Compensation & Financial Relief

What Is Compensation and Financial Relief?

Initiatives and investments can ensure compensation is commensurate with that of a skilled professional, accounting for the educator’s qualifications, expertise, and experience. Compensation refers to wages/salaries and benefits (e.g., health insurance, retirement plans). Financial relief refers to additional sources of income such as stipends, tax credits, and bonuses that are intended to ameliorate the effects of low pay in early care and education, but do not increase wages or salaries.

Early educators are skilled, experienced professionals. Many ECE workers have 16 or more years of experience¹ and hold college degrees (see About the Early Childhood Workforce). Yet their work remains undervalued: throughout the United States, 97 percent of other occupations are paid more than early educators. Nationally, early educators earn a median wage of $13.07 per hour (see Early Educator Pay & Economic Insecurity).

Pay disparities within the ECE field are linked to funding source and children’s age. Early educators working in a home-based child care program, a Head Start-funded program, or a public pre-K program are likely to earn different amounts for doing the same work. Furthermore, racial biases and systemic inequities cause even greater harm to certain populations. These disparities translate into even lower pay, especially for Black educators and educators who work with infants and toddlers, who are paid thousands of dollars less than their peers each year (see Early Educator Pay & Economic Insecurity).

Early educators also typically lack access through their work to benefits like health insurance and retirement plans. In order to get by, 43 percent of early educator families must rely on public safety net programs like Medicaid and food stamps, and they still struggle with financial insecurity and economic stress (see Early Educator Pay & Economic Insecurity).

Federal policy leaders increasingly understand the urgency of improving early educators’ compensation. The U.S. Department of Labor released guidance for recipients of federal funding, arguing that child care providers should earn no less than a living wage, with recommended wages of $15.00 to $25.30 per hour nationwide.² Yet even these amounts still fall short of the median hourly pay of elementary and middle school teachers ($31.80) (see Early Educator Pay & Economic Insecurity). Meanwhile, the Administration for Children and Families (ACF) finalized rule changes that will require federal Head Start programs to pay at least enough to meet local cost of living standards and to advance toward pay parity with elementary school teachers.³

An increased sense of urgency to address low pay in early care and education stems in part from early educator staffing shortages exacerbated by the COVID-19 pandemic.⁴ In 2022, ACF explicitly encouraged state leaders to use federal Child Care Development Fund (CCDF) funding for compensation increases to address staffing shortages.⁵ Furthermore, recent studies have shown that increases in early educators’ income can have important impacts: increasing early educators’ financial security and well-being; lowering their stress; and reducing turnover, improving interactions with children as a result.⁶

With or without federal funding, state and local leaders have the power and authority to advance ECE compensation. Many state and local leaders did just that with the historic influx of federal funding through the American Rescue Plan Act (ARPA) and other pandemic relief. CSCCE identified more than 95 distinct initiatives to raise wages, provide benefits, or otherwise provide financial relief through stipends and bonuses between 2021 and 2023.⁷ Encouragingly, many of these efforts provided more meaningful support for the ECE workforce than typically seen with pre-pandemic compensation and financial relief initiatives.⁸ For example, stabilization grants were used to provide direct funding to all licensed child care programs—not just those receiving pre-K or Head Start funding—and allowed, incentivized, or required programs to raise pay or provide additional benefits.⁹ Policy leaders also experimented with more frequent (e.g., quarterly or monthly) and more generous stipend and bonus initiatives. In some cases, these payments were decoupled from individual educational requirements or program-level quality ratings in recognition of the need for early educators to be paid more for the work they already do.

Almost one half of these initiatives have already ended—more than 45 by our count—aligning with the expiration of ARPA child care stabilization funding in September 2023 (see Appendix Table 3.8). Furthermore, the expiration of ARPA discretionary CCDF funding in September 2024 threatens the continued existence of many additional compensation and financial relief initiatives, among them several initiatives included in the 2024 Index assessment of state progress.

