Licensing reform could be the key to fixing childcare in North Dakota

Compared to its neighbors, North Dakota has relatively affordable childcare. However, there is room for improvement, particularly for older children and for home-based childcare. Easing regulations could help.

According to data from Childcare Aware, in 2023, it cost 14 percent of the median household income to send an infant to daycare in North Dakota. This is lower than it costs in both Minnesota and Montana, but higher than it costs in South Dakota. For 4-year-olds, North Dakota was surpassed by seven other states, and daycare cost 13 percent of the median household income.

Figure 1: Average Annual Cost of Center-Based Infant Care as a Percent of Median Household Income

Looking only at home-based providers, North Dakota fares worse than both Minnesota and South Dakota. In 2023, home-based infant care consumed 14 percent of the median household income, ranking North Dakota as the 16th most affordable state. For 4-year-olds, North Dakota ranked 23rd, with home-based care costing 11 percent of median household income.

To bring costs down, lawmakers should consider easing regulations.

Stringent regulations = higher prices

Research evidence indicates that strict childcare regulations raise costs for providers, who have to raise prices for parents. Additionally, burdensome rules also drive providers out of the market, leading to shortages, particularly in rural areas where sparse populations make large commercial daycare centers economically impractical.

The lack of affordable, high-quality childcare is an issue vexing the entire country. Fortunately, North Dakota is relatively well situated compared to most states. But for further improvement, lawmakers should consider easing the state’s restrictive licensing rules, making it easier for providers to operate.

According to a report by the Knee Center for Regulatory Research, North Dakota ranks as the fifth most restrictive state for large commercial daycare centers, faring worse than all of its neighbors.

Loosening rules, including staff-child ratios, could reduce costs for providers and lower prices for parents. It could also incentivize new entrants, addressing shortages that are plaguing North Dakota and the rest of the country.