Suppose the government is considering implementing a child care subsidy for low-income single-mother households. This subsidy would provide low-income single mothers $5 per hour worked to spend on child care (and only child care). a. Is this child care subsidy equivalent to a wage subsidy to low-income single-mother households? Explain. (Note: assume that all low-income single mothers use formal child care in order to work.) b. Why might the government want to regulate the quality of child care? What problems might this sort of regulation cause? Explain.
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This child care subsidy is not equivalent to a wage subsidy to low-income single-mother households. A wage subsidy would increase the income of the single mother, regardless of whether or not she uses child care. The child care subsidy, on the other hand, only Show more…
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