Introduction and key findings
In recent decades most Americans have endured stagnant hourly pay,
despite significant economy-wide income growth (Bivens and Mishel
2015). In essence, only a fraction of overall economic growth is
trickling down to typical households. There is no silver bullet for
ensuring ordinary Americans share in the country’s prosperity; instead,
it will take a range of policies. Some should give workers more
leverage in the labor market, and some should expand social insurance
and public investments to boost incomes. An obvious example of the
latter is helping American families cope with the high cost of child
care.
The high cost of child care has received attention from an array of
policymakers. For example, in his 2015 State of the Union address,
President Obama cited child care affordability as a key to helping
middle-class families feel more secure in a world of constant change
(White House 2015). New York City Mayor Bill de Blasio recognized
similar concerns and released an interagency implementation plan for
free, high-quality, full-day universal prekindergarten (NYC 2014). High
quality, dependable, and affordable child care for children of all ages
is more important than ever, especially since having both parents in
the workforce is an economic necessity for many families.
This paper uses a number of benchmarks to gauge the affordability of
child care across the country. It begins by explaining how child care
costs fit into EPI’s basic family budget thresholds,
which measure the income families need in order to attain a modest yet
adequate standard of living in 618 communities. The report then
compares child care costs to state minimum wages and public college
tuition. Finally, to determine how child care costs differ by location
and family composition, the paper reconstructs budgets for two-parent,
two-child families in 10 locations to include the higher cost of infant
care, compares these families’ child care costs to those of families
without infants, and compares costs for both family types with metro
area median incomes.
Key findings include:
- Child care costs account for a significant portion of family budgets.
- EPI’s basic family budget threshold for a two-parent, two-child
family ranges from $49,114 (Morristown, Tennessee) to $106,493
(Washington, D.C.). In the median family budget area for this family
type (Des Moines, Iowa), a two-parent, two-child family needs $63,741
to attain a modest yet adequate standard of living.
- Across regions and family types, child care costs account for the
greatest variability in family budgets. Monthly child care costs for a
household with one child (a 4-year-old) range from $344 in rural South
Carolina to $1,472 in Washington, D.C.
- As a share of total family budgets, center-based child care for
single-parent families with two children (ages 4 and 8) ranges from
11.7 percent in New Orleans to 33.7 percent in Buffalo, New York.
- Among families with two children (a 4-year-old and an 8-year-old),
child care costs exceed rent in 500 out of 618 family budget areas. For
two-child families, child care costs range from about half as much as
rent in San Francisco to nearly three times rent in Binghamton, New
York.
- Child care is particularly unaffordable for minimum-wage workers.
- The high cost of child care means that a full-time, full-year
minimum-wage worker with one child falls far below the family budget
threshold in all 618 family budget areas—even after adjusting for
higher state and city minimum wages.
- Among families with young children, child care costs constitute a
large share of annual earnings for families living off one full-time,
full-year minimum-wage income. For example, to meet the demands of
infant care costs for a year, a minimum-wage worker in Hawaii—the state
with the median state minimum wage ($7.75)—would have to devote his or
her entire earnings from working full time (40 hours a week) from
January until September.
- Other salient benchmarks highlight the extremely high costs of child care.
- In 33 states and the District of Columbia, infant care costs exceed
the average cost of in-state college tuition at public 4-year
institutions.
- In terms of child care costs’ share of total family budgets, only
in a handful of EPI’s 618 family budget areas are child care costs
close to the 10 percent affordability threshold established by the
Department of Health and Human Services (HHS).
- Child care costs are particularly high for younger children. When
10 family budgets in various areas are reconstructed to include
two-parent, two-child families with an infant and a 4-year-old (instead
of a 4-year-old and an 8-year-old), child care ranges from 19.3 percent
to 28.7 percent of total family budgets. This compares with a range of
11.8 percent to 21.6 percent for families with a 4-year-old and an
8-year-old.
- In these 10 areas, child care costs for an infant and a 4-year-old
constitute between approximately 20 percent and 31 percent of median
family income—far above the HHS’s 10 percent affordability standard.
Child care costs and EPI’s basic family budgets
Perhaps the best way to evaluate the affordability of child care is
to determine the share of a family’s budget accounted for by child care
costs. Toward this end, this paper relies upon EPI’s Family Budget Calculator
(Gould, Cooke, and Kimball 2015), which measures the income families
need in order to attain a modest yet adequate living standard where
they live by estimating community-specific costs of housing, food,
child care, transportation, health care, other necessities, and taxes,
for 10 family types living in 618 U.S. communities.
