If child care in New England were more available and more affordable, a significantly larger percentage of mothers with children younger than 6 would be able to look for and secure jobs, according to a new report from the Federal Reserve Bank of Boston.

The New England Public Policy Center report also finds that the availability of home-based child care is particularly important for labor force participation and employment among mothers living in the region’s non-urban and low-income areas. Meanwhile, center-based child care has a significant effect in urban neighborhoods.

The report, “How Do the Availability and Cost of Childcare Influence Women’s Labor Market Outcomes in New England?”, was written by Boston Fed principal economist Bo Zhao and economist and visiting scholar María José Luengo-Prado. It combines multiple data sources, including detailed child-care licensing records, to construct neighborhood-level measures of supply and cost.

“Most previous research relies on state-level or county-level measures of childcare supply and cost, overlooking the vast differences within states and counties,” Zhao and Luengo-Prado write. “A simple count of childcare slots in a city, county, or state also would ignore that families typically use childcare that is close to home and sometimes cross jurisdictional boundaries for it.”

The authors find that expanded child-care supply for a neighborhood, particularly home-based care, correlates with higher labor force participation and employment rates for mothers with young children who live in that neighborhood. A 0.23 increase in child-care slots per child is associated with a 0.42 percentage point increase in labor force participation among such women. The authors also find that a $563 per month decrease in the cost of child care is associated with a 1.9 percentage point increase in labor force participation for this demographic.

“Taken together, our findings underscore that childcare is not only a family concern but also a macroeconomic one,” the authors write. “Increasing childcare availability and affordability can directly improve women’s participation in the labor force, alleviate workforce shortages, and strengthen household incomes and government budgets.”

New England’s child-care costs have risen, while home-based supply has plummeted

New England has some of the nation’s highest child-care costs and faces a shortage of available slots. Across the five New England states that the authors examined (New Hampshire is omitted due to a lack of available data), the average cost during the report’s study period — 2010 through 2023 — was $2,136 per month. Massachusetts had the highest costs, and Maine had the lowest. Across the region, child-care costs increased sharply after the COVID-19 pandemic.

The average child-care supply for the five New England states studied was approximately 0.57 licensed slots per child younger than 6. The number of slots varied substantially between states, from 0.49 in Rhode Island to 0.86 in Vermont.

The overall supply of child care in New England declined only slightly from 2010 to 2023, but home-based supply fell significantly in each of the five states. The authors say this trend could reflect the region’s aging child-care providers, regulatory complexity, and increased real estate costs. They report that as the supply of home-based care contracted, center-based care expanded to account for approximately 75% of total capacity, signaling a shift toward more structured settings, which typically come with higher prices.

The report shows the supply of child care is relatively low and the cost is relatively high in large areas of each New England state. These areas tend to include urban communities. Neighborhoods with greater supply and lower costs are much less prevalent in each state. In addition, areas where availability — not cost — limits access to child care tend to be in rural parts of each state.

Home-based child care plays a crucial role, especially in non-urban and low-income areas

Zhao and Luengo-Prado find that home-based child-care supply has a stronger and more consistent effect than center-based supply on the labor market outcomes of mothers with young children across the region. An increase in home-based supply of about 0.09 slots per child is associated with an increase in labor force participation of 0.63 percentage points and an increase in employment for mothers with young children of 0.66 percentage points.

The authors note that home-based supply is particularly crucial for non-urban areas and low-income areas. “In non-urban and low-income areas, home-based care drives the positive effects of additional local supply, whereas center-based care plays a limited role,” they write.

In urban neighborhoods, however, center-based supply plays a relatively larger role than home based supply.

The authors also identify geographic and income-related disparities in how child-care costs affect labor market outcomes of mothers with young children. They find that high costs have a stronger impact in urban and high-income areas than in non-urban and low-income areas, possibly because many low-income families rely on state-issued subsidies, informal care, or part-time arrangements.

“By contrast, high-income families generally pay the full market price for childcare, so price increases affect them more directly,” the authors write. “Such families also tend to be more responsive to childcare costs because their jobs typically create a greater need for formal full-time care.”

Zhao and Luengo-Prado describe various policies New England states have implemented to respond to shortages and high prices. “The policy activity underway across New England reflects the growing recognition of the childcare sector’s structural challenges,” they write. “Our analysis underscores the central yet declining role of home based providers and suggests that policymakers could consider offering additional support to them.”