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Illinois: The Economic Impact of Early Care and Education in Illinois

Project status

Completed January, 2005

Lead Agency

Day Care Action Council of Illinois (
Chicago Metropolis 2020 (
Illinois Facilities Fund  (

Contact Person

David Alexander, Ph.D.
Research Director
Day Care Action Council of Illinois
4753 N. Broadway
Suite 1200
Chicago IL 60640
tel. direct (773) 697-6123; main: (773) 561-7900 ext. 6123
fax  (773) 561-2256
Sara Slaughter, Chicago Metropolis2020
Susan Cohan, Illinois Facilities Fund

Research Firm

National Economic Development and Law Center (NEDLC)


  • Number of Establishments
  • Child Care Labor Force
  • Children Served
  • Gross Receipts
  • Multiplier Effects on Local Economy
  • Governmental Transfers / Subsidies

Case Study

Case Study: Illinois
“Executive Summary: The Economic Impact of the Early Care and Education Industry in Illinois”
“The Economic Impact of the Early Care and Education Industry in Illinois”
Date of Study Completion: January 2005


Membership and Context

The Illinois statewide study was initiated by David Alexander, of Action for Children, and Elizabeth Evans of the Illinois Facilities Fund (IFF), a community development financial institution in Chicago . Each had independently become interested in the concept of a child care economic impact study, and Elizabeth suggested that Action for Children and IFF invite Metropolis 2020 to join them in conducting a child care economic impact study for the state. Action for Children, a Child Care Resource and Referral Agency, was uniquely situated to play a key role in creating the study as its research director, David Alexander, is an economist. Metropolis 2020 is an organization of local business and civic leaders that focuses on developing civic entrepreneurship in the Chicago metro area. Its Director of Programs, Sara Slaughter, has an extensive background working on both economic development and early care and education issues. The National Economic Development and Law Center (NEDLC) also played a role in initiating the study, including providing some funding, conducting data analysis and contributing to the format of the report.

The Advisory Committee included, among others, representatives from: Action for Children, the Women’s Self-Employment Project, the Women’s Business Development Center , the Bureau of Workforce Development, Northern Trust, Abbott Laboratories, State and local Chambers of Commerce, and State and local government.

The study:

Sector Definition

One of the initial challenges faced by the Illinois team was the process of thinking about child care as an industry. While David Alexander understood the reluctance of the child care community to see itself as an industry, he felt that a basic requirement of the study was to bring the language and rhetoric of economic value to the child care sector. “You know, there are good reasons people want to think about themselves as caregivers rather than economic agents…two totally different perspectives. When we were going around talking to some of the large Illinois advocacy groups - we ran into that…for them industry means making cement and steel…the economic aspects of child care and early education are not so much appreciated.”

Another challenge faced by the Illinois team was how to define child care within the study. In particular, they struggled with the issue of whether or not to count licensed-exempt care and education. In the end, the team chose to base the analysis on two groups of providers: 1) all licensed child care programs in the state, and 2) license-exempt providers that could be tracked as part of the formal economy. This included part-day programs such as Head Start, Early Head Start and state pre-k, but did not include license-exempt home-based child care or unregulated programs for school-age children.

Data Analysis

Measurement* Illinois
Number of Establishments 15,800
Child Care Labor Force 56,000
Children Served 262,811
Gross Receipts $2.12 billion
Number of Parents with Children in Paid Care  
Multiplier Effects on Local Economy X
Governmental Transfers / Subsidies X
Tax Receipts / Fiscal Impact  

*Not all studies included the same components making it difficult to compare the numbers provided in this chart with those of other studies. In its definition of the number of establishments, this study included licensed and regulated center and family care, regulation-exempt center care, pre-k in public schools, but did not include regulation-exempt home-based (informal care) or school-age providers. In its definition of gross receipts, this study included provider charges (parent fees and vouchers in lieu of parent fees), government funded programs (Head Start, pre-k) and provider subsidies (quality dollars, Child and Adult Care Food Program, etc).

The report mentions the large number of license-exempt home providers who receive child care subsidies for child care provided to children under age six (over 22,000). However, because the Illinois Child Care Assistance reimbursement rate for these providers is so low, it was determined that they should not be included when reporting on the total size and economic contributions of the child care industry.

