, Wales and Northern Ireland. Therefore most of the Westminster government’s policies for childcare provision only directly apply to childcare in England. Similarly, the regulation of childcare is carried out by separate regulatory bodies in each region. However, other aspects of British childcare policy, such as tax credits, are operated UK-wide. As the UK government is simultaneously responsible for both UK-wide fiscal policy and England-specific education and social services, where applicable this paper will focus on policy and provision for England only.

In England, both pre-primary education and care services are integrated under the national Department for Education, but administration is decentralised among local governments (English Local Authorities). The central UK government legislates and provides funding to the Local Authorities who are responsible for distributing funds to providers, overseeing the delivery of services and in some cases, direct provision of services.

The US is a federal system and education and childcare policy is largely the responsibility of each US state. Accordingly, there is no national ECEC policy as such. Nevertheless, the US government is involved in funding ECEC in various ways. At the federal level, administrative responsibility is divided between the Department of Education and the Department of Health and Human Services (which includes a sub-department called the Office of Child Care). State governments are responsible for spending the funds received through the federal government, enacting their own childcare legislation and programs, and regulating private provision of services. As a result, ECEC policies and provision vary widely across the 50 states.

Policies & Programs

England has had a national ELCC agenda since the election of New Labour in 1997, which asserted an active role for the state in promoting formal early learning and care services for young children. Prior to this time, how children below school-age were cared for was largely a private matter left up to parents and communities, other than in exceptional circumstances where children were deemed to be ‘at-risk.’3

In order to promote the policy goals of increased maternal employment, lower child poverty and school-readiness, ELCC policy since New Labour has actively encouraged the expansion of formal market-based care through direct and indirect government subsidies (see Table 1). The emphasis on market care is viewed as a way of preserving flexibility and individual choice for parents. At the same time, there has been an emphasis on the educational dimension of ELCC, particularly with the Early Years Foundation Stage curriculum which prioritises specific learning goals and achievement by pre-school aged children (DfES 2006).

Table 1: UK ECEC Policies & Programs

3 This is not to suggest that the state had no involvement in ECEC policy-making. The previous Conservative government had also introduced initiatives for pre-school children (Penn & Randall 2005). What changed was the introduction of an explicit national agenda which was not present prior to the 1998 National Childcare Strategy.

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Program DescriptionChildren’s Centres Provides funding for a wide range of support

services to children and their families, including childcare

Early Years Entitlement Guarantees access to part-time nursery education for 3 and 4 year olds and some disadvantaged 2-year olds

Working Families Tax Credit - childcare element

Parents may claim a tax credit of up to 70% of childcare expenses for a maximum £175 per week for one child (up to £122.50), and £300 per week for two or more children, (up to £210)

Employer voucher scheme Employers may help workers pay for childcare in exchange for a reduction in tax liability through Income Tax and National Insurance contributions exemptions

Sources: HMRC 2011a; HMRC 2011b; Penn 2007

The US, in relation to its federal structure, has no comprehensive national agenda regarding ECEC. Nevertheless, the federal government is involved in funding ECEC provision through various programs (see Table 2), such as the Child Care Development Fund, which takes the form of a block grant to the states to make care more affordable. Instead, much childcare policy is enacted or administered at the state level. Federal funding is spent by individual states and is matched by each state’s own spending. States set their own provisions for subsidy eligibility, regulate childcare provision, and in some cases, provide public preschool programs. Some states also provide state-level tax credits or deductions for childcare, in addition to the federal tax credit (Maag 2005).

Table 2: US Federal and State Policies & ProgramsProgram DescriptionChild Care Development Fund (CCDF)

Federal block grant to states to subsidise childcare facilities (at least 4% of CCDF funds must be used to improve the quality of childcare) and the cost to parents through a voucher scheme; primarily used to assist low income families or those receiving public assistance

Temporary Assistance to Needy Families (TANF)

Federal block grant for welfare benefits – 30% may be transferred to CCDF or spent directly on childcare

Social Services Block Grant (SSBG) Provides funds for a variety of services, including but not limited to childcare.

