Employment by Women continues to be strong, as Friday’s jobs report shows. However, the escalating cost of child care, that sometimes rivals college tuition fees, may whip out any financial gains.
Friday’s employment report from the U. S. Bureau of Labor Statistics showed that employment by women continues to hold steady at 3.5 percent as overall unemployment moved upward .1 percent to 3.9 percent.
Last spring employment for women officially bounced out of its pandemic slump and topped 75 percent for the first top. Since then, the number has climbed or remained steady. However, child care costs have risen faster than employment gains and incomes. Those costs not only threaten women’s employment, but the economy as a whole.
The Cost of Child Care
Care for one child in a licensed facility costs on average $321 a week, or $16,692 a year, according to the Care.com 2024 Cost of Care Report.
Meanwhile, the Economic Policy Institute found that child care costs more than in-state college tuition in 33 states.
“Within the first five years of their child’s life, parents are being forced into a financial hole that is nearly impossible to climb out of,” says Brad Wilson, CEO of Care.com. “A healthy economy depends upon the ability for people to save and spend, but given the crushing weight of child care costs, those pillars are crumbling. The child care crisis should be a major red flag for everyone, not just parents. It is a systemic failure that will impact our nation’s economic growth, and that affects us all.”
Exceeding Family Budget
The Department of Health and Human Services suggests child care should take no more than seven percent of a family’s budget. However, the Care.com survey found that, on average, families are spending 24 percent of their income on child care. That is a slight decrease from last year’s 27 percent.
Parents may be compensating for the oversized bite child care takes out of income by dipping into savings. The Care.com report shows that 35 percent of families are doing just that.
Tapping savings for child care may be siphoning away from other goals, such as buying a home, retirement – even college for kids in child care.
Loss of Federal Funds
A major blow to child care costs came in September when $39 billion in American Rescue Plan Act (ARPA) funds began phasing out. That money had been set aside in the 2021 legislation to help families and providers pay for child care costs.
With the loss of federal funds, thousands of providers are facing tough choices. They can raise rates, cut wages to already underpaid staff or close.
The ARPA was a response to the financial hardships for families and childcare facilities brought on by the pandemic. It was intended as a one-shot effort to meet a short term need. During the first year of Covid-19’s spread, 10 percent of child care centers closed their doors, according to a report from Child Care Aware of America.
Today, roughly 70,000 child care providers face closure due to the loss of federal funds, according to The Century Foundation. That would put about 3.2 million children in jeopardy of losing child care.
How do You Guys do it?
Some government assistance remains in place. However, income requirements to qualify for those programs are too low for many families to qualify.
The angst of parents over affordable child care is not new as demonstrated in a Reddit thread.
The thread began with this question: “We are starting childcare tomorrow, and the cost is an enormous burden. How do you guys do it?”
Here are excerpts from some of the replies:
- “My youngest is about to turn two. My fiance’ and I work opposite shifts. Him 730am-330pm, me 4pm-10pm. That way someone is always with the youngest and always available if a child gets sick because missing work for us can not happen or we fall behind on bills. I’m a certified medical assistant but currently working retail because of the shift I needed.”
- “My wife works for the preschool/daycare. Her pay is depressingly low, but the childcare is discounted. She is getting the hopes (help) she needs to get moving on her teaching career and certification, while making basically $6 an hour. It sucks, but it is better than nothing.”
- “I can’t. I stopped working when we moved back to southern California for my husband’s job because despite my skill set, I would actually lose money on child care for our son.”
- “We have a 1 year old and 3 year old that attend daycare full-time, we have no family, and their daycare cost is 2x our mortgage payment and is more than most college tuition cost in a year.”
States Picking Up Costs
Although the federal government continues to appropriate funds for child care, how those funds are spent usually falls to state governments. With ARPA funds ending, some states have taken action to provide a permanent funding solution.
- In 2022, New Mexico voters approved a constitutional amendment to provide child care funding. The money comes from non-renewable natural resources and returns on capital investment in the state’s Land Grant Permanent Fund. Roughly $150 million would be produced annually to cut child care costs and boost the wages of child care workers.
- Maine elected to establish more than $12 million in annual funding to continue child care subsidies originated with ARPA .
- Illinois is in the process of creating a new agency that will put all early childhood education under one roof. As part of that process, the state has funded the first year of a $250 million program to fund early childhood education. Of that, $75 million will go to block grants to expand pre-K. Another $130 million is earmarked for hiring more child care workers.
Universal Pre-K the Solution?
Four government options, or a combination, are commonly considered to address the childcare crisis.
- Universal Pre-K – This is the most discussed solution to the child Care crisis in the United States and the most used option by other developed countries. Because the government would set eligibility requirements and fees, it may be the most affordable option for families. However, it would come with a weighty price tag for the government.
- Child Care Provider Subsidies – Under this plan, providers would get money directly from the government to defray operating costs. Again, this might reduce parental fees, but it could incentivize new providers to open shop. That would dilute the subsidy and reduce the impact of the program.
- Expand Tax Credits for Parents – This is the most cost effective option for the government. It would increase the existing tax credit making child care more affordable for families. The ARPA did the same thing. However, considering rising costs, it is doubtful that the help will be enough.
- Expand Tax Credits and Subsidies for Employers – This plan would provide tax benefits to employers who offer child care or help employees obtain child care. This program is already in effect. The new wrinkle would be increasing tax incentives to employers. The big drawback to this plan is that childcare is tied to employment. Even with tax benefits, many employers, especially smaller firms, can not offer child care help to employees.
Investing in Our Future
It is often said that children are our future. At the same time, any good financial advisor will tell you to invest in the future.
According to a study by Ready Nation, the economy is losing $122 billion a year due to a lack of child care. The loss comes from employees missing work or leaving jobs ($78 billion), employers loss of productivity and hiring costs ($23 billion) and the government missing out on tax revenues ($21 billion).
Looking farther down the road, it has been estimated that every $1 invested in preschool offers a return of $7 to $12.
In addition to monetary value, preschool can put young lives on the road to productive citizenship that reaps untold benefits for society.
As U. S. Senator Patty Murray (D-WA) and a former preschool teacher said:
“The bottom line is: child care is out of reach for millions of families, and the growing child care crisis doesn’t just hurt parents who are forced to make impossible tradeoffs—it hurts businesses trying to hire and retain staff and holds our entire economy back. Child care isn’t a nice-to-have; it’s an absolute must—and an economic imperative.”
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