Demystifying Child Care Affordability
Access to high-quality, affordable child care is important for working families, and now it is necessary for our nationwide economic recovery during and after the pandemic. Frontline workers, work-from-home employees, and student parents all need child care in various capacities—a need that will be even more pressing as many elementary schools do not plan to reopen with a full-time, in-person schedule. The key word in any conversation about child care access is “affordability”.
Even before the COVID-19 pandemic, families struggled to pay for child care. An October 2019 BPC/Morning Consult survey found that almost one-third of families who earn under $50,000 a year find it very difficult to afford child care, compared to only 10% of high-income households. The survey also found that 67% of low-income families cut back on spending for necessities, such as food and transportation, to pay for child care. Race and ethnicity are related to barriers to affordable child care as well. The Rapid-EC Project from the University of Oregon found that, during the pandemic, Black and Latino households experienced more financial and material hardship than others, independent of income. Particularly, 12% of Black households and 14% of Latino households reported difficultly in affording child care.
While the need for affordable child care is clear, the definition of affordability is not. The most commonly cited definition is the 7% affordability benchmark from the Department of Health and Human Services (HHS), in which child care is considered affordable if it does not exceed 7% of a household’s income. However, as described in the preamble to the 2016 Child Care and Development Fund final rule and recent testimony to the House Education and Labor Committee, this 7% benchmark was never meant to be an affordability metric for all families. Rather, it is a recommendation for how much a low-income, working family receiving a child care subsidy should pay as a co-payment for child care services. As the current child care market is driven by private pay families, with only 6.4% of children in early childhood education programs receiving public or private subsidies, broadly applying the 7% benchmark overlooks the significant public funding covering the gap between 7% of a family’s income and the price of child care.
The Child Care and Development Block Grant (CCDBG) Act of 2014 requires states to establish a sliding fee scale for parents who receive subsidies in order to share the costs of their child care services. After the bipartisan reauthorization of CCDBG, HHS recommended parental copayments not exceed the benchmark of 7% of a household’s income. HHS chose the 7% benchmark to reflect U.S. Census Bureau data that showed the average percent of monthly income spent by all families on child care stayed consistent at about 7% from 1997 to 2011. Because low-income families disproportionately spend more of their income on child care compared to higher income families, HHS recommended the 7% benchmark in order to achieve parity in child care cost burden. This benchmark only applies to the required copayments required of low-income families receiving a child care subsidy.
More work must be done to achieve child care affordability for low- and middle-income families. Child care affordability metrics are an important piece of this effort. However, a blunt income-based threshold does not truly reflect the child care cost burden for many families. Any affordability metric must be sensitive to income brackets and other considerations, such as household size and regional cost of living. One option is the family budget calculator developed by the Economic Policy Institute which determines the minimum household income a family needs in order afford child care and other necessities, while maintaining a modest living standard. The budget calculator includes regional costs of living and adjusts based on family characteristics, such as the number of parents and children.
Any policy considerations related to making child care more affordable for parents must include child care providers, especially since providers cannot lower prices. They already operate on slim budgets, and child care workers receive poverty wages and often lack health insurance and other benefits. Often, child care providers are not able to charge parents the true cost of providing high quality child care because they know parents are struggling. Any blunt affordability requirements or limits will hurt child care providers, since any decrease in parent fees will mean a decrease in business revenue. Therefore, working to make child care more affordable must also include more public funding for child care providers.
A first step for addressing the child care affordability crisis is to increase funding for CCDBG, so it can reach many more eligible families. In 2016, CCDBG and other federal funding streams provided child care subsidies to an average of 2 million children each month, representing only 15% of all children eligible for subsidies under federal rules. Addressing issues around child care affordability are critical to meet the needs of families, but also must take into account that child care providers simply cannot lower the price of care. A strong foundation of public and private funding is necessary to lift up families and providers. In order to fix a broken system, we must repair from what is already there, without overlooking child care provider and family needs.
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