Parents face Catch-22 on child care

Already spending more than government, parents need to work more to pay for child care that costs more

Since the 1990s, the cost of child care has been rising at twice the rate of inflation. (Shutterstock)

By Ted Cox

Parents, who are already spending more on child care than the state and federal government combined, face a Catch-22 in caring for their kids, needing to work more to pay for day care that costs more by the year.

That’s according to a new study by the Economic Policy Institute, which also found that parents are deprived of up to $35 billion a year in lost wages by dropping out of the workforce or reducing hours to care for their kids.

“Who’s Paying Now?: The Explicit and Implicit Costs of the Current Early Care and Education System” was released last month by the EPI. It found that parents are outspending the state and federal government on child care, devoting $42 billion a year to day care and early childhood education, while the federal government pays about $22.2 billion and state and local governments contribute about $11.8 billion, for a total of $34 billion in government assistance.

CNBC did the math in a piece published last week and, with the U.S. Census Bureau reporting there are 7 million households with children under 5, that translates as $6,000 a year for those families, or about $500 a month out of pocket. CNBC also reported that parents were being deprived of between $30 and $35 billion a year in lost wages as parents leave the workforce or reduce hours to care for young children. According to the EPI study, that’s also $4.2 billion in lost tax revenue.

Otherwise, as CNBC put it, parents face a Catch-22, needing to work more to pay for child care that costs more, as child care has increased at double the rate of inflation since the 1990s.

Even so, day-care centers are trying to keep costs low on their end, with the result that early childhood educators make about $12 an hour, with a median annual salary of $25,000. If those day-care teachers were paid at levels similar to elementary-school teachers, their average annual salary would shoot up to $60,000, resulting in $80.3 billion in overall pay increases. That would potentially translate into $27.1 billion in federal taxes and another $15.8 billion in state and local taxes, for a hike of $42.9 billion in government revenues.

“The chronic underfunding of early care and education is compromising the well-being of educators and the children they teach and threatening the economic security of millions of families in the United States,” the study states. “While the cost to parents for ECE is high, the current market rates for services are inefficiently low because ECE teachers are underpaid. Nationally, the median hourly wage for ECE teachers is $12.12.

“High-quality early care and education is important and it is worth the investment,” the study concludes. “The United States is already pouring billions of dollars into the current system through government expenditures and parental contributions. And yet the current system is failing parents by stretching family budgets and keeping millions out of the labor force. The current system is also failing early educators by keeping their pay low and their working conditions suboptimal, which comes at a cost for their own economic security as well as at a cost to the children in their care. The loss of potential earnings for both parents and educators translates into lower government revenues.”

Not coincidentally, the study notes that “finally, the current system is failing to make the kinds of high-quality investments that U.S. children deserve and that will pay off many times over in years to come.”

Gov. Pritzker has made early childhood education and development a key initiative, and he reaffirmed in his State of the State speech last week that “Illinois will be the best state in the nation (in which) to raise a young family.”