Regardless, some state and local leaders continue to find creative ways to prioritize compensation (see States Pilot Strategies to Raise Early Educator Wages). The most significant advance for early educator compensation occurred with the implementation of the District of Columbia’s Early Childhood Educator Pay Equity Fund. Under this initiative, dedicated local funding from a wealth tax was used initially to provide payments of $10,000 to $14,000 directly to educators. As of FY2024, ECE programs could opt in to receive quarterly payments from the local education agency—the Office of the State Superintendent of Education (OSSE)—in exchange for paying early educators at least the minimum salaries set by the agency’s pay scale, which aligns with the District’s public school salary scale.¹⁰ Despite success in retaining early educators,¹¹ the Pay Equity Fund faced the prospect of elimination in the FY2025 budget. Only about 80 percent of FY2024 funding was restored,¹² despite wide outcry from the ECE field and demonstrations by early educators.¹³

State Spotlight Dark blue silhouettes of Arizona, Colorado, and Illinois

States Pilot Strategies to Raise Early Educator Wages

Colorado is conducting a two-year (2023-2025) livable wage pilot program for early educators using CCDF funds.¹ Participating programs were selected randomly through a lottery. Three hundred early educators are receiving wage increases of between $2.99 and $7.58 per hour, depending on their role and geographic location. The pilot is currently being evaluated to understand how programs implement the wage increases, as well as the impacts on recruitment and retention.

Illinois has been piloting their salary scale through their ExceleRate pilot program since 2021.² Using Preschool Development Grant (PDG) B-5 funding, contracts are awarded to participating ECE programs, which must pay their staff the minimum salaries designated by the salary scale as a condition of the funding. Initial results from the pilot indicate that programs have had greater success in recruiting and retaining staff with higher credentials.³

Arizona is piloting use of the Arizona Early Childhood Educator Salary Scale through their apprenticeship program.⁴ Participants receive a minimum dollar per hour increase to their base pay, and participants who reach educational milestones will receive additional wage increases in alignment with the salary scale. Apprentices also receive a $1,000 cash award at the end of each year of the two-year apprenticeship. Crucially, child care programs that participate in the apprenticeship program receive a Wage Enhancement Grant to fund the wage increases. The grants are funded through a combination of federal pandemic relief sources (ARPA CCDF, CRRSA) and PDG B-5. As the funding is time-limited, the pilot is expected to end in 2025.

Given their small scope and time-limited nature, these pilots have not been included in the Index assessment of state progress below. Nevertheless, these promising initiatives demonstrate that compensation reform is possible when ECE programs have access to reliable public funding through grants and contracts.

State leaders have also recognized the need to address benefits such as health insurance, paid sick leave, and retirement contributions, not only wages. Substantial advances have been made in this area since the 2020 Index, though more remains to be done. Advances include:

The District of Columbia and Washington State began covering the cost of health insurance premiums for early childhood educators.¹⁴
California became the first state to fund a retirement program for early educators in child care programs as a result of collective bargaining, with the Child Care Providers United union representing family child care providers.¹⁵
Kentucky led the way in ensuring that early educators working in child care programs have subsidized access to early care and education for their own children, regardless of their income.¹⁶ Several additional states have implemented or are actively pursuing similar policies.¹⁷

To make sustainable progress on appropriate compensation for all early educators and to make teaching young children an attractive career, there must be a reckoning with the inadequacy of current public funding at local, state, and federal levels. Historic federal funding through ARPA demonstrated that transformative reforms can be implemented, but they will require sustained investment, not time-limited grants. What’s the bottom line? Estimates vary, but all confirm that substantial increases are necessary to reform the system, especially in order to provide fair compensation to early educators. For state-level estimates developed by CSCCE and the Economic Policy Institute, see Public Funding.

States like New Mexico and Virginia have increased child care subsidy payments to programs based on cost models that include target salaries for early educators.¹⁸ Nevertheless, it remains unclear whether increased funding alone will lead to intended wage increases, especially as program leaders face competing priorities and continued underfunding. Explicit policies and mechanisms designed to raise compensation and to do so fairly—through salary scales, for example—are necessary to undo the wage gaps that characterize today’s system.

“Pay inequity is difficult [because] people don’t know how to talk about it—what other people are making—this is the benefit of standardizing. People need to know what they deserve to be able to advocate for themselves. Everyone deserves to be able to live and support themselves.”
Early Educator in a Center-Based Classroom¹⁹

An educator sitting with two children at the table doing a craft project.

Although there has been progress in recent years, all states have far to go to achieve a system in which all early educators are paid enough to thrive, regardless of setting, funding source, or the age of the children they work with. To assess state progress across the country, the Index identifies states that are: articulating or requiring minimum standards for early educator wages; dedicating funding to early educator compensation; and/or providing financial relief in the form of stipends, tax credits, or bonuses. The Index does not currently assess state policy efforts to improve benefits, though this may be added in future editions as more states create strategies to address this important need. For information on the inclusion of staff benefits in the standards of quality rating and improvement systems (QRIS) for programs, see Work Environment Standards. For information on which states collect data on wages and benefits for the ECE workforce in their state, see Workforce Data.

