America\u2019s child care market is an abject failure. Even at prohibitively high prices, supply doesn\u2019t meet demand, preventing children, parents and the entire economy from reaching their full potential.<\/p>\n
This is a problem that only government intervention can solve.<\/p>\n
For far too long, the debate around how to look after our children has been stuck in the 1970s, when then-President Richard Nixon vetoed an affordable child care bill in part on the grounds that it would weaken families. While liberals and conservatives argue about whether government subsidies would or should endorse mothers\u2019 choice to work, society has already moved on: More than 70% of women with children under 18 are in the labor force.<\/p>\n
The political ambivalence is reflected in piecemeal and largely ineffective policies. Programs such as subsidy vouchers for low-income parents and Head Start, which provides limited pre-kindergarten and after-school supervision, reach only a fraction of those eligible. Tax credits and tax-preferred spending accounts are hard to navigate and too small to make enough of a difference. The Biden administration\u2019s Chips Act implementation \u2014 requiring manufacturers applying for federal subsidies to provide on-site child care \u2014 is far too narrow to turn things around.<\/p>\n
The result is a market that doesn\u2019t adequately serve anyone it should. Over the past 30 years, the cost of daycare has risen at an average annual rate of 3.8%, compared with 2.5% for consumer prices overall. As of March, it was up 6.8% from a year earlier, the largest increase since records began in 1991. In one 2022 survey, more than half of families said they spend more than 20% of their income on child care. Yet supply remains inadequate and poorly compensated: Employment in the sector remains 7% below its pre-pandemic level, and the median worker earned $13.22 an hour in 2021, well below the national median wage.<\/p>\n
The economics of the industry will never align. For one, parents tend to need child care at the beginning of their careers, precisely when they can least afford it. Costs stay high because it\u2019s labor intensive and hard to scale: One person can take care of only so many kids. Also, because quality care produces broader social benefits that aren\u2019t reflected in the price, the market inevitably supplies too little.<\/p>\n
What, then, can the government do? It should start by reducing the market\u2019s scope. Establish federal paid family leave for the first three months of life (at a minimum), so parents can do the initial caring themselves. Add two years of universal preschool to the existing public school system, so kids have somewhere to go when their parents return to work.<\/p>\n
If policymakers want to maintain some semblance of a market, they\u2019ll still need to subsidize both supply and demand. This would entail funding the development and maintenance of child care centers and augmenting staff salaries, in exchange for services of a certain quality and price \u2014 and installing government centers where the private sector won\u2019t go. It would also require expanding low-income vouchers to cover as many as 13 million children, compared with fewer than a million today.<\/p>\n
Given the market\u2019s dysfunction, even generous subsidies might not be enough. In that case, the best solution would be full-on government-provided child care, along the lines of public education.<\/p>\n
Radical as public child care might sound, it\u2019s not a risky move. Like most early-childhood investments, it delivers a high return through improved outcomes for children into adulthood \u2014 as well as an increase in mothers\u2019 labor force participation and earnings. Building it would be difficult but doable: The Department of Defense did so after the Military Child Care Act of 1989, and its accredited centers now provide quality care.<\/p>\n
Certainly, such deep government involvement would be disruptive, though that could be more a feature than a flaw. Paying federal wages and benefits to child care workers would apply upward pressure on the compensation of the entire underpaid service sector \u2013 as well as teachers, whose real salaries have barely budged in decades.<\/p>\n
The idea of creating good-paying public jobs to expand opportunity and raise wages isn\u2019t new. A federal job guarantee was a key part of the civil rights movement\u2019s economic agenda, including the 1967 Freedom Budget written by A. Phillip Randolph and Bayard Rustin, and endorsed by Martin Luther King Jr. Although they didn\u2019t mention child care specifically, more recent proposals do.<\/p>\n
Where young children spend their days, and whether both parents work, is a question for each family to decide on its own. What\u2019s crucial is having economically viable options. If the market can\u2019t provide, the government must.<\/p>\n
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ABOUT THE WRITER<\/p>\n
Kathryn Anne Edwards is a labor economist and independent policy consultant.<\/p>\n
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