Head Start/Early Head Start Early education program for disadvantaged children and services for families; Grant funding to local public and private providers primarily to serve children living below the federal poverty level

Federal Child and Dependent Care Tax Credit (CDCTC)

Non-refundable tax credit for the purchase of childcare

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Dependent Care Assistance Program

Employer-based tax-free savings account for childcare expenses; Up to $5,000 may be excluded from pay, reducing overall tax liability

State Pre-school Public early education programs for 3-4 year oldsState Child and Dependent Care Tax Credit (CDCTC)

Similar to federal tax credit; exists in 28 states (13 have a refundable tax credit)

Source: NCCIC 2011; Maag 2011

Although some states have taken a more active role in promoting ECEC, generally the principle guiding US policy is that children’s care is a private matter, best left up to the decision of the parents (Sosinky 2012). Direct expenditure for childcare funding has been heavily linked to a broader social policy agenda to reduce poverty, rather than to encourage childcare use per se. Policies are primarily designed to assist low-income families with the costs of childcare in order to facilitate mothers’ employment and reduce dependence on welfare benefits. For example, federal law stipulates that families may only receive CCDF subsidies if their income does not exceed 85% of the state median, and states are allowed to set a lower maximum income eligibility (Lynch 2010). Most federal funding goes to those families who are at or below 150% of the poverty line (ASPE 2010). Similarly, the Head Start/Early Head Start program is an early education program specifically for very low-income children.

Although US policies are largely targeted toward families on low incomes, this is not always the case. Some state preschools are provided for all children through the public school system, and subsidisation through the tax system is largely a middle-class entitlement due to the non-refundable aspect of the childcare tax credit and the greater likelihood of such parents having access to employer support.

Expenditure & Systems of Public Funding

In 2007, as a percent of GDP the UK had the third highest total government expenditure (after Denmark and Sweden) in the OECD countries on childcare and pre-primary education at 1.1%. US expenditure was .4% of GDP (OECD 2011). Both countries spend more on educational services for children than they do on care services. In the UK the proportion of GDP spent on pre-primary education was .7% versus .4% for care services; in the US it was .3% versus .1%, respectively. In terms of absolute per-child expenditure, the US actually spent more on pre-primary services at $4,660 (in US dollars) compared to $4,255 in the UK. However, the UK government spends much more on care services - $3,563 versus $794 per child in the US.

Supply-side funding

The British system of childcare funding has tended to emphasise the supply-side rather than the demand-side, though it includes aspects of both. In line with the policy goal of increasing the use of formal, registered early education and care services, several initiatives have delivered funding directly to providers. Local Authorities have a statutory duty to ‘manage the market’ by ensuring that there is sufficient ECEC provision in their area (Penn 2007). They receive funding from the central government which they then grant to

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various providers to offer Children’s Centres or the Early Years Entitlement. Although they are intended to be providers of last resort (DfCSF 2010), some Local Authorities also provide their own nursery schools.

In the US the primary source of supply-side funding is through public preschool programs at the state level. As these services are considered part of the public education system, they are funded, controlled and directed by the state, though at a local level. In 2011, 39 states provided public preschool programs, of which 31 states had an income limit for participation in the program (Barnett et. al. 2011).

Some federal funding is also earmarked specifically for providers. States must use at least 4% of the Child Care Development Fund to fund quality development in childcare facilities. Similarly, the Head Start/Early Head Start programs may be provided by independent organisations, but receive public funding for delivery.

Demand-side funding

The majority of US funding has been devoted to helping parents pay for care rather than directly investing in facilities (Hofferth 1999: 30). Most US childcare subsidies from federal block grants are provided in the form of vouchers. Parents may choose from any childcare provider who meets state and local regulations; relative care is also eligible if the relative lives in a separate residence (Office of Child Care 2010).

Both governments also provide demand-side support for ECEC through the tax system. The two countries have similar tax schemes to aid parents in their purchase of care – a tax credit for households and a reduction in tax liability for employer support. In the UK parents can claim up to 70% of childcare expenses of a maximum £175 per week for one child and £300 per week for two or more children. The credit is calculated based on the overall amount of Working Families Tax Credit the family is entitled to and is reduced as income increases. The tax credit may only be used to purchase registered or approved care (HMRC 2011a). In the US families may claim up to 35% of a maximum $3,000/ year for 1 child or $6,000 for 2 or more children, depending on income (IRS 2011).

In the UK employers may also offer their employees childcare vouchers in exchange for a reduction in tax liability through Income Tax and National Insurance contributions exemptions (HMRC 2011b). In the US employer-supported childcare takes the form of a tax-free savings account, in which the employer deducts money from the employee’s pay before taxes are applied, reducing overall tax liability (Maag 2011).

Regulatory Framework

In England, the inspection and regulation of children’s services and education is the responsibility of Ofsted (the Office for Standards in Education, Children’s Services and Skills), a non-ministerial government department. Ofsted registers and inspects all types of providers of ELCC. For independent (non-state) provision, Ofsted holds two registers for providers – the Early Years Register for those looking after children in the Early Years Foundation Stage (0-5 years) and the Childcare Register for all other providers (Ofsted 2011).