Policy Solutions Paycheck icon

Policy Solutions to Increase Pay and Provide Benefits

Establish, implement, and fund wage standards that ensure, at a minimum:

All ECE workers earn at least a locally assessed living wage;
Early educators with similar levels of education and/or experience are paid no less than parity with elementary school teachers;
Wage/salary increments are clearly differentiated based on role, qualifications, years of experience, and forecast wage/salary increases over time;
Regular adjustments are made for cost of living and inflation;
Home-based family child care providers are able to pay themselves and any assistants a salary that meets equivalent wage standards to their center-based peers; and
Pay inequities, such as racial wage gaps or lower pay for infant and toddler teachers,⁵ are identified and remedied.

Establish and fund benefit standards, incorporating at minimum:

Guaranteed paid time off (this includes paid sick days, vacation, and parental leave);
Enrollment in comprehensive health insurance plans at no cost or a significantly reduced cost to the educator;
Funding for retirement plans that provide federal and/or state contributions to educators with a vesting schedule that allows educators to retire with economic dignity; and
For enrollment in programs like child care subsidies⁶ or healthcare initiatives that require low wage thresholds for eligibility, consider creating an income waiver or establishing educators as a priority population.

Dedicate sufficient public funding for all programs to meet wage and benefit standards.

Design accountability measures to verify that wage and benefit standards are applied to educator compensation.
Partner with educators to routinely assess immediate and long-term needs associated with the implementation and sustainability of wage and benefit standards.
Frame advocacy messages to clarify that financial relief initiatives (tax credits, stipends) are an interim strategy, not a long-term solution that will increase paychecks and benefits for early educators.

State Progress on Compensation & Financial Relief

Stalled: 28 states
Edging Forward: 15 states
Making Headway: 1 state
Not Available: 7 states
Not Applicable: 0 states

donut chart of 28 stalled states, 15 edging forward states, 1 making headway states, 7 states not available, and 0 non applicable states

Between 2020 and 2024, there was a net improvement as 10 states and the District of Columbia made strides in one or more compensation and financial relief indicators.

The District of Columbia earned the first and only assessment of making headway.
Arkansas, Illinois, Iowa, Maine, Maryland, Minnesota, New Mexico, Utah, Virginia, Washington, West Virginia advanced from stalled to edging forward.
Meanwhile, two states moved down in their assessments: Alabama and Delaware moved from edging forward to stalled.

Overall, 28 states remain in the stalled category, without implementing substantial compensation strategies or financial relief measures in their ECE workforce policies, while a total of 15 states are edging forward. Notably, many states temporarily advanced compensation or financial relief for the early educator workforce using pandemic relief funding that expired between 2021 and 2023 (see Appendix Table 3.8). This Index assessment only includes initiatives that continue into 2024.

Table 3.3.1.

Key to State Progress on Compensation and Financial Relief

Figure 3.3.1.

Map of State Progress on Compensation and Financial Relief, 2024

Figure 3.3.2

Number of States Making Progress on Compensation and Financial Relief, 2020 and 2024

Figure 3.3.3.

Number of States Making Progress on Compensation and Financial Relief per Indicator, 2020 and 2024

State Progress on Compensation and Financial Relief: Indicators

Indicator 1: Does the state require salary parity for publicly funded pre-K teachers?

Rationale: An appropriate benchmark for determining early childhood educator compensation standards is parity with K-3 teachers, recognizing that early education and care requires just as much skill and training as teaching older children in the birth-to-age-eight continuum.²⁰ Yet, even when working in publicly funded pre-kindergarten programs (pre-K), early educators are not necessarily guaranteed equivalent pay and benefits to public school teachers.

Using the National Institute for Early Education Research (NIEER) State of Preschool Yearbook, we assess whether states require the same starting salary and salary schedule, prorated for differences in hours/days worked, for pre-K teachers as for K-3 teachers. In order to meet our indicator, this requirement must be applied to publicly funded pre-K teachers in all types of settings and all pre-K programs in the state.
While we have focused on whether states meet the criteria for salary parity—both starting salary and salary schedule—parity in benefits and payment for professional responsibilities are aspects of parity that also require attention, but are not part of the current assessment (see Table 3.3.3).

