The First Pillar of Care: Cost

The cost of child care in the United States is expensive. For everyone. The Care Index found that the average cost of center-based care in the United States is one-fifth of the median household income, and infant care costs more than college in 33 states. For a parent making minimum wage, the average cost of care would take up an unsustainable two-thirds of their earnings, with little left over for rent or mortgage payments, food, transportation, clothing, and other basic necessities.

And there are real economic consequences—for families, communities, and the economy—when the burden of shouldering that high price tag falls disproportionately on families. And it does. Research has found that parents pick up 60 percent of the cost of child care; federal, state and local governments shoulder 39 percent; and businesses and philanthropy contribute just 1 percent.

When parents can’t find affordable, quality child care, their only alternatives are to cut back on work hours, seek alternative work arrangements, look for care on the unregulated, cheaper “gray market,” rely on an informal network of families, friends, and neighbors, or even exit the labor market completely to take on child care responsibilities themselves. This move is not without consequences: Parents who exit the labor market could be losing more than three times their annual salary every year they are not working due to the opportunity cost of wage growth and retirement savings, according to a Center for American Progress report. Dropping out of the workforce, however, is not an option for working single parents, who must seek informal care or a limited number of government subsidies to pay for licensed care in order to support their families and continue working.

Women are the ones who typically have faced these trade-offs between work and care, both because they generally earn less than men, and because prevailing cultural norms still expect mothers to take on primary responsibility for caregiving. Women around the world do 75 percent of the unpaid work of housework and child care. A recent McKinsey Global Institute report found that that invisible work, if given market value, would equal at least 13 percent of the global GDP. Further, they estimated that creating conditions and policies to better recognize and more fairly redistribute this unpaid labor and create more parity for women in the paid labor force, could add $12 trillion to the global GDP by 2025. And $2.1 trillion in the United States alone.

Why is child care so expensive? In a word: people. It takes teachers to provide the early care and learning. And a lot of them. Infants, toddlers, and preschoolers need much more supervision and one-on-one care than children in K-12 education—and safety and quality requirements reflect that need. While state regulations allow one teacher to teach anywhere from 18 to 30 elementary school-age children, the National Association for the Education of Young Children recommends, depending on group size, one teacher for every three or four infants, one teacher for every three to six toddlers, and one teacher for every six to ten preschoolers.

The cost of that labor is expensive. The true cost is more than parents can pay, especially at a time in life when many are starting out, haven’t reached their full earning potential, and haven’t yet built up savings. So child care providers can only charge as much tuition as the parental market will bear, then must seek out other sources of income from federal, state, or local government, businesses, and private philanthropy to cover the difference.

But the problem is, tuition and alternative income are not sufficient to cover that difference. Which means providers must keep costs low. Because so much of the child care infrastructure is really a patchwork of small businesses, nonprofits and often altruistic “mom and pop” family home care centers, most providers operate on razor-thin margins, typically less than 1 percent. And approximately 80 percent of a child care program’s cost is devoted to payroll and related expenses—making employment costs the area a provider can target when strategizing to reduce cost to themselves.

It should come as no surprise, then, that early care and learning teachers earn poverty wages—among the lowest wages of any profession, one recent study found. The early education workforce earns, on average, $9.77 an hour—less than bellhops and parking garage attendants. Nearly half are part of families that qualify for at least one form of public support, such as food stamps, Medicaid, or child care subsidies. And those who teach infants and toddlers make about 70 percent of what those who teach three and four-year-olds make.

According to a report released by the U.S. Departments of Education and Health & Human Services, there is a noticeable gap between early childhood educators’ average salaries and those of elementary school educators.

This is a problem. While caregivers are an essential part of child development, parents’ ability to work, and family well-being, low wages send the message that they are not valued—so much so that they do not deserve a living wage. Perhaps more importantly, low wages have been linked to a high turnover rate in the early childcare workforce, leading to care of inconsistent—and often low—quality. Reducing wages is incongruous with a desire to hire people trained in child development and capable of providing quality care. The current system undercuts quality, underpays employees, and still presents prices so high that many consumers are pushed into unlicensed markets of questionable quality.

For working parents looking to offset child care costs, most families can find theoretical relief in the Child and Dependent Care Tax Credit (CDCTC). Upon filing state and federal income taxes, families may receive credits worth 25 to 30 percent of child care costs, capped at $3,000. (Separately, about 61 percent of businesses offer employees Dependent Care Assistance Plans to help them pay for care with up to $5,000 pre-tax dollars a year, according to the 2014 National Study of the Employer.)

That relief may well only exist in theory, however; despite its intent, this tax credit has several limitations (which echo limits of tax credits as social policy more generally):

• The amount of the credit is woefully inadequate to make a serious impact on child care expenses. The credit caps at $3,000. By comparison, the Care Index  shows the the cost of full-time infant care at a center or family home runs from a low of $6,590 a year in Arkansas to as much as  $16,682 in Massachusetts.

• Though some state tax credits are refundable, because the federal tax credit is nonrefundable, it can only be used to offset income taxes owed. That means that low-income families who owe little or no income tax do not derive much benefit from the CDCTC.

• Because the credit is distributed annually, it does not provide much relief for families having to deal with payments on a weekly or monthly basis.

• The CDCTC requires that families be working or looking for work, but this isn’t always feasible (for example, for parents on disability).

• And finally, many families may not be not aware of the tax credit, nor the procedure for properly filling out forms to receive it, which could limit its use.

Most people know intuitively that the cost of child care is too high. But the impact of that cost extends beyond the families that must shoulder the burden. Businesses pay, too, as much as $4 billion a year, by one estimate, in lost worker productivity and absenteeism due to child care breakdowns. As long as the child care system continues to undervalue its workers and jeopardize quality by pricing consumers into unregulated family care, parents will continue to face the choice between care and work. The path is clear: Either our policies will continue to stunt overall productivity, economic growth, and progress towards gender equality and equal opportunity for all, or we will choose to invest in quality education for children, gender equity in the workforce, economic growth, and a financial and cultural shift toward valuing care work.