Wage Enhancement and Provider Stability In Early Care and Education: Evidence from the Smart Start Workforce Grants In Chicago

Background
In the United States, early care and education (ECE) for children ages 0–5 is viewed both as a private good for families and a public good with broader societal benefits, including improved educational outcomes and workforce productivity (Sosinsky, 2012; Campbell et al., 2014; García et al., 2021). Despite these benefits, ECE remains largely privately financed and delivered, contributing to underinvestment, fragmented services, workforce instability, and unequal access, particularly for low-income families (Sosinsky, 2012; Davis & Sojourner, 2021; Genç, 2024). Policy responses include subsidies and supply-side interventions such as public preschool, Head Start, and wage enhancement programs aimed at strengthening provider stability (Harbach, 2015; Blau & Mocan, 2002).

This study examines how workforce investment relates to stability in Chicago’s ECE market by focusing on the Illinois Smart Start Workforce Grants (SSWG), a wage enhancement program launched in July 2024. It asks: How do SSWG participants and non-participants differ in their likelihood of staying licensed or exiting the ECE market in Chicago over time, and how do these differences vary between center-based and home-based providers? This study closes an important gap in the literature by providing descriptive evidence on how participation in wage enhancement programs is associated with provider stability and market continuity.

Methods
This study uses linked monthly administrative data from DCFS licensing records (2014–2025) and SSWG data from the Illinois Department of Human Services. The final analytic sample includes 2,410 Chicago providers (about 54% of all providers operating during the study period), linked at the provider-by-month level. The main outcome is monthly licensing status, coded as licensed or not licensed, with transitions interpreted as market exit or cessation of operations. TraMineR in R is used to construct licensing trajectories, and hierarchical cluster analysis (Ward’s method with optimal matching distances) identifies groups of providers with similar licensing patterns. The number of clusters is selected using Average Silhouette Width, Hubert’s C statistic, and interpretability.

Results
SSWG participants consistently exhibit longer and more stable licensing trajectories than non-participants across the 2014–2025 period. They are more likely to remain operational through the end of the study period and show fewer exits over time. Differences are most pronounced among center-based providers, where non-participants display greater heterogeneity, shorter trajectories, and higher exit rates. SSWG participants, by contrast, are more homogeneous and stable with sustained long-term operation. Among home-based providers, the same pattern is present but weaker; while participants still show longer and more stable trajectories, differences between groups are smaller and overall stability is higher across both.

Conclusions and Implications
This study finds that SSWG participation is associated with longer and more stable licensing trajectories, particularly among center-based providers. Non-participants, especially centers, exhibit greater heterogeneity and higher exit rates, while home-based providers show more moderate differences between groups. These results suggest that SSWG participation aligns with greater provider stability in a dynamic ECE market. While descriptive and not causal, they highlight the importance of provider type in designing workforce support policies, especially in center-based settings where instability is more pronounced.