There is evidence that increasing the compensation of child care workers improves the quality of child care. This study was funded by the Child Development Division of the California Department of Education to identify policy options addressing the improvement of compensation for staff working in child care and development programs. The report presents a literature review, California survey results, extant data analyses, promising practices, and recommendations that were developed during the course of the study. Part 1, "A Review of the Literature and Recent Findings," consists of four chapters which summarize the research literature on: (1) child care quality and children's outcomes; (2) the influence of staff compensation on child care quality; (3) a profile of the child care work force; and (4) family access to affordable services. Part 2 of this report, "Next Steps," is divided into two chapters. The first presents a review of promising practices that have been developed by other states and organizations to improve the quality of child care through better compensation for child care and development workers. The second is the result of a combined effort by project stakeholders and staff to synthesize the research, recent findings, and promising practices to design a range of recommended policy options relevant to the state of California. Appendices present methodology, tables, a list of stakeholders, a workforce profile in Los Angeles County, a workforce profile in Alameda County, and child care center and staff surveys. Contains about 108 references. (WJC)