Background on EPI’s basic family budgets
EPI’s basic family budgets differ by location, since certain costs,
such as housing, vary significantly depending on where one resides.
Geographical cost-of-living differences are built into the budget
calculations by incorporating regional, state, or local variations in
prices (depending on item). Basic family budget measurements are also
adjustable by family type because expenses vary considerably depending
on the number of children in a family (if any), and whether a family is
headed by a single parent or two parents. The 10 family types include
one or two adults with zero to four children. To estimate family costs,
we assume one-child families have a 4-year-old, and that a second child
is 8 years old, a third 12 years old, and a fourth 16 years old. (For
more on the methodology used to construct the budgets, see Gould et al.
2015.)
The shares of expenses going to various categories vary
substantially across areas and family types. Unsurprisingly, the lowest
family budgets are for a single person. Except for child care (in which
case families composed of two adults with no children also spend
nothing), one-person families have the lowest expenses in every
category. For example, they require only efficiency housing and only
need to purchase other items, such as food and health care, for one.
Budgets rise significantly with family size, since more children
require more housing, food, health care, and child care.
What it takes to get by varies greatly across the country, as displayed in Figure A.
For a two-parent, two-child family, the family budget threshold ranges
from $49,114 (in Morristown, Tennessee) to $106,493 (in Washington,
D.C.). In the median family budget area for this family type—Des
Moines, Iowa—a two-parent, two-child family needs $63,741 to attain a
modest yet adequate standard of living.
How child care costs fit into EPI’s basic family budgets
Child care costs are one of the most significant expenses in a
family’s budget, largely because child care and early education is a
labor-intensive industry, requiring a low student-to-teacher ratio
(CCAA 2014). Across regions and family types, child care costs account
for the greatest variability in family budgets. Monthly child care
costs for a household with one child (a 4-year-old) range from $344 in
rural South Carolina to $1,472 in Washington, D.C.
In EPI’s family budgets, child care costs in metropolitan
areas—which constitute over 90 percent of our family budget areas—are
statewide averages of the cost of center-based care. (For rural areas,
which may not have easy access to center-based care, the budgets assume
family-based care.) Although center-based care varies in quality, it
serves as the standard for child care costs in the vast majority of our
budget areas because it is the predominant form of child care (CCAA
2014).
However, center-based care is out of reach for many working
families. Costs are particularly high for families with infants due to
increased staff sizes and additional training and licensing
requirements (CCAA 2014); center-based infant care costs range from
$468 a month in Mississippi to $1,868 a month in the District of
Columbia. Child care costs are even higher for families with multiple
children; in the District of Columbia, monthly child care costs for a
three-child household (with a 4-year-old, an 8-year-old, and a
12-year-old) are $2,784—nearly 90 percent higher than for a household
with one child (a 4-year-old).
As a share of total family budgets, center-based child care for
single-parent families with two children (ages 4 and 8) ranges from
11.7 percent in New Orleans to 33.7 percent in Buffalo, New York. When
comparing child care costs with other budget components, the high
expense of child care becomes even more evident. In fact, among
one-child families with a 4-year-old, child care expenses exceed
housing expenses in 90 of 618 family budget areas. Among two-child
families with a 4-year-old and an 8-year-old, child care costs exceed
rent in 500 of 618 family budget areas. For two-child families, child
care costs range from about half as much as housing costs in San
Francisco to nearly three times housing costs in Binghamton, New York.
Affording child care on the minimum wage
Affording child care is particularly difficult for families living
off a minimum-wage income. By a wide range of measures, the current
federal minimum wage of $7.25 per hour is well below the historical
peak reached in 1968, with profound implications for the standard of
living of workers at or near the minimum wage (Cooper, Schmitt, and
Mishel 2015). Even in the best of economic times, many parents in
low-wage jobs will not earn enough through work to meet basic family
needs. Indeed, annual wages total just $15,080 for a full-time,
full-year worker (i.e., one who works 40 hours per week, 52 weeks per
year) paid the federal minimum wage. Even after adjusting for higher
state and city minimum wages, a full-time, full-year minimum-wage
worker is paid less than is necessary for one adult to meet his local
family budget threshold—and far below what is required for an adult
with even just one child to make ends meet anywhere.
In fact, a large share of annual earnings from a full-time,
full-year minimum-wage job must be devoted to child care. The shares of
annual minimum-wage earnings required to afford 4-year-old care costs
in each state are depicted in Figure B;Figure C depicts these shares for infant care costs.
Of course, in families with more than one child, these expenses are
even higher. In two-child families, with an infant and a 4-year-old,
child care expenditures as a share of full-time, full-year minimum-wage
earnings range from 62.9 percent in South Dakota to 183.5 percent in
Washington, D.C. (not shown).
