Parents, children, and the cost of care

Families spend between $24,000 and $147,000 in total for the first five years of daycare, with a median cost of $44,000, according to an August analysis from The Wall Street Journal. The Economic Policy Institute published research in March showing that infant care in New Mexico costs 86% more than in-state tuition at a public university.

“Daycare now costs more than rent,” wrote one X user earlier this month. “And we wonder why no one’s having children.”

To alleviate the financial burden of caring for children while parents work, legislators and advocacy groups have lobbied to expand tax credits and provide federal funding for child care. But, while many families could benefit financially from these policies, some experts believe that when governments offset the cost of child care, children bear the consequences.

According to data published in 2023 by the Center for American Progress, nearly 68% of children under age 6 live in homes where both parents work. And it’s becoming more common for children to attend traditional daycare and preschool centers rather than be cared for by relatives or friends. In 2017, child care centers enrolled about 8.7 million children.

Child Care Aware of America reported in May that the average married couple would have to allocate 10% of their budget to child care to afford the median cost. According to the Department of Health and Human Services, child care should cost no more than 7% of a family’s annual income to be considered affordable. But the average cost of child care keeps going up, rising 29% between 2020 and 2024—outpacing the 22% average rise in overall consumer prices.

There are several reasons for the hefty price tag of licensed child care. Due to insurance costs and staff-to-child ratio requirements, running a child care center is expensive. Even though the number of providers increased slightly in 2024, the demand for child care far exceeds supply. In 2018, roughly half of Americans lived in a “child care desert,” an area without many available licensed child care options.

There’s little incentive for child care centers to lower their prices, since the vast majority operate with profit margins of roughly 1%.

Many daycare and preschool centers are private or consumer-funded entities, but some government assistance is available for low-income families. The majority of federal funding for child care comes from the Child Care and Development Block Grant and Head Start. But, as of 2020, about 85% of children under 6 who could qualify for federal child care subsidies didn’t receive any because of insufficient funding.

Legislators have made several efforts to expand access to funding. In July, Sen. Patty Murray (D-Wash.) re-introduced the Child Care for Working Families Act. Through state grants and subsidies, the bill would ensure that “the typical family in America will pay no more than $15 a day for child care.”

Support for child care also comes through tax credits. First introduced in 1976, the Child and Dependent Care Tax Credit allows families to claim a portion of their child care expenses. The Trump administration’s reconciliation bill raised the amount of child care expenses that low-income earners can claim. Before the bill, earners had to make less than $43,000 annually to be eligible for the tax credit. Now, taxpayers making up to $105,000 per year can claim a portion of their child care expenses. Businesses that offer child care benefits to employees are also eligible for certain tax credits.

More than a dozen states, including Florida, Iowa, and California, have passed universal pre-K policies in an effort to offset child care costs, though national support for these programs may be slow in coming due to the expense of implementing them. Universal pre-K for all would cost roughly $351 billion over a 10-year period. Universal pre-K programs may raise parent earnings by more than 20%, according to a 2024 brief from the White House Counsel of Economic Advisers.

But quality of child care usually suffers when pre-K becomes government-funded, says Jenet Erickson, a senior fellow at the Institute for Family Studies. She pointed to Quebec’s 1997 rollout of government-sponsored daycare. “What you saw was a significant increase in risk for children socially and emotionally,” said Erickson. On average, children between the ages of 2 and 4 who were enrolled demonstrated more hostile behavior than children not in daycare.

Since government subsidization of child care for everyone could flood the market with more demand than child care providers could meet, Erickson recommends policies that “target families with the most [difficulty] providing child care.”

When it comes to minimizing the cost of child care, Erickson believes that the best solution is one that takes parent preferences into account. The majority of parents “like to be able to choose a child care situation that they feel is best for that child,” she said. “And it might be a neighborhood. It might be a grandparent.”

That could look like giving families vouchers which can go toward the child care providers of their choice. Prior to his appointment as secretary of state, then-Sen. Marco Rubio introduced a bill calling for child care vouchers last summer, but legislators have not passed any measures like it so far.

Some experts believe that addressing the cost of child care could have a bigger trade-off than simply offsetting household budget costs. A March policy brief from the Department of Health and Human Services suggested that, despite the lack of concrete evidence, “it is possible that these rising costs may contribute to the declining birth rates in the U.S.” The national fertility rate dropped to 1.6 child per woman at the end of last year.

The Institute for Family Studies’ Jenet Erickson doesn’t think subsidizing child care would significantly raise the birth rate. She argues that some Nordic and European countries have tried to address falling birth rates by offering extensive maternity leaves and years of federally funded daycare. “We have looked at countries that have done all of those things that we might consider the ideal scenario for families to have children,” said Erickson. “It has not moved the needle even a little bit in terms of fertility rates.”

There is some evidence that giving parents more flexible child care options could encourage more women to have children. Clara Piano co-authored a paper analyzing the link between child care costs and fertility rates, telling WORLD via email that “well-intentioned regulation” drives up the cost of running a child care center. “If child care costs were brought down via more flexible regulation, our research suggests this could have a significant positive effect on fertility,” she wrote.

Katharine Stevens, president of the Center on Child and Family Policy, also says flexibility is key. Many parents, for example, would like the option of working part time during their children’s preschool years. “If we had a society where people were able to raise their own young children, that, I think, would do more to increase fertility rates than making leaving your child with a paid stranger more affordable for you,” said Stevens.

According to Stevens, concerns about the wellbeing of children are largely missing from conversations about child care. “Institutional environments are inconsistent with what young children need to develop well,” said Stevens.

Ultimately, she’s concerned by the very notion of subsidizing child care wholesale. “I don’t take it lightly that a person would get a puppy and drop it off in doggy daycare all day. … What I don’t understand is why we can so clearly see how icky that is for a puppy,” Stevens said. “Why don’t we have that parallel mentality with young children?”