In the US, non-public childcare provision is regulated by public agencies at the state level through occupational licensing. Similar to English registration, providers must meet certain requirements in order to operate legally. State agencies are required to inspect

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licensed providers in order to ensure compliance with state-based regulatory standards and must ensure that providers receiving federal funds comply with health and safety requirements (Lynch 2010). Because the US government does not impose federal standards, there is huge variation in the degree and type of regulation of the childcare market across the 50 states.

In both countries statutory requirements span areas such as health and safety, staff education and training and group sizes/child: staff ratios. England also requires early years providers to follow the Early Years Foundation Stage (EYFS) framework, which is the national curriculum for pre-school aged children. The EYFS4 was introduced in 2008 to provide an integrated framework for early learning and development and includes 69 early learning goals in six areas of child development. US state regulations often include requirements for particular activities to promote child development, but there is no standardised curriculum for pre-school children.

In both countries childcare is not uniformly regulated –providers may be exempt altogether, regulated only under particular circumstances or subject to different standards based on characteristics such as where the care is located and the number and age of children served. A wide range of American childcare is not subject to statutory regulation at all (e.g. informal care, formal care of only a few children at once), whereas English providers are only exempt from registration under very specific circumstances (e.g. when caring for a child over 8, for under 2 hours per day, or care in the child’s home). Additionally, statutory requirements in the US tend to be minimum thresholds to protect children rather than stricter requirements designed to raise the quality of care (NCCIC & NARA 2010; Ofsted 2010).

The Structure of ECEC provision in the US and UK

Types of Provision and the Public-Private Mix

In the UK, compulsory school age is 5 years. Nevertheless, some children, usually 4 year olds, begin school early in reception classes (the first year of primary school). In addition, many children receive their early education entitlement through their primary school rather than a childcare provider per se. 60% of the EYE is available through the state education sector (Blackburn 2012: 52).

In the US, compulsory school age is set by the states and varies between 5-7 years; however, the vast majority of 5 and 6 year olds attend school (between 86-98%, depending on the state) beginning either in kindergarten or 1st grade (Aud et. al. 2011). As previously mentioned, however, many younger children attend pre-school, including some within the state education system. The proportion of children served in state preschool programs varies widely: for 4 year olds it ranges from about 61-71% in Florida, Oklahoma and Vermont to 10% or less in states like Ohio, Alabama, Oregon and others (Barnett et. al. 2011: 9).

Of childcare provision, rather than early education provided through the state school system, roughly 70% is for-profit in both the US and UK. In the UK, non-profit provision makes up 23% and public provision, usually by local authorities, makes up 8% (Penn 2011:

4 The Early Years Foundation Stage was recently reviewed, along with the regulations for the Early Years Register, and the revised format will be introduced from September 2012.

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154). As the most recent US data is based on categorisation for federal income tax purposes, all not-for-profit provision is lumped together, including non-profit organisations and community groups as well as public agencies and state pre-kindergarten services (Sosinsky 2012: 136-137).

Provider types include organised childcare provision such as school- or centre-based care provided by the state, non-profit and for-profit private organisations; group-based care often provided by local community groups; and childminding or family day care operated as small businesses. Some families do not use formal care at all but instead rely on informal care by family, friends, neighbours and other home carers such as nannies.

In both countries formal childcare use is more common among 3-4 year olds than among younger children. A greater proportion of British children are enrolled in formal care than American children (see Table 3). However, British children spend less time in care than American children; for children under 3 the average number of hours per week spent in care was 16 in the UK but 31 in the US (OECD 2011).

Table 3: Enrolment in formal care (%) by ageUnder 3 years 3 years 4 years

United Kingdom (2008) 40.8 82.4 97.3United States (2005) 31.4 36.3 57.5

Source: OECD Family Database

The Cost of ECEC

It is difficult to compare the cost of care across countries, partly due to variation across provider type and geographical area, and partly due to a dearth of reliable and comprehensive information. Aggregate data from the OECD suggests that both fees and the cost of care to parents after receiving government benefits are lower in the US than in the UK. For similar dual-earner couples with full-time childcare arrangements the net proportion of family income paid after benefits is 19.4% in the US but 32.7% in the UK. For lone parent families, the proportion is 6.2% in the US and 14.4% in the UK (OECD 2011).