Child care costs exceed college tuition in many states
High and rising college tuition is a well-known phenomenon; while
hourly wages have stagnated, college tuition has grown faster than both
overall inflation and median incomes, making college increasingly
unaffordable (Barrett 2015). What is less well known is how comparable
college tuition is to child care costs.
As with child care costs, postsecondary education costs vary greatly
by institution type and state. The average annual cost of tuition for
an in-state full-time undergraduate student in a degree-granting public
institution ranges from $3,756 in Wyoming to $14,469 in New Hampshire
(NCES 2014). While these sums are sizable, 4-year-old care exceeds the
average cost of in-state college tuition at public 4-year institutions
in 24 states and the District of Columbia (as shown in Figure D). Similarly, infant care costs exceed tuition in 33 states and the District of Columbia (as shown in Figure E).
Even when looking at out-of-state tuition at public 4-year
institutions, which is significantly more expensive than in-state
tuition, college costs still do not dwarf child care costs.
Is child care affordable?
Another benchmark against which to measure child care costs is the
Department of Health and Human Services’s official affordability
threshold of 10 percent or less of a family’s income (HHS 2014).
In only a handful of EPI’s 618 family budget areas (all in Louisiana)
are child care costs close to 10 percent of the income required for a
family with two parents and two children (a 4-year-old and an
8-year-old) to attain a modest yet adequate living standard.
As mentioned previously, child care is even less affordable for
families with infants. To illustrate this, we reconstructed family
budgets in 10 areas for two-parent, two-child families with an infant
and a 4-year-old (instead of a 4-year-old and an 8-year-old). To
account for population differences and geographic variations in the
cost of individual components, we reconstructed budgets for a range of
areas, including San Francisco; Stamford, Connecticut; Tampa, Florida;
Atlanta; Chicago; Boston; Detroit; Kansas City, Missouri; Raleigh,
North Carolina; and Las Vegas.
Costs greatly increase when substituting an infant for an 8-year-old in EPI’s basic family budgets, as shown in Figure F.
While infants require a smaller food budget than 8-year-olds, infant
care costs greatly exceed child care costs for an 8-year-old. Annual
budgets for two-parent families with an infant and a 4-year-old range
from $67,536 in Atlanta (which saw the smallest change in its overall
budget, increasing $3,648) to $108,245 in Stamford. (Boston saw the
largest change in its overall budget, increasing $16,921.) Annual child
care costs for an infant and a 4-year-old range from $13,245 in Atlanta
to $29,478 in Boston. As a share of total family budgets, these child
care costs range from 19.3 percent in San Francisco to 28.7 percent in
Boston. This compares with a range of 11.8 percent in San Francisco to
21.6 percent in Chicago for families with a 4-year-old and an
8-year-old.
We next measure these child care costs against what families actually earn. Specifically, as shown in Figure G, we
compare median incomes in these 10 areas to child care costs both for
two-child families with an infant and a 4-year-old, and for families
with a 4-year-old and an 8-year-old. Even in Atlanta—the area in our
case study with the lowest child care costs—child care costs for an
infant and a 4-year-old equal nearly 20 percent of median family
income, almost double the HHS affordability standard. This share
increases in places with more expensive child care, peaking in Boston
at over 31 percent for an infant and a 4-year-old—over three times the
affordability standard. However, lower child care costs do not
necessarily equal affordability. For example, in Las Vegas—which had
middle-of-the-pack child care costs in our case study—child care costs
for an infant and a 4-year-old equal 30.3 percent of median family
income, because the area’s median income is relatively low. This
provides further evidence that child care is unaffordable for many
families. Moreover, half of families actually earn less than the
median, suggesting that far more families cannot afford child care than
the data imply.
Conclusion
As policymakers look for ways to improve living standards for the
vast majority of Americans who have endured decades of stagnant wages,
increasing child care affordability is an excellent place to start.
Child care costs constitute a large portion of the income families need
in order to achieve a modest yet adequate standard of living—and are
particularly onerous for workers paid the minimum wage. Measuring child
care costs against a variety of benchmarks—including the cost of
college tuition, the HHS’s 10 percent affordability threshold, and
median family incomes—demonstrates that high quality child care is out
of reach for working families.
Every week in the United States, nearly 11 million children younger
than age 5 are in some type of child care arrangement. On average,
these children spend 36 hours a week in child care, with costs ranging
upwards of $500 a month for an infant (CCAA 2014). As child care
consumes a larger proportion of family budgets, funding high-quality
child care services should be a paramount concern for governments,
business leaders, and families alike.
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