The Impact of the High Cost of Child Care

How the High Cost of Childcare Impacts America

Updated May 30, 2024 | Posted June 14, 2023
By the Annie E. Casey Foundation
A Black female child care provider helps three young children with a craft activity

The country’s lack of afford­able and acces­si­ble child­care short­changes chil­dren, costs the Amer­i­can econ­o­my bil­lions of dol­lars a year, stymies women pro­fes­sion­al­ly and is push­ing fam­i­lies to the break­ing point, accord­ing to the 2023 KIDS COUNT® Data Book, released by the Annie E. Casey Foun­da­tion. Each year, the report sheds light on the well-being of America’s kids; in 2023, the report focused on how expen­sive, hard-to-find child­care affects par­ents. It also describes low pay lead­ing to a chron­ic short­age of providers and demands that pol­i­cy­mak­ers at the state and nation­al lev­els enact real solutions.

Down­load the 2023 KIDS COUNT Data Book

Effects of Incom­pat­i­ble Child­care & the Aver­age Cost Per Year

Too many par­ents can­not secure child care that is com­pat­i­ble with work sched­ules and com­mutes. The Data Book reports that in 202021 13% of chil­dren birth to age 5 lived in fam­i­lies in which some­one quit, changed or refused a job because of prob­lems with child care. And women are five to eight times more like­ly than men to expe­ri­ence neg­a­tive employ­ment con­se­quences relat­ed to caregiving.

Even if par­ents can find a child­care open­ing near their home, they often can’t pay for it. The aver­age annu­al nation­al cost of child­care for one child in 2021 was $10,600, a tenth of a mar­ried couple’s medi­an income and more than one-third of a sin­gle parent’s income, accord­ing to one analy­sis. The short­com­ings of the child­care sys­tem dis­pro­por­tion­ate­ly affect the finan­cial well-being of women, sin­gle par­ents, par­ents in pover­ty, fam­i­lies of col­or and immi­grant families.

A good child­care sys­tem is essen­tial for kids to thrive and our econ­o­my to pros­per. But our cur­rent approach fails kids, par­ents and child care work­ers by every mea­sure,” says Lisa Hamil­ton, pres­i­dent and CEO of the Annie E. Casey Foun­da­tion. With­out safe child­care they can afford and get to, work­ing par­ents face impos­si­ble choic­es, affect­ing not only their fam­i­lies but their employ­ers as well.”

Rank­ings & Cost of Child­care by State

Each year, the Data Book presents nation­al and state data from 16 indi­ca­tors in four domains — eco­nom­ic well-being, edu­ca­tion, health and fam­i­ly and com­mu­ni­ty — and ranks the states accord­ing to how chil­dren are far­ing over­all. New Hamp­shire, Utah and Mass­a­chu­setts rank first, sec­ond and third in over­all child well-being in the 2023 KIDS COUNT Data Book; Mis­sis­sip­pi, Louisiana and New Mex­i­co ranked 48th, 49th and 50th.

Fac­tor­ing both the price of care and medi­an income in each state, cen­ter-based care for tod­dlers cre­ates the largest cost bur­den for mar­ried cou­ples with chil­dren in Neva­da (15%), Col­orado (14%) and New York (14%), and home-based care for mar­ried cou­ples with chil­dren in New Mex­i­co (12%), Neva­da (11%), Cal­i­for­nia (10%), Col­orado (10%), New York (10%) and Wash­ing­ton (10%).

How the High Cost of Child­care Impacts America

Effects on Child­care Workers

While child­care costs bur­den fam­i­lies, child­care work­ers are paid less than 98% of pro­fes­sions. Medi­an nation­al pay for child care work­ers was $28,520 per year or $13.71 an hour in 2022, less than the wage for retail ($14.26) and cus­tomer ser­vice ($18.16) workers.

Some 94% of child­care work­ers are women; 14% are Black and 4% are Asian. Across all races, 24% described their eth­nic­i­ty as His­pan­ic or Lati­no.