Absolute costs for childcare are likely to be lower in the US given comparatively less restrictive labour market regulation (Morgan 2005) as well as less restrictive childcare-specific regulations. For US states, those with the lowest cost of care (i.e. less than 10% of state median income) were also those with the least restrictive licensing standards (NACRRA 2011: 18). It is also possible that US parents pay less for care because fewer proportions of American children use formal care, which tends to be more expensive.

Quality and the ECEC Workforce

There is a broad consensus that high quality care services are good for children’s development, though there is some debate about the types of quality which are most important. Blau & Currie (2006: 1184) distinguish between structural quality such as child-staff ratios, worker education/training, and staff turnover, and process quality such as the interaction between caregivers and children. Of the two, the latter is judged to be a better indicator of quality, but is extremely difficult to measure. In practice therefore, policy is directed toward, and services are judged by their structural quality. In particular, staff training has been found to be a relatively good indicator of quality (Rigby et al. 2007).

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In both the US and UK the ECEC workforce is predominantly made up of low-paid women (Moss & Bennett 2010; NACCRA 2012) Childcare workers are paid just slightly over the national minimum wage. In the US the average wage for all full-time child care workers is $10.15 per hour while the federal minimum wage is $7.25 per hour (NACCRA 2011). In England the average wage for all staff in day nurseries in England was £7.30 in 2008 while the national minimum wage was £5.73 (Moss & Bennett 2010).

The level of staff training and qualifications (and corresponding pay and work benefits) varies by the type of provider and/or particular occupation of the staff member. Those working within early education are considered ‘teachers’ and usually have higher level qualifications, better pay and working conditions whereas ‘carers’ tend to have lower level qualifications and worse pay and working conditions (Blau 2001; BLS 2012; Moss & Bennett 2010). This split also tends to follow a public/private divide, given the higher level of public provision in early education compared to care.

In the US 55% of family childcare providers, 57% of centre-based care assistants and 80% of centre teachers have at least some higher education (NACCRA 2012). In England, 3% of childminders and 42% of early years staff hold a level 6 (honours degree) qualification (Brind et al. 2011: 20). This is not directly equivalent, partly because the US measure is some higher education whereas the English measure is a completed degree and also because English education becomes more specialised at an earlier level than American education. It is likely that a greater number of English providers have a qualification which is directly relevant to ECEC, in part due to specialisation and in part due to regulatory requirements.

Furthermore as part of the drive to increase the quality of ECEC provision, the UK government has been actively attempting to raise the qualification level of workers. In 2007 a new professional status for early years providers was introduced – the Early Years Professional Status (EYPS). Providers with this graduate level qualification are intended to work in leadership positions in formal care settings (Moss & Bennet 2010).

Heterogeneity in liberal welfare regimes: approaches to ‘market management’

The approaches to ECEC policy in both the US and the UK can broadly be described as ‘managing the market’ in the sense that much provision is market-based and policies are designed to subsidise and regulate that provision. To some degree their differences can be viewed as a simple continuum between more state involvement in ECEC provision (in the UK) and less (in the US). However, it is not quite so straightforward. Not only does the ‘pure’ US case include substantial government involvement in the provision of ECEC at both the federal and state levels, but the UK approach simultaneously combines more ‘state,’ in terms of increased expenditure and stricter regulation, with more ‘market,’ in terms of an explicit attempt to encourage for-profit provision.

As broadly liberal welfare regimes, the US and UK approaches to ECEC share several key features. First and most obvious is the overall emphasis on private rather than public provision, particularly with regard to services for younger children, which tend to be viewed as ‘care’ rather than ‘education’. This split between publicly provided education and privately provided care can be seen in both the US and UK, although the UK has taken further steps to integrate children’s services, in line with broader European trends.

They also both allow a substantial role for sub-national governance in administration (in the English Local Authorities) and even policy-making (in the US states). Both approaches

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exhibit a targeted approach to support for low-income or disadvantaged families and children, with the twin goals of developing early learning and promoting maternal employment. The centrality of tax expenditures to childcare policy in both the US and UK is also consistent with the general use of the tax system for social policy purposes in liberal welfare regimes (Kamerman and Kahn 1997).

However, within these broad similarities lie key differences which may help to explain structural differences in their overall ECEC provision. On the surface, these differences appear to be simply one of degree, where the US embodies a purer case of liberalism than the UK. Here the relative generosity and universalism of the UK approach is consistent with its more advanced welfare state and its sometimes contested nature as a liberal welfare regime (see Arts & Gelissen 2002). Proportional ECEC expenditure, for example, is much higher in the UK than in the US, and private providers in the UK are subject to stricter regulations by the state, particularly with regard to England’s Early Years curriculum for all 3-5 year olds.

