A child-care crisis, spurred by a bigger affordability crisis in general, is unfolding on many Americans.
The average cost of childcare for two children, which the majority of American families have, is greater than the average price of rent in all 50 states in the country, according to a new report by the nonprofit Child Care Aware of America, which also found the price of childcare is more expensive than the average mortgage payment in 45 states.
The country is in the midst of a child-care crisis, with systemic problems—including the soaring price of childcare, low wages for child-care providers, inadequate federal funding, and the pandemic, which left 16,000 child-care providers with shuttered doors—rendering the child-care market broken. It’s alarming, considering how scant paid parental leave benefits are and how crucial high-quality childcare is for childrens’ emotional and academic development.
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When it comes to affordability, there are a few general rules of thumb to consider. Housing is considered affordable if it costs no more than 30% of a household’s income, and according to the U.S. Department of Health and Human Services, affordable childcare should cost no more than 7% of a household’s income. Yet, half of Americans spend over 30% of their incomes on housing, and the share of people spending over 7% of their incomes on childcare is sizable, too.
According to the report, affording the current cost of care for just one child would require 10% of a married household’s income and 32% of a single parent’s income. The actual price people are paying in childcare is often higher, too, since most households have more than one child, according to Census Bureau data. These costs are so high that the price of childcare is now equivalent or higher than rent in every state in the country.
In New York, the typical monthly cost of childcare for two children is $2,634, while the typical cost of housing is $2,451, according to a family budget calculator by the Economic Policy Institute, which estimates the costs of living around the country. In Greensboro, North Carolina, childcare for two children costs an average of $1,182 each month, while housing costs $1,039 monthly, according to the EPI’s calculator; and in even Cottle County, Texas, one of the cheapest housing markets in the country, the monthly price of childcare averages to $968, while housing costs $826 monthly.
The problems that contribute to expensive care are multifold and can be understood by taking a close look at how the market is funded, according to Jocelyn Frye, the president of the National Partnership for Women & Families, a nonprofit that works to improve lives.
“It’s a perfect storm in terms of a number of things coming together,” Frye told Fortune. “Families are struggling across the country, the costs are going up, the number of child-care workers has not yet rebounded fully from pre-pandemic numbers, the costs of operating child-care facilities are escalating and we don't pay child-care workers themselves enough.”
Child-care providers earn an average of just around $30,000 per year, according to the Bureau of Labor Statistics, which is below the poverty line for a family of four. The biggest problem in the system, Frye said, is the lack of a national solution.
“We are really leaving it to families to figure this out on their own,” Frye told Fortune. “We need significant investments in childcare that supports better wages and sets caps in terms of costs so that people aren't spending all of their income, sometimes more than how much they spend on rent or a mortgage, on childcare.”
To be sure, the child-care market is a deeply broken system: Many centers are small businesses that operate on razor-thin margins and have less wiggle room to respond to federal initiatives like minimum-wage hikes and receive inadequate federal funding, which forces many centers to make tough decisions on how many children they can accept while paying staff enough—all of which affect profitability.
The crisis was exacerbated by the pandemic, which caused 16,000 centers to close permanently, due, in large part, to increased operating costs, unpredictable attendance as a result of COVID, and rising labor costs due to inflation.
In October 2022, a $24 billion federal-aid package from the American Rescue Plan, a pandemic relief aid fund, helped providers afford things like raising workers’ wages, pay bonuses, reduce customer prices, and improve infrastructure—but it was a temporary band-aid fix to an already thin-stretched industry.
The temporary federal aid ran dry in September, and according to estimates from the Century Foundation, could cause as many as 70,000 childcare centers which look after 3.2 million children to close.
Solutions to the broken market, according to a National Women’s Law Center report, include national investments into the market. The report estimates that at least $16 billion in investments each year is needed to “stave off shrinking childcare spots, staffing shortages and rising prices that will disrupt both families and our economy at large.”
Frye added that a national solution to ensure provider centers are properly funded is paramount to fixing the industry, too. In the absence of a national solution, she said, “people grasp at whatever is available as opposed to understanding how different support mechanisms should work together.”
There’s not much planned in terms of a national solution for the industry’s deep problems so far, though in February the Biden administration announced a rule that reduced costs for families that receive and use childcare subsidies, limiting the amount they pay to 7% of their household income. The new legislation is estimated to impact 100,000 children.
