It has been estimated that child care providers derive ninety percent of their income from tuition. In all areas of the state child care accounts for a significant percentage of the expenses in a family budget. In rural or low income areas where wages tend to be lower child care providers come up against this ability-to-pay constraint as a substantial barrier to entry and growth. That is, even in the face of scarcity, child care providers remain price takers with little ability to move their prices down or up: raise prices and the market fails; lower prices and the business fails. Taken together these factors of demand, price inflexibility, and consumer choice constraints mean that the child care market place does not perfectly resemble the traditional economic marketplace where consumers look to substitute one product or provider for another. It becomes important for a new entrant to the market to offer, right away, its best available mix of capacity, price, and program to attract and retain clients now and build reputation effects for later. Most importantly, the potential provider must ask if the effort involved in operating in such a market is worth the effort. The 2017 report of the Minnesota Legislative Task Force on Access to Affordable Child Care heard testimony that the average annual salary for family child care providers was around $24,566 for an average work week of fifty three hours per week with half of all providers making less than $8 per hour before taxes.
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