Current Status Across States: As of the 2022-2023 school year, just four states met these criteria for pre-K salary parity in all settings/programs (Hawaii, Nevada, New Jersey, and Oklahoma).

Additionally, 19 states required salary parity for some pre-K teachers (e.g., in public schools only or only in some of their pre-K programs, if the state had more than one).
Minnesota, Oregon, and Tennessee met the criteria for partial or sub-parity, at least for some pre-K teachers, meaning that their requirements did not meet the full definition of parity (e.g., there are requirements for starting salary only, or they do not account for differences in hours worked).
Six states do not have NIEER-assessed state pre-K programs, so no data were available for these states (Idaho, Indiana, Montana, New Hampshire, South Dakota, and Wyoming).²¹ Since 2020, Utah established a pre-K program, but did not require salary parity.

Change Over Time: The number of states that met the criteria for pre-K salary parity in all settings/programs declined from six to four between 2020 and 2024. Alabama and Rhode Island were understood to require salary parity for all settings/programs in 2020, but in 2024, these states no longer meet the criteria for their community-based programs.²²

Table 3.3.2.

Compensation Parity and Related Forms of Compensation Improvement: A Framework

Indicator 2: Does the state set required compensation standards for ECE settings outside of public pre-K programs?

Rationale: Compensation parity is not just for educators in public pre-K programs. All early educators of children birth to age five should be paid appropriately. To the extent that early educators have equivalent education and/or experience—and many already do—they should be paid equivalently to teachers of older children, regardless of the setting in which they teach.

Current Status Across States: The District of Columbia, Illinois, and Utah²³ have required minimum compensation standards for ECE settings beyond pre-K.

The District of Columbia made national news with their Pay Equity Fund, which requires that participating ECE programs pay minimum salaries by role and education level, as established by the fund’s pay scale.
In Illinois, licensed programs can access Smart Start Workforce Grants that fund minimum required wages (a “wage floor”) for teachers and assistant teachers, starting at $17 per hour. Illinois is investing state funds to continue and build from grants they initiated with pandemic relief funding.
In Utah, ECE programs could receive an "Enhanced Payment Rate" as part of their ARPA stabilization grants, but they were required to pay at least one half of their staff a minimum of $15 per hour.

Change Over Time: In 2020, no states met this indicator. In 2024, two states (Illinois and Utah) and the District of Columbia set required compensation standards.

Indicator 3: Does the state have plans or guidelines for compensation in ECE settings outside of public pre-K programs?

Rationale: Since few states have implemented required compensation standards for ECE settings outside of pre-K, an important first step is to articulate these standards.

Current Status Across States: Fifteen states and the District of Columbia have articulated compensation standards or guidelines for early educators beyond pre-K teachers. For more detailed information, see Appendix Table 3.4.

Thirteen states (Arizona, Arkansas, Colorado, Connecticut, Delaware, Illinois, Minnesota, New Mexico, North Carolina, Oregon, Rhode Island, Vermont, Washington) and the District of Columbia have developed proposed salary scales. The scales have been actively implemented in the District of Columbia and are being piloted in Arizona. Illinois has been piloting a scale and is now implementing a “wage floor” through their Smart Start Workforce Grants.
Three states have developed salary targets as part of their efforts to estimate the true costs of high-quality early care and education for the purposes of increasing child care funding for programs (Massachusetts, New Mexico, Virginia).
Six additional states (Alaska, Iowa, Maine, Maryland, New York, South Carolina) have convened advisory groups or made other plans to begin developing salary scales or other guidelines for compensation.

Change Over Time: Since 2020, there has been a net addition of two states that have either articulated compensation guidelines or have made plans to do so, increasing from 20 states to a total of 22. However, this scant improvement belies substantial movement: in 2020, only six states (Illinois, North Carolina, Oregon, Rhode Island, Vermont, and Washington) and the District of Columbia had articulated compensation guidelines. The other thirteen only had plans to do so. As of 2024, nine additional states have articulated compensation guidelines.

Indicator 4: Does the state require any public funding to be used for early educator wages/salaries in settings outside of public pre-K programs?

Rationale: Establishing compensation guidelines and standards is an important step, but states must also provide public funding for compensation. Funding should be specifically designated for compensation or be required to be used for compensation. Otherwise, even when reimbursement rates are raised or program grants are made available, funds may be used for other purposes, leaving compensation unaddressed.

Current Status Across States: Eight states and the District of Columbia designated funding specifically for early educator compensation. For more detailed information, see Appendix Table 3.5.