In addi­tion to low wages, child­care work­ers face oth­er bur­dens inside the class­room. Most child­care work­ers have min­i­mal time for les­son plan­ning and must con­tend with high teacher-child ratios. These chal­lenges are often com­pound­ed by a lack of resources for their learn­ing environment.

Effects on Par­ents & the Economy

The fail­ings and high cost of the child­care mar­ket also affect the health of the Amer­i­can econ­o­my, cost­ing $122 bil­lion a year in lost earn­ings, pro­duc­tiv­i­ty and tax rev­enue, accord­ing to one study. All of these chal­lenges put par­ents under tremen­dous stress to meet the dual respon­si­bil­i­ties of pro­vid­ing for their fam­i­lies and ensur­ing their chil­dren are safe and nur­tured. The report also found:

  • While 10% of white chil­dren (birth to age 5) lived with a fam­i­ly mem­ber who had to quit, change or refuse a job because of child care, this fig­ure was 17% for Black and 16% for Lati­no children.
  • More than 60% of child care work­ers report­ed hav­ing dif­fi­cul­ty pay­ing their own food and util­i­ty bills in the most recent month.
  • Infant child care is so expen­sive that one analy­sis indi­cates it costs more than in-state col­lege tuition in 34 states and the Dis­trict of Columbia.
  • The main fed­er­al mech­a­nism for sub­si­diz­ing care, the Child Care and Devel­op­ment Block Grant, par­tial­ly off­sets costs for only 1.3 mil­lion of the more than 12 mil­lion kids in child care. Of chil­dren eli­gi­ble for sub­si­dies under fed­er­al rules, only 1 in 6 receives them.

Effects on Child Development

The high cost of child­care means that young chil­dren are miss­ing out on care and ear­ly learn­ing dur­ing a peri­od of impor­tant brain devel­op­ment. Access to ear­ly child­hood edu­ca­tion is invalu­able in prepar­ing young learn­ers for ele­men­tary school, which is why it is one of the 16 indi­ca­tors that make up the KIDS COUNT index in each year’s Data Book. Despite gains in recent years, our coun­try is still fail­ing to deliv­er ear­ly child­hood edu­ca­tion to more than half of its chil­dren (54%, a one-point increase over the pre­vi­ous measurement).

With­out a sig­nif­i­cant ear­ly child­hood edu­ca­tion, chil­dren are more like­ly to fall behind their peers — and clos­ing the gap will like­ly prove to be dif­fi­cult. Research has shown that the con­se­quences of inad­e­quate ear­ly edu­ca­tion include: aca­d­e­m­ic strug­gles, behav­ioral issues and even poor­er health out­comes in adult­hood. Addi­tion­al­ly, chil­dren who miss out on ear­ly child­hood edu­ca­tion are more like­ly to drop out of school and more like­ly to nev­er attend college.

How We Can Improve the Child­care System

Tran­si­tion­ing from a fal­ter­ing child­care sys­tem to cre­at­ing a flour­ish­ing one will take new think­ing and invest­ing at the local, state and nation­al lev­els. Col­lab­o­ra­tion among the dif­fer­ent lev­els of gov­ern­ment could pio­neer a sig­nif­i­cant change, but more work is needed:

  • Fed­er­al, state and local gov­ern­ments should invest more in child­care. State and local gov­ern­ments should max­i­mize remain­ing pan­dem­ic recov­ery act dol­lars to fund need­ed child care ser­vices and capac­i­ty. Con­gress should reau­tho­rize and strength­en the Child Care and Devel­op­ment Block Grant Act and increase fund­ing for pub­lic prekinder­garten and Head Start.
  • Pub­lic and pri­vate lead­ers should work togeth­er to improve the infra­struc­ture for home-based child care, begin­ning by low­er­ing the bar­ri­ers to entry for poten­tial providers by increas­ing access to start­up and expan­sion capital.
  • To help young par­ents, Con­gress should expand the fed­er­al Child Care Access Means Par­ents in School pro­gram, which serves stu­dent parents.

Down­load the 2023 KIDS COUNT Data Book at www​.aecf​.org/​d​a​t​abook.

Down­load this news release in Spanish

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