Each day, millions of children from the ages of six weeks to 14 are placed in some form of child care arrangement while parents work. Providers of child care services vary greatly and range from for-profit or nonprofit, center-based facilities and after school programs, to care that is offered out of a provider’s home. The quality of such “market-based” child care varies greatly, but has been found to be, on average, of mediocre quality. Moreover, researchers and advocates are quick to point out the inequities in the child care market with higher-income families accessing significantly higher quality care than their lower-income peers. Among low-income families, the quality of market-based care they access is quite low—considerably lower than that of the federal Head Start program, for example. It is for this reason that while a majority of children are cared for in market-based child care arrangements in United States, it is considered the “weak link” of the country’s early care and education system.
Market Imperfections
Market imperfections are a primary reason for the low quality of care in the child care market. Inefficiencies in this market derive in part from the fact that most parents either do not have a good understanding of what quality child care is, or have difficulty recognizing quality characteristics when they are present. Because of this “lack of information,” parents cannot accurately value different child care options, and often fail to choose the “optimal” child care arrangement based on their specific preferences related to quality and cost. Therefore, it is not surprising that research has found that parents significantly overestimate the quality of the care that their children receive. This issue, coupled with the fact that working parents often prioritize convenience and affordability over quality when choosing care, negatively affect the overall quality of care in the market, which in turn, has an impact on the school readiness of children who are placed in these settings prior to entering kindergarten.
The Solution: Early Learning Ventures Alliance
A solution to the conundrum described above is to significantly increase the operational efficiencies of child care providers to allow them to provide higher quality care at a lower cost. This concept represents the theoretical foundation of the Early Learning Ventures (ELV) Alliance model. According to the National Association of Child Care Resource and Referral Agencies, there are over 350,000 child care providers in the United States. While a number of large providers exist, most child care providers care for a relatively small number of children. While these providers are the foundation of the U.S. economy, providing care for families while parents work, it is difficult for them to attain an economy of scale because of their small size. Therefore, it is this large group of small providers that are the most sensitive to the increased costs associated with providing higher quality care.
As a solution to this problem, ELV funds financially-stable nonprofit organizations to act as hub agencies called “Alliances” to promote business efficiencies and higher quality among small providers in a community. The Alliances target family child care providers and independent child care centers creating networks of up to 100 providers. These providers retain their autonomy but attain critical economies of scale in purchasing, procurement, marketing, human resources, and other business operations by coordinating these functions through the Alliance. In addition, providers in the network are given access to a unique technological platform called Alliance CORE which streamlines a host of business functions and allows the Alliance to help manage the administrative operations of the providers. The web-based IT platform optimizes file management, record keeping, and child and adult food program and licensure requirements. The bulk purchasing power of the network combined with more streamlined and efficient business operations provides a significant cost savings to the provider.
