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North Carolina: Economic Impact of the Child Care Industry in North Carolina

Project status

Completed June, 2004

Lead Agency

North Carolina Partnership for Children

Contact Person

Gerry S. Cobb
Director, National Smart Start Technical Assistance Center
North Carolina Partnership for Children
1100 Wake Forest Road
Raleigh, NC 27604
919-821-9540 (o)
919-828-7354 (fax)

Research Firm


2005 update to original report conducted by Anthony Solari, Policy Analyst for N.C. Partnership for Children (919.821.9502, Fax: 919.821.8050, E-mail:, Web site:


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

Case Study

Case Study: North Carolina
"The Economic Impact of the Child Care Industry in North Carolina"
Study Released: June, 2004


The North Carolina economic impact study was conducted by the National Economic Development Law Center (NEDLC), with funding from the Kellogg Foundation. The advisory committee was comprised of representatives of the state Office of Economic Development, the Rural Economic Development Center, the Department of Transportation and the North Carolina Partnership for Children,. Also involved were representatives from U.S. Senator John Edwards’ office and a number of corporations including GlaxoSmithKline, IBM and Consolidated Deisel. Academics from the Office of Economic Development and Curriculum in American studies at UNC-Chapel Hill participated as well.


Twelve years ago Governor James Hunt ran on a platform of Early Childhood education and spent eight years implementing this vision--a new community-based initiative called Smart Start. Each NC county now has a Smart Start local partnership and, despite the fact that NC now has a new Governor, the initiative has maintained strong political support. As part of the Smart Start package, NC also initiated a statewide T.E.A.C.H. Early Childhood scholarship program that supports continuing education for child care providers, as well as a 5 Star license that serves as a quality rating system for early childhood programs across the state. A tiered reimbursement system is a component of the licensing system so that the amount of funding a program receives from the child care subsidy system increases based on a star quality level.


NC early care and education leaders hoped that conducting an economic impact study would provide data to help convince state legislators and the business community of the importance of child care in the State’s economy. Sponsors of the economic impact study wanted to increase public and private resources for early care and education services at both the state and community level.


Sector Definition

The study included licensed centers and family child care facilities, before and after school programs, public and private pre-schools and Head Start. Also included were faith-based centers which are required to be registered and receive a G.S. 110 exemption instead of a star license, and special education pre-school programs in schools. (Note: Licensing for school-based pre-kindergarten is being phased in so the study only included those that are already licensed.

Data Analysis

Measurement North Carolina
Number of Establishments1 9,200
Child Care Labor Force1 46,000
Children Served1 337,000
Gross Receipts2 $1.5 billion
Number of Parents with Children in Paid Care X
Multiplier Effects on Local Economy X
Governmental Transfers / Subsidies X
Tax Receipts / Fiscal Impact  

1 Not all studies included the same components. In it's definition of establishments, this study included all licensed child care centers, family child care homes, public and private pre-kindergarten programs, and faith-based programs receiving a G.S.110 exemption. 2 In calculating Gross Receipts this study included parent fees and co-payments, state and federal child care subsidies to low-income families, all Head Start programs, as well as provider subsidies (CACFP , salary supplements, health insurance benefits, professional development, Title 1, Mental Health, Smart Start and other quality supports.)

The report includes a general overview of the demographics and economic profile of North Carolina and how these factors relate to child care. In addition to the measurements listed above, the report measured the number of children in each age cohort from infants to age five and the percent served by full-time care. The number of unlicensed child care facilities was also estimated, although these facilities were not counted in the number of establishments, labor force or gross receipts estimates.

When the statewide study was done, the research team also created data for each of the local Smart Start Partnership Boards. These data are not in the report but are available on the web and were distributed to each local Partnership, along with a press packet, a power point presentation and training on how to present the data to key constituencies.

The North Carolina policy team decided not to highlight multiplier effects in the study because they were concerned about the controversy among academics. This turned out to be a fruitful strategy. When they shared a draft report with a leading economist in the State (who had been critical of Smart Start in the past) he responded favorably. He told the study team that he was able to endorse the report because it focused primarily on direct effects.

Unique Findings

  • The percent of North Carolina businesses that offer child care benefits was reported (in a bar chart) based on the number of employees of the firm. The chart graphically demonstrates that the likelihood of child care benefits increases with the number of employees a company has. Approximately 19% of firms with more than 500 employees offered child care assistance as opposed to only 5% of firms with fewer than 50 employees.
  • A section entitled "Attracting Business to North Carolina" stresses that a strong, quality child care infrastructure is an important component in business recruitment.
  • Data from a North Carolina Smart Start evaluation was used to stress that children in higher quality settings had significantly higher scores on tests of language literacy and numerical skills.
  • Average North Carolina per pupil expenditures for K-12 education ($4,535) and for higher education ($8,100) were compared with the total state investment per child under six enrolled in licensed care ($770).)
  • Table I graphically displays the cost to families (who do not receive assistance) for child care/early education ($5,740) with that of K-12 education ($0) and a four-year public college ($2,641.)


Organizational Change and Outreach

Relationships with the business community were strengthened when key leaders were brought on to the advisory committee and/or asked to review the report.

These relationships were further nurtured when the report was released. A large "roll-out" event was held at a private business club. Findings from the report were presented by a panel that included the State Secretary of Commerce, Chairman of the State Chamber of Commerce, a leader in minority business development, a leader in community development, and the owner of a television station. These individuals also signed the roll-out invitation letter, which was sent to all legislators, business leaders, economic development agencies, and many others.

Prior to releasing the report, the research team developed and field-tested a power point presentation on the findings. This was another very effective way to get feedback on the report -- and the overall frame -- prior to the roll-out event. In addition to using the power point at the event, copies were made available to each of the local Smart Start Partnership Boards, along with a press kit and a training session on how to disseminate the findings locally as well as local data for their particular area.

In addition to the presentations and events described above, the study team scheduled special presentations on the report with key boards and commissions. They also presented to three legislative committees, the State Economic Development Board, and multiple regional economic development boards.

In addition to widely distributing press packets at the time the report was released, the research team scheduled appearances on talk shows and other public relations events.


The report contained four pages of recommendations split into three major categories: public understanding, increasing quality and affordability. Each of these categories had suggested actions for business, government and the child care industry. Results to date include:

  • A group of key stakeholders has been established to focus on implementing the recommendations in the report. 
  • Karen Ponder, President of the North Carolina Partnership for Children, is now a member of the State Chamber's Economic Development and Policy Committee.
  • The State Commerce Department now includes child care recruitment data on their website.
  • The research team is working with the state's Employment Security Commission to explore the feasibility of creating a unique identifier for the early care and education workforce. This will allow workforce data to be collected on an on-going basis by the agency that gathers similar data on other North Carolina employment sectors.
  • The state legislature’s Workforce Development Committee has issued numerous recommendations for legislation as a result of the study and those are under consideration in the 2005 legislative session.

Interview with:
Gerry Cobb, Director
Smart Start’s National Technical Assistance Center
August 9, 2004


Download report