Child care keeps getting more expensive, with fees rising faster than family income and inflation in many states, even as the nation struggled to emerge from one of the worst recessions in decades, a new report found.

The report is packed with examples of the broken economics of child care. For example, average child care center fees for infants were more than what a family paid, on average, for food last year in every region of the country, according to the report “Parents and the High Cost of Child Care.” (Click here for the full report). Families with kids also aren’t imagining it, over the last decade child care costs rose twice as fast as their median income, the report said.

And the average annual cost of center-based child care for an infant was higher than the average annual tuition and expenses at a four-year college in 40 states, the report found. These costs jumped in an industry where workers’ wages can be depressingly near working poverty levels. 

Overall, the cost of child care for an infant ranged from $4,550 a year to $18,750 a year. Sadly, Washington State ranked among the least-affordable states for center-based child care for a four-year-old. Those states are: Massachusetts, New York, Minnesota, Wisconsin, Colorado, Maine, Pennsylvania, Montana, Rhode Island and Vermont.

The annual snapshot of child care costs also has ideas on making good quality care more affordable, including:

• Lowering barriers to aid for child care costs.
• Helping expand the capacity of the child care system to meet the needs of more families.
• Working to help publicly funded prekindergarten and Head Start programs provide all-day child care during the entire year.

Check it out.

As policymakers begin considering how to improve early learning in the coming tight budget season, a new report offers them an analysis of the economics behind high quality child care and its cost – not cheap at $11,500 a child.

The analysis zeroes in on one market, Southeast Wisconsin, and reports the region’s direct child care services, driven largely by labor, cost roughly $370 million. In contrast, it would cost $701 million in direct services to create a high quality system.

While, it would be a dramatic jump in investment, the Public Policy Forum’s analysis adds this critical point:

The research also demonstrates, however, that the most significant long‐term benefits have been found to accrue only from high quality care. Mediocre or low‐quality care may have some short‐term benefits, but does not result in the same return on investment as higher quality care. – “The Price of Quality: Estimating the Cost of a Higher Quality Early Childhood Care and Education System for Southeast Wisconsin” December 2009.

(The report does not endorse any strategy, but instead is designed to explain costs, outcomes and other factors, all material policymakers could use in upcoming budget battles. It also goes deeper into government and other related costs.)

In fact, the report is packed with useful information for legislators, advocates, teachers and parents, including summaries of high quality care’s definition and research on the economic returns of early learning investments.

The cost‐savings can be estimated per child; for example, the average high school dropout recently was found to cost taxpayers more than $292,000 in lower tax revenues, higher cash and in‐kind transfer costs, and imposed incarceration costs compared to the average high school graduate.

Researchers may have already explained the broken economics of child care, but this report offers one of the best summaries of why the industry doesn’t follow the rules of supply and demand.

In a well‐functioning market, consumers are informed about the quality of the product and would be expected to pay more for a higher‐quality product. In the child care market, however, research shows parents have little information about the educational quality of the care they are purchasing. In addition, the cost of high‐quality care is too great for most parents. Thus, there is little demand for highest‐quality care, and child care providers have little financial incentive to increase the educational quality of their services. This dynamic provides a rationale for government intervention to either subsidize or regulate quality in light of its demonstrated economic, educational, and societal benefits.

Further Reading:

• “Child care quality studied: Better early education would benefit region, but at double the cost,” – Milwaukee Journal Sentinel. 12/21/09.
• · “The Price of Quality: Estimating the Cost of a Higher Quality Early Childhood Care and Education System for Southeast Wisconsin.”

Thanks to the National Institute for Early Education Research for highlighting this report.

Happy Holidays!

Child care matters not only to families but to the economy and a recent report outlines its growing economic power, including the billions of dollars it generates every year in New York State.

The Cornell University policy brief spells out how child care helps 775,000 parents work and earn $30 billion, generates $4.7 billion a year on its own, through such things as parent fees and government investments, and employs 119,000 workers in New York.

“Child care teachers, aides and staff represent one of the fastest growing employment sectors in the economy,” the report said.

All of this economic clout is finally influencing business leaders, who increasingly realize child care affects their balance sheets. More than 80 percent of surveyed chamber of commerce officials and economic developers agreed a lack of affordable child care hurts worker productivity, the report found. In addition, 67 percent feel a lack of quality child care hurts businesses’ ability to recruit.

“Child care is becoming a key part of New York State’s economic development plans,” researchers wrote. “Just like roads and bridges, a high quality child care system is part of the infrastructure for economic development by enabling working parents to work, as well as investing in the future labor force (children),” they suggested.