Information on the size and gross receipts of the industry was obtained from administrative data on child care licensing, Illinois Child Care Assistance payments, Illinois Pre-kindergarten, Head Start, CCR&R provider rates and enrollment, contracted centers and food programs and the IDHS’ 2003 Wage and Salary Survey . Industry employment was based on enrollment data provided by the CCR&R agencies applied to mandated staff-to-child ratios and statewide data on staff employed as administrators and other supportive positions.

Data Challenges

One of the most significant challenges faced by the team has been a lack of data. In particular, they have experienced frustration that they can’t count all early care and education services. If providers aren’t listed with the CCR&R, or if they don’t receive a subsidy from the State, then they aren’t counted by data collectors. Ideally the team would have liked to conduct a survey of their own to measure the industry, but funding and timeline requirements have prevented that. David Alexander stressed that child care data collection needs to be both more comprehensive and perhaps redefined to capture our new understanding of the industry’s importance. “Data collection…probably needs to be rethought, and we probably have enough experience that some people ought to get together and really look carefully at the data used to describe child care….it just doesn’t fit very well with [an industry-wide study.]”

Another tension that surfaced several times in different forms was whether the economic impact report should be a rather spare document, largely reporting just the findings on industry receipts and employment, or whether it should also include some combination of other narratives and data. For example, some members of the partnership wanted to add a demand and supply analysis, including demographics and a discussion of available slots; an economic and financial profile of early care and education as an industry; more data and literature review on working parents, employee retention and turnover; more on employee child care benefits; or advocacy dimensions of all of these. The desire to include more information had to be balanced with the effectiveness of a shorter document.

Although this was a statewide study, the study team also gathered data with future regional studies in mind. This approach led to a concern that some of the more rural areas of Illinois have very little early care and education available. The team had trouble bringing rural representatives to the discussion, which makes addressing this concern even more difficult.

Unique Findings

  • Unregulated child care businesses comprise a very large--and largely invisible--segment of the industry. More than 58% of all children in the Illinois Child Care Assistance program, and 44% of those under 6 years old, are in licensed-exempt child care settings.
  • Several Illinois businesses have reported positive results from including child care as part of an employee benefits package. These employers--and the increased recruitment and retention and reduced absenteeism that resulted--are highlighted in the report.
  • With few exceptions outside of public sector programs, even the most prosperous, business-savvy early care and education establishments operate on tight margins. Between July 1999 and December 2003, approximately 400 child care centers (that could serve as many as 17,000 preschoolers) closed their doors.
  • The largest population growth factor in Illinois is international migration, which accounted for 55% of the population growth between 1990 and 1999. As a result, young children living in Illinois are more diverse in terms of race and ethnicity than the general population. This increases the need for dual or multi-lingual early care and education staff and culturally appropriate programs.


Organizational Change and Outreach

Bill Testa of the Federal Reserve Bank of Chicago, State Senator Don Harmon and Jim Sipes of Abbott Laboratories helped the partnering organizations lead a roll-out event, which was held on January 24th, 2005 in Chicago . Over 100 people attended, including media representatives.

In Chicago the report was featured by one major newspaper columnist , and letters to the editor appeared in both major newspapers. A number of organizational newsletters carried stories about the report. The roll-out event received radio coverage.

Downstate project leaders opted for a decentralized press campaign, instead of a roll-out event.


The report ends with recommendations for business, government and the early care and education industry. These include:

Business should support public funding for early care and education, increase their own financial support, help the ECE industry improve it's business skills and practices, and nominate ECE industry representatives for appointment to the boards of organizations involved in economic development and workforce issues.

Government should increase funding for early care and education; integrate ECE into planning for education, housing and workforce development; publicly recognize businesses that support their employees’ ECE needs; and analyze how population trends affect the demand and distribution of ECE services in the state.

The ECE Industry should advocate for increased public and private funding for early care and education, work with government and the economic development community to market ECE as a vital state industry, advance an ECE industry workforce development agenda to improve quality, and provide data on trends in ECE .

To date, almost 10,000 copies of the Executive Summary have been distributed, as have 1,000 copies of the full report. The report has proved to be such a useful public education and advocacy tool that the study team is now working to prepare county reports

Facing a persistent state budget crisis in Illinois , some legislators have called for cuts in the 2005 Illinois child care budget. Advocates across the state turned out in surprising numbers at regional budget hearings and used the report to make their case for public investments in early care and education.

Interview with:
David Alexander, Research Director
Action for Children
Summer 2004


Download report