For most lower- and middle-class families, non-parental child care in a daycare center is a luxury that is beyond reach. In Mississippi, the cost of sending a child to daycare equals roughly 25 percent of the income of a family living at the poverty level. In Massachusetts, the same service costs on average 86 percent of the income of a family at the poverty level. The high cost of formal child care at a daycare center leaves most families looking for other options – and those options often include unlicensed, black-market providers.

There’s a two-class system of child care in this country: high-cost, regulated care for high-income families and lower-cost, unregulated care for lower-income families.

In a new working paper published by the Mercatus Center at George Mason University, Devon Gorry and I investigate what causes the high cost of child care in this country. We find that the regulatory burden daycare centers must meet is one of the primary causes of the high cost of care. We argue that the most effective way for policymakers to end the existing two-class system of early childhood caregiving is to eliminate ineffective rules that don’t improve quality but significantly increase the cost of child care.

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State regulatory standards are, of course, well intentioned and put in place to ensure children have a healthy, nurturing environment outside of the home. But while most rules increase the cost of care, not all improve the quality of child care.

In a review of the child development literature, we find that regular staff training in early childhood development is one of the most important factors influencing child development outcomes. Child-staff ratios and group size limits, on the other hand, seem to be relatively ineffective in generating good development outcomes.

Despite the fact that they have only small or statistically insignificant effects on development outcomes, child-staff ratios and group-size limits are regulated in most states. Child-staff ratios limit the number of children per staff person. They range from a low of four 18-month-old children per staff member in many states to a high of nine 18-month-old children per staff member in Mississippi. Group-size limits restrict the number of children per classroom. They range from a low of eight for 18-month-old children to no limitations in a number of states.

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Our study shows that, while those rules have little effect on the quality of care, they contribute significantly to the cost of regulated care. In fact, in our sample, an increase in the child-staff ratio by one child would on average result in a 20 percent reduction in the cost of care.

Regulation of childcare providers should focus on measures that improve quality without unnecessarily increasing the cost of care. Reforms directed at alleviating the regulatory burden without compromising quality would allow all children, whether they live in low- or high-income families, access to high-quality child care.