American women are having fewer kids than they’d like. By one estimate, the average fertility gap—the distance between a woman’s ideal number of children and achieved fertility—for U.S. women is 0.76, close to one child. That figure, though, varies significantly between states: in North Dakota, the gap is one-third, while in New Hampshire, Rhode Island, and Alaska, it’s greater than one child.
These state-level differences help us investigate how state policy could be shaping family decisions. Affordable childcare options are key for young families, and regulations of childcare vary greatly by state. Using the fertility-gap metric and a novel Childcare Regulations Index, we set out in a recent working paper to understand just how pertinent childcare regulations are when it comes to the gap between ideal and achieved family size.
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States with more flexible childcare regulation, it turns out, have smaller fertility gaps than states that impose heavier regulatory burdens. After imposing a host of demographic controls, we find that a one-point increase in childcare freedom on a zero-to-ten scale is associated with a reduction in the fertility gap of about 0.025 children. The policy implications are obvious: overzealous childcare regulations are one obstacle keeping Americans from having as many kids as they want.
For example, imagine that Vermont (the most heavily regulated state) matched the regulatory environment of a middle-scoring state like North Carolina. Our results show the fertility gap would shrink from 0.78 to 0.68 children per woman—a 12.5 percent change—without additional subsidies or cash transfers.
The results increase in magnitude when the sample is restricted to women under 35 and remain stable for women currently in the workforce, ruling out the possibility that women disconnected from childcare might be driving results. They also hold up under an “instrumental-variables” approach designed to address the concern that some unobserved state characteristic other than regulation might be driving both looser rules and higher fertility. A robust childcare market appears to make a big difference in family decisions.
These results highlight the way work-family compatibility—the ease with which people achieve their desire for both career and family—influences fertility decisions. The data reveal that regulations make it harder to find the right childcare fit. Childcare regulations make the service more expensive by tightening staff-to-child ratios, ramping up credentials, or limiting classroom capacity. Worse, they eventually run providers out of the market and limit the range of childcare options available to parents. States with lower scores on the Childcare Regulations Index report a higher percentage of parents expressing difficulty finding childcare and a greater reduction in home-based childcare providers over the past decade, on average.
Moderating childcare regulations does not mean throwing caution to the wind and putting kids at risk. Research on the effects of regulation on childcare quality has been largely inconclusive. What is known is that tighter regulation increases overhead costs and decreases staff wages, driving many providers, especially in low-income areas, out of business. With more regulatory freedom, childcare providers experience competitive pressure motivating them to provide the best and safest services to families.
Notably, the effect of regulation on fertility gaps is concentrated in rules governing children roughly 18 months and older, particularly staff-to-child ratios for toddlers and preschoolers. Educational requirements for teachers also play a large role in shaping childcare availability. Regulations governing infant care are more agreed upon across the states and show no measurable relationship to the fertility gap.
These insights create an opportunity for deregulation. What matters is, for example, whether ten (Pennsylvania) or 20 (North Carolina) four-year-olds are allowed to share a classroom, and whether their teachers are required to have college credit in early childhood education. The stringent rules on preschool-aged children cause childcare prices for four-year-old care to be just as high as infant care in some states. Relaxing them to match those imposed in less stringent states can reduce costs while keeping children safe.
From childcare to housing to occupational licensing, overregulation is stunting the efforts of hardworking families. To help people have the families they say they want, policymakers need to address how excessive state childcare regulations may be working against that goal.