The District of Columbia’s Pay Equity Fund, which is used to fund the required minimum pay scale, is one notable example.
Six states (Illinois, Minnesota, Missouri, North Carolina, Utah, Wisconsin) are continuing programs begun with ARPA stabilization funding that expired in September 2023. While all states allowed ARPA grants to be used for compensation, only states that required ECE programs to use all or part of the funding they received for compensation are counted for Index purposes. Several of these states are using ARPA discretionary CCDF funding, which expires in September 2024, posing a risk to the continuation of these grants. However, states like Minnesota and Illinois have provided state funding to ensure continuity.
Massachusetts has a rate reserve for early educator salaries in their child care subsidy funding and also provides supplemental funding to their Head Start programs in the form of grants, a portion of which must be used to support staff salary and benefits.
Montana’s QRIS requires programs to allocate a portion of their incentive dollars toward the base pay of early educators.

Change Over Time: Since 2020, six additional states (Illinois, Minnesota, Missouri, North Carolina, Utah, Wisconsin) and the District of Columbia met this indicator. The majority of these changes stem from innovations that occurred as a result of federal pandemic relief funding. One state (Alaska) no longer met this indicator.²⁴

Indicator 5: Is there a statewide stipend or tax credit to supplement early educator pay?

Rationale: To the extent that compensation strategies have not yet been implemented, state leaders should consider introducing financial relief strategies as an interim measure. Stipends include programs that offer cash awards to educators on a repeated basis (e.g., monthly or annually), often along graduated supplement scales according to educational level. One such stipend program is Child Care WAGE$® licensed to states by the T.E.A.C.H. Early Childhood® National Center at Child Care Services Association. Other states have created their own stipend programs, such as REWARD in Wisconsin. Similarly, tax credits serve to supplement wages by providing refundable tax credits annually. Stipends and tax credits may be applied for and received by qualifying teachers, if funds are available (which is not guaranteed). These initiatives vary across states in the amount paid to early educators and the number of educators who benefit. For more information on stipend amounts, see Appendix Table 3.6.

Current Status Across States: Twenty states have a statewide stipend program, and three states (Colorado, Louisiana, and Nebraska) offer ECE teacher tax credits.²⁵ As Nebraska offers both a stipend (WAGE$) and a tax credit, a total of 22 states have a stipend and/or a tax credit program.

Some states offer multiple stipends. For example, New Mexico has four distinct initiatives that supplement the pay of early educators.²⁶ Notably, these payments aim to fill the gap between educators’ wages and minimum salaries that are aligned to parity with elementary school teachers and adjusted for education/experience. North Carolina also offers two separate stipend programs: WAGE$ and Infant-Toddler Educator AWARD$®; the latter program was introduced in Fall 2018 to specifically address low pay for infant-toddler teachers.²⁷

Change Over Time: Since 2020, there has been a net increase of 10 states with one or more stipend programs. Eleven states established new stipend programs (Arkansas, Iowa, Maine, Maryland, Massachusetts, Mississippi, Missouri, North Dakota, Oklahoma, Rhode Island, Virginia, and West Virginia), while Delaware lost its stipend program.

Indicator 6: Is there a statewide bonus to supplement early educator pay?

Rationale: Like stipends or tax credits, bonuses can provide a measure of financial relief to educators in the absence of wage increases. In contrast to stipends/tax credits, bonuses are typically smaller cash awards, usually provided as a one-off recognition, often of educational achievement. For more information on bonus amounts, see Appendix Table 3.7.

Current Status Across States: A total of 35 states offer statewide bonus programs.

21 of these bonus programs are linked to a T.E.A.C.H. Early Childhood® scholarship program, where bonuses are provided as scholarship recipients achieve an educational milestone.
Nine states have multiple bonuses (Alabama, Connecticut, Maryland, Minnesota, Missouri, Nevada, Ohio, Utah, Washington).

Change Over Time: Since 2020, there has been a net increase of three states with bonus programs.

Six states added a bonus program (Alaska, Hawaii, Maryland, New Mexico, New York, North Dakota).
Delaware previously offered a bonus connected to their T.E.A.C.H. scholarship program in 2020, but this program has been discontinued.
Two states that had bonus programs in 2020 (Montana and Oregon) did not have data available in 2024 and could not be assessed.

Table 3.3.3.

Progress on Compensation and Financial Relief, By State and Territory, 2024

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State Policies to Improve Early Childhood Educator Jobs