American Childcare Industry Weakens the Financial Security of Women

Women’s equity cannot be achieved without addressing childcare. In order to prompt global action on this issue, the United Nations declared childcare burden inequalities as one of its sustainable development goals (7). The United States has yet to adequately address these inequities. By all accounts, the American childcare industry is in economic disarray. Compounded by low profit margins and an unstable consumer base, many child care centers are at the precipice of market failure. Without a reliable child care network, many American families, and particularly women, will face negative economic impacts.

Traditionally, childcare operates as an informal system backed by the unpaid labor of women. As more women enter the economy, and with many families requiring dual incomes, this form of childcare is no longer sustainable. Currently, 56% percent of married families with children under 6 rely on dual incomes (9). For single parents, 60% are the sole providers of their children (9). There has been an increased demand for standardized child care due to the prevalence of working families (9).

Despite the demand for formal child care centers, purchases of childcare services remain at low rates; affordability issues restrict access to licensed care facilities. Estimates for full-time childcare, defined as 40 hours per week, range from $10,000 to $14,800 annually (9). The Department of Human Health and Services state that childcare should not exceed 7% of parental income - an unreasonable target for most families (9). At any one time, approximately 3.6 million children under the age of five live in poverty, while 3.2 million live between the Federal Poverty Line and 200% of that level (9). Despite the obvious need for care, child care centers are unable to reduce prices - The average child care center operates on razor thin margins of less than one percent (8). Child care workers are paid low wages due to low revenue. The average wage for a child care worker is $14.67/hour, whereas a kindergarten teacher makes nearly double at $32.80/hour (1). The child care industry is unable to support low income families while maintaining operations, resulting in a need for government support.

Because an operational child care industry is necessary for parental economic stability, the American federal government provides financial support. Unfortunately, this support currently lies at rates below the true cost of services. The United States spends an average of $500 per child for child care services (1). In comparison, Organization for Economic Co-operation and Development (OECD) countries on average spend $14,436 per child (1). Considering that the United States represents the fifth largest economy out of OECD countries (4), the comparatively insubstantial amount of childcare investments demonstrates a disinvestment in childcare in the United States.

The Child Care and Development Block Grant (CCDBG) Act of 1990 established the Federal Child Care and Development Fund (CCDF), the main method of financial child care support for families (1, 10). It operates as a federal and state partnership program with state matching funds in order to provide child care subsidies for low income families. Unfortunately, the CCDF is chronically underfunded and currently reaches only 1 in 7 eligible families (1). When these subsidies are utilized by families, child care centers are harmed. CCDBG subsidies cover up to only 43% of the true cost of care (10). The gap between subsidies and true cost of care creates inequalities in child care client demographics; low income parents are likely to be excluded as child care centers cater to high-income parents with disposable incomes (10).

Child care’s lack of affordability has been further exacerbated due to additional COVID-19 protocols, such as a reduction of the care provider to child ratio, causing child care centers to raise their prices as much as 47% (6). The CCDF requires states to set subsidy rates at a minimum 75% of the true cost of care. Currently, only one state fulfills such requirements: Maine. The disparity between subsidies and paid care worsens for infants. Infants require individual attention and more extensive services in comparison to preschoolers. Subsequently, infant care costs 49% more than a preschooler, yet corresponding subsidy rates are only 26% higher (10). This substantial disparity results in families with infants being excluded from the child care industry.

The lack of access and affordability of childcare has a ripple effect on the American economy. If a parent must miss work hours due to inadequate child care, employers lose productivity. A parent may decide to leave the labor market entirely to provide child care, causing the family to lose reliable income and retirement benefits. The alternative, enrollment in child care centers to maintain income, leads to a loss in future benefits such as college funds due to disposable parental income being prioritized for child care. Before the pandemic, it was estimated that working parents lost an aggregate $37 billion due to subpar childcare, costing employers approximately $13 billion (2). For single parents, enrollment in child care is not an autonomous choice; many families enroll their child into centers within the first year of life in order to regain reliable income (3). Child care enrollment comes with the caveat of large expenditures, undercutting the financial stability of these families. Additionally, financial effects are felt unequally between men and women. When deciding which parent must remain at home as a primary caregiver, women were much more likely to stay home due to lower income rates and because it was believed that the woman was a “better” care provider (6). Such decisions have long-term effects on a woman’s career; college educated women who take a 18 month hiatus due to child care can experience up to a 41% decrease in income 15 years down the line (8). Over 2.3 million women have left the workforce since February 2020, causing the labor participation rate to plummet to 57%. When asked why they left the workforce, 26% cited child care constraints (5, 8). The inequitable distribution of child care toward women causes irreversible economic damage to women.

Inadequate child care erodes the financial security as well as the career longevity of women. Not only are women expected to take on additional child care responsibilities at home, but women in the child care workforce are expected to work lower wages for longer. It is estimated that women spend 2.5 times more hours per week on child care than men (7). To address such inequalities, the United States has created the country’s first universal preschool program, as well as billions invested into boosting childcare subsidies (11). To create an equitable society with the free economic participation of women, child care must be accessible and affordable for all families.

1. Miller, Claire Cain. “How Other Nations Pay for Child Care. the U.S. Is an Outlier.” The New York Times, The New York Times, 6 Oct. 2021, https://www.nytimes.com/2021/10/06/upshot/child-care-biden.html.
2. Modesto, Alicia Sasser, et al. “Childcare Is a Business Issue.” Harvard Business Review, 9 Sept. 2021, https://hbr.org/2021/04/childcare-is-a-business-issue.
3. National Research Council (US) and Institute of Medicine (US) Committee on Integrating the Science of Early Childhood Development. “Growing up in Child Care.” From Neurons to Neighborhoods: The Science of Early Childhood Development., U.S. National Library of Medicine, 1 Jan. 1970, https://www.ncbi.nlm.nih.gov/books/NBK225555/.
4. OECD National. “GDP per Capita (Current US$).” GDP per Capita (Current $US) - OECD Members, World Bank, 2021, https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2020.
5. Parker, Kim. “Women More than Men Adjust Their Careers for Family Life.” Pew Research Center, Pew Research Center, 14 Aug. 2020, https://www.pewresearch.org/fact-tank/2015/10/01/women-more-than-men-adjust-their-careers-for-family-life/.
6. Polo, Michelle Jokisch. “The Soaring Costs of Day Care Stifle Some Parents' Return to Work.” NPR, NPR, 22 June 2021, https://www.npr.org/2021/06/22/1008986943/the-soaring-costs-of-daycare-stifle-some-parents-return-to-work.
7. “The 17 Goals | Sustainable Development.” United Nations, United Nations, https://sdgs.un.org/goals.
8. United States, Congress, U.S. Department of the Treasury. THE ECONOMICS  OF CHILD CARE SUPPLY  IN THE UNITED STATES, 2021, pp. 1–29.
9. Whitehurst, Grover J. "Russ". “Why the Federal Government Should Subsidize Childcare and How to Pay for It.” Brookings, Brookings, 29 Mar. 2017, https://www.brookings.edu/research/why-the-federal-government-should-subsidize-childcare-and-how-to-pay-for-it/.
10. Workman, Simon. “The True Cost of High-Quality Child Care across the United States.” Center for American Progress, https://www.americanprogress.org/issues/early-childhood/reports/2021/06/28/501067/true-cost-high-quality-child-care-across-united-states/.
11. Zhou, Li, et al. “What's in - and What's out of - Biden's Latest Spending Proposal.” Vox, Vox, 28 Oct. 2021, https://www.vox.com/2021/10/28/22748554/biden-budget-build-back-better-democrats-child-care-taxes.