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Designing Subsidies for the Entire Child Care Provider Landscape

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By Kelly Wilcox, Toko Oshio, and Jeff Kupperman


Child care subsidies are essential both for the well-being of families with low incomes trying to make ends meet and for promoting early development and learning for children receiving care. Federal and state policies have adapted in response to evidence that early childhood development is crucial for life outcomes. Yet strategies to support child development through quality metrics such as caretaker education easily backfire, exacerbating affordability issues and unnecessarily excluding a class of providers known as Family, Friend, and Neighbor (FFN). By excluding these providers, policymakers systematically exclude minoritized communities from important support for care, potentially limiting the quality of available care in these communities. Rather than simply pushing families toward licensed care, policymakers and child care professionals should reform the treatment of FFN child care, providing context-appropriate support and training and adequate funding.

Key Findings

  • Family, Friend, and Neighbor (FFN) child care providers are a valuable part of the child care landscape. Besides providing cost-effective and flexible care options, FFN providers are particularly good at meeting family needs such as having a trusting relationship with the provider; sharing a cultural background; and offering care outside of traditional business hours. FFN providers also play a crucial role in increasing capacity for infant/toddler care.
  • Child care policies largely overlook FFN providers. Policies related to child care offer little support to FFN providers and are not well designed to meet their needs. From an equity perspective, resources should be spent supporting providers from varied backgrounds to provide care.
  • FFN providers face special barriers to participating in the child care subsidy and licensing system. FFN providers can qualify to participate in the subsidy system, albeit at a very low level. But technical and procedural barriers make it difficult for many FFN providers to prove qualifications, receive payment when they are eligible, and become eligible for higher payment tiers.


1. Design training systems specifically for FFN providers. In Michigan and in many states, training provided by the state quality system is designed for licensed providers. But these trainings are often not effective or attractive for FFN providers, who do not necessarily respond to “professional development.” However, there are evidence-based training approaches that have success improving child care quality in FFN settings. Two successful models are home visiting and Play and Learn Groups.

In a home visiting model, staff from an organization or government agency visit providers’ homes (or the parent home where the provider is working) to develop a relationship and offer guidance and support, including modeling activities with children. Early childhood professionals pursued home visiting for providers after successful evaluations of parent visiting programs. These models can adopt a variety of curriculums and provide flexibility to meet the needs of providers. Evaluations have found improved provider mental health, higher-quality interactions with children, increased time spent on literacy activities, better routines, and increased quality on several measures.

In Play and Learn Groups, providers and children meet in a facilitated group setting that includes play time between the provider and the children in their care. Evaluations of Play and Learn Groups found increased school readiness, decreased feelings of isolation, improved parent-provider relationships, and increased connection to community resources.

These models can be implemented together or separately in a unified program. They should be supplemented with workshop approaches and targeted distribution of well-developed resources such as literacy kits. These workshops will be most effective if they are developed specifically for providers’ home-based environments. Other early childhood education programs serving low-income populations should also include connections and services for FFN providers. Many children in programs like Head Start or Early Head Start are also in FFN care, and these programs could include providers in the same types of outreach they provide for parents.

Regardless of setting or style, programs to support FFN providers should be built on respecting FFN providers’ assets and strengths. Rather than focus on a possible lack of provider education or potential safety challenges, these programs should acknowledge FFN providers’ strengths, including their accessibility for parents in terms of both hours and location, exceptional child-to caretaker ratios, cultural competency, and community embeddedness. Programs that honor these strengths will almost certainly find more success engaging with providers.

2. Include explicit pathway plans for FFN providers to reach licensing. While some FFN providers only plan to provide care for as long as a specific friend or relative needs their help, others are interested in becoming licensed. Programs assisting FFN providers should provide information with clear steps to make this happen. The recent redesign of the application for Medicaid and other kinds of assistance in Michigan can provide a model for this, making the requirements as clear and simple as possible. By providing good support for quality care and making a career pathway clear and obvious, states could develop a talent pipeline for child care providers that improves situations for both children and other adults in their communities.

3. Increasing subsidy rates for all provider classifications, and pay providers directly. In Michigan, a FFN license-exempt provider taking no vacation, earning the base subsidy rate of $2.30 per hour per child, and caring for a child approved for the maximum 90 hours per pay period would earn just over $5,300 in a year for working more than full time. If they completed 10 hours of approved training that year to reach a Level 2 classification, they could earn about $9,100. Both of these income levels are far less than the minimum wage. A license-exempt provider at the base level classification would need to care for five children, each averaging more than 37 hours of care per week to earn more than minimum wage. Raising subsidy rates even higher than their recent increase is essential to even come close to adequately compensating license-exempt providers for their work.

Many FFN providers do not even attempt to qualify for the license-exempt status necessary to receive subsidies, because they consider the hassle of retrieving the subsidy from parents to be too great. Increasing the subsidy rate and paying providers directly, as many states do, could increase participation of providers in the subsidy system, allowing them to receive training to deliver better care, an opportunity for a career path, and compensation for their work.

Low levels of subsidies and support for FFN providers will not encourage families to place their children in licensed care or increase the supply of licensed providers. Rather, it means providers who are making sacrifices to care for children will not be as supported as they should be. Children, families, and providers in under-resourced communities in particular, with parents working chaotic schedules, will continue to have inequitable access to quality, affordable child care. A better way would be to support parental choice and provide adequate support for families and communities who need it by equitably supporting and funding FFN providers.

Download PDF of full policy brief