The brief’s most important section, though, is its evidence of one of the new economy’s greatest disconnects: Service jobs are a defining feature of the U.S. economy, but many of these jobs don’t pay workers enough to cover their child care costs. It’s hard to overstate this critical point in an economy increasingly defined by two-career families.

“While a few high-end industries also experienced job growth, the job expansion of these high wage industries reached 160,000, barely exceeding half the growth of low-wage jobs. Clearly, these trends indicate a growing challenge for NYS (New York State) employees who have to pay the high cost of child care with increasingly lower wages. This also represents a challenge for employers who need to attract and retain parent workers.” – The Economic Importance of the Child Care Sector, Department of Development Sociology, Cornell University. September.

The two-page briefing is packed with facts and analysis. It was based on work done by New York State’s Child Care Coordinating Council and Cornell University’s Department of City and Regional Planning.

The cost of child care continued to outstrip inflation last year, with care often costing more than food and rent, a new report found.
Last year, the annual cost of center-based infant care reached as high as $15,895, while quality care at an accredited center hit $16,835, according to “Parents and the High Price of Child Care: 2009 Update.”

“The bottom line is that you get what you pay for,” Linda Smith, executive director of the National Association of Child Care Resource & Referral Agencies, said in a statement. “And today’s economy only makes it that much harder for parents who are already struggling with the current cost of child care to afford the quality child care their children need and deserve.”

The cost of child care rivaled or topped other essentials. Parents, on average, spent more on child care fees than food in every region of the country, the report said. In fact, while the nation’s cost of living rose 3.8 percent last year, center care for a baby rose 4.8 percent and care for a four year old jumped 6.2 percent, the report said, relying on Bureau of Labor Statistics data.

New York topped the list of least affordable states for baby care, with Massachusetts the second most expensive, followed by Minnesota, Colorado, California, Hawaii, Oregon, Illinois, Wisconsin, and Indiana, according to the report. (Washington State ranked 13th.)

The report offered a few interesting recommendations beyond the demand for greater federal funding of child care grants, including a suggestion the early learning-friendly Obama administration could embrace.

“Requiring the Department of Health and Human Services in conjunction with the National Academy of Sciences to determine the cost of quality child care and report back to Congress.”

The report’s broader goal gets to the heart of the early learning issue: Are child care, preschool and pre-k parts of our commitment to public education or elements of a different and complimentary system?

The Virginia-based child care group suggests its position in another recommendation.

“Designing a system to help underwrite the cost of child care so that all families, not just wealthy families, can afford the cost of quality child care.”

We know the economics of child care are breaking down even more under the strain of this relentless recession. Over the weekend, The Oregonian ran the best story I have read about how and why child care doesn’t work in the 21st Century economy.

It is a story about two college-educated working parents who can’t afford child care for their two young children.

Set aside the misguided notion that mothers have much of a choice when it comes to working a paid job or staying at home. Not when wage and salary data, adjusted for inflation, show the typical Oregon man earning $3 less an hour in 2007 than in 1979, according to the Oregon Center for Public Policy.

Let go of the lie that Grandma lives down the street and wants to watch Junior for free. Not in a state where more than half the residents weren't born here.

No shortcuts in sight, what's left is a scramble. – Two parents, two kids...and only 24 hours a day, Oregonian newspaper, 4/18/09.

While child care is steep in neighboring Oregon, it generally costs even more in Washington state, where parents pay, on average, $10,140 a year for infant care in centers, according to the National Association of Child Care Resources and Referral Agencies.

Washington ranks as the 14th most expensive state for infant care.

That means middle class and even upper middle class families can struggle to pay for child care, not to mention families further down the economic ladder.

It is problem I’ve run across again and again in covering the finances of child care in recent years. Economists and my own experience convinced me the laws of supply and demand don’t work here.

Now families are struggling even harder with this flawed equation as they lose jobs or hours, while lawmakers consider cuts to early learning programs.

This is another unfortunate wrinkle in the massive economic contraction: more families may no longer be able to afford child care, the story suggests.

 In nearly 60 percent of two-working-parent couples with children younger than 5, at least one spouse worked some combination of weekends, evenings and nights, University of Maryland professor Harriet B. Presser found through studying Department of Labor and Census data.
Almost 40 percent of married women said child care drove the decision to work odd hours, Presser reported in her 2003 book, "Working in a 24/7 Economy."

Bobbie Weber, a researcher with Oregon State University's family policy program, says our own state's data hint at an emerging trend of low-income families increasingly avoiding paid child care.

"Some families," Weber says, "were priced out of the market. – Oregonian, 4/18.

Plus, the story is a great read. The writer beautifully carries you through the family’s day.