Yet it is not quite this straightforward. The UK approach combines both relatively greater state involvement with an explicit acceptance and encouragement of market care – more ‘market’ and more ‘state’ simultaneously. The UK embraces a more top-down approach of ‘market-making’ – using the market as a policy instrument – in order to achieve specific ECEC goals. Not only is the UK approach to actively encourage a childcare market, but one with particular qualities – formal care which must have an educational component, largely provided on a for-profit basis. This is particularly evident through the explicit role for Local Authorities as ‘market managers’ (DFCSF 2010). The UK also relies on supply-side funding and places restrictions on the use of demand-side subsidies to a greater extent than in the US.

The rigidity of the Early Years Entitlement and the Early Years Foundation Stage also exemplify the top-down approach to market-making. Rather than simply funding market care (or private care more broadly) the UK government is invested in encouraging particular forms of care which are in line with its broader policy goals and desired social outcomes.

The US approach, in contrast, is largely market-based by default. Private responsibility for childcare provision (through the market or otherwise) is assumed and US ECEC policy and regulations tend towards minimal involvement. Public funding is usually available only to assist those who otherwise might not be able to afford any childcare services, with almost no restrictions on the types of care which may be used. ECEC policy tends to exist only where childcare intersects with other policy goals such as preparing disadvantaged children for school or reducing the numbers of people receiving welfare benefits. US childcare regulation imposes minimal thresholds primarily for child health and safety in order to protect children while still ensuring maximum flexibility and choice for parents. However, the state nevertheless plays a substantial role in, if not ‘market management,’ in the style of the UK then perhaps ‘market mitigation’ – targeted intervention to reduce the excesses of the market.

To some extent these differences likely reflect their governance structures. The UK is a unitary state with a parliamentary system of government which allows for more centralised control over policymaking and greater leeway for the political party in power, whereas the US federal, presidential system is more restrictive. Cultural differences regarding the proper functions of government in certain spheres of social life, such as the family, may also play a role.

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In either case, the approaches adopted have implications for the structure of ECEC provision in these two countries. In the UK the explicit role of government in encouraging the development of for-profit providers through supply-side subsidies amplifies politicisation of the issue, leading to increased attempts to control the outcomes of the market in order to deliver value for public money. Such controls do not necessarily provide the desired outcomes, as individual responses to policy can be unpredictable; they do, however, reduce the likelihood that the market will deliver the benefits which arguably were the reasons behind relying on private provision in the first place – flexibility and choice. Tighter controls on private provision can have the perverse effects of reducing parents’ choices and raising the cost of care. Rigidity in the regulatory framework also reduces the flexibility of private provision. These effects may be considered acceptable if the goal is to reduce variability in the market and limit provision to particular forms, as it appears to be in the UK case. Such limitations may raise the quality of care by keeping out certain providers; alternatively, it may simply drive them underground or make care less affordable for parents.

The US approach by contrast affords less control over outcomes, but is less restrictive of parental choice. Regulations are generally minimum requirements to protect children rather than to encourage high standards. There are fewer barriers to entry for suppliers and fewer restrictions on parents’ use of subsidies. The key issue for US ECEC therefore tends to be one of ensuring that all children have access to high quality care. A wider base of unregulated care and less stringent requirements implies, if not an overall lower quality of care, then certainly greater variability.

Conclusion

While both governments are actively involved in shaping the market for childcare through regulation and subsidies, the UK approach is explicit in its ‘managerial’ role whereas the US approach appears more conflicted, attempting to combine a basically non-interventionist approach with limitations on the market. These findings suggest that ‘liberal’ approaches to family policy are not homogeneous or even always straightforwardly liberal and that these differences may have an important impact on social outcomes. In certain areas (education), liberal regimes tend to abandon market mechanisms, whereas in others (care) for-profit provision and demand-led subsidies are the norm.

They also suggest some fundamental contradictions within the ‘market-manager’ approach to policy. The mixed approach to ECEC policy is an attempt to achieve the efficiency and flexibility of the market with political control over social outcomes. This tension is at the heart of both American and British ECEC. Though largely market-based, the structure of ECEC provision in these countries is nevertheless influenced by public funding, regulatory frameworks, and in some cases, direct public provision. The perverse effects observed in ECEC provision in these countries are likely not a simple result of ‘market failure’ but of the compounded effects of both ‘market failure’ and ‘government failure.’

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