Amid rising vaccination rates, domestic employers have commenced their slow transition back to in-office activity. The return to office life will likely pose many challenges for employees, such as managing commutes, striking a new work-life balance and navigating the sometimes-awkward cadence of office social interactions. However, working parents are once again tasked with planning for child care. Similar to many other industries, the Day Care industry experienced significant pandemic disruption; however, it will likely now play a pivotal role in the broader labor market recovery.
The cost of child care in the United States
Affordable child care is a primary focus of working families in the United States; on average, child care commands more than 10.0% of household income. The economic benefits of child care go beyond payments for services, but contribute toward increased productivity for working parents and higher long-term economic output for children. In wealthier states, such as New York, child care for a 4-year-old costs more than $12,000 per year, according to the Economic Policy Institute. While national headlines often focus on the rising cost of college tuition, child care expenses in New York are one-and-a-half times that of in-state tuition at public four-year institutions. Compare that to child care for a 4-year-old in Kentucky, which ranges between $6,000 and $6,500 per year. While the dollar value of these expenses can be substantially lower state to state, the average amount spent on childcare is still considered out of reach for low-wage individuals.
COVID-19 and day care centers
Child care costs have increased as a direct result of the COVID-19 (coronavirus) pandemic. The Day Care industry experienced significant disruption, in which revenue declined 14.8% in 2020 alone. Moreover, recovery among the industry’s labor market has been lackluster, forcing existing centers to significantly increase wages to address staff shortages. The typical annual pay for day care employees increased only 2.5% between 2010 and 2019 as centers benefited from consistent labor market expansion. However, the industry experienced employment fall 15.7% in 2020, while average wages unprecedently increased 7.8% in 2020.
Though wage increases have been welcomed by day care employees, increased labor expenses have significantly encroached on profit. These cuts to profit have put the financial viability of many domestic day care centers into question. Competing enterprises have been forced to reflect this pressure on profit through increased service pricing, which has led to a substantial rise in child care costs in the past year. According to a survey by Care.com, the average American household spent $346.00 per week for two children in a child care facility in 2019. In 2020, that amount has nearly doubled to an estimated $640.00 per week for two children (latest data available).
Policy response and implications
With day care recovery still highly uncertain, the need for government intervention has come into the public eye more than ever. Many day care centers initially benefited from payroll support under the Coronavirus Aid, Relief and Economic Security (CARES) Act, but these funds were depleted in subsequent months. Child care organizations have lobbied Congress for more targeted support. In response, the Biden administration proposed the American Families Plan in April 2021, which includes more than $200.0 billion in child care reform funding. The plan would ensure access to child care for low- and middle-income families by ensuring an expense cap of no more than 7.0% of household income. Child tax credits have also been extended up to $3,600 per qualifying child 6 years old and younger. Continued pressure is needed to ensure adequate funding for the Day Care industry, as the domestic labor market rides on its success.
