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Kathryn Anne Edwards is a labor economist and independent policy consultant. She wrote this column for Bloomberg Opinion.
America’s child care market is an abject failure. Even at prohibitively high prices, supply doesn’t meet demand, preventing children, parents and the entire economy from reaching their full potential.
This is a problem that only government intervention can solve.
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’ choice to work, society has already moved on: More than 70 percent of women with children under 18 are in the labor force.
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 prekindergarten 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’s Chips Act implementation — requiring manufacturers applying for federal subsidies to provide on-site child care — is far too narrow to turn things around.
The result is a market that doesn’t adequately serve anyone it should. Over the past 30 years, the cost of day care has risen at an average annual rate of 3.8 percent, compared with 2.5 percent for consumer prices overall. As of March, it was up 6.8 percent 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 percent of their income on child care. Yet supply remains inadequate and poorly compensated: Employment in the sector remains 7 percent below its pre-pandemic level, and the median worker earned $13.22 an hour in 2021, well below the national median wage.
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’s 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’t reflected in the price, the market inevitably supplies too little.
What, then, can the government do? It should start by reducing the market’s 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.
If policymakers want to maintain some semblance of a market, they’ll 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 — and installing government centers where the private sector won’t go. It would also require expanding low-income vouchers to cover as many as 13 million children, compared with fewer than a million today.
Given the market’s 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.
Radical as public child care might sound, it’s not a risky move. Like most early-childhood investments, it delivers a high return through improved outcomes for children into adulthood — as well as an increase in mothers’ 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.
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 — as well as teachers, whose real salaries have barely budged in decades.
The idea of creating good-paying public jobs to expand opportunity and raise wages isn’t new. A federal job guarantee was a key part of the civil rights movement’s 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’t mention child care specifically, more recent proposals do.
Where young children spend their days, and whether both parents work, is a question for each family to decide on its own. What’s crucial is having economically viable options. If the market can’t provide, the government must.
