On September 30, 2023, child care stabilization grants, included in the American Rescue Plan Act (ARPA), expired. The $24 billion in grants to providers kept program doors open and children served by helping programs pay for higher early educator wages, rent and utilities, and other operating expenses. The consequences of these funds expiring will be widespread, starting, in many communities, with rising child care prices. That’s why the Biden administration’s call for Congress to invest $16 billion in supplemental child care funding is so urgent.
Every month the Bureau of Labor Statistics (BLS) releases data on price changes across the economy, including child care prices. This data provides the best real-time information on price changes for child care across the country. New data released by BLS show that, in September, child care prices grew by 1.7 percent, marking the largest month-to-month increase in child care prices since last September. Some of this price increase may be the result of providers preparing for, or responding to, the loss of the child care stabilization grants.
Data released last week show that, in September, child care prices grew by 1.7 percent, marking the largest month-to-month increase in child care prices in the previous year (since last September).
Growing child care prices threaten to worsen the child care affordability crisis. Child Care Aware of America finds that in forty-one states and the District of Columbia, the average price of child care for two children in a center is more than the average mortgage. In thirty-two states and the District of Columbia, the average price of child care for an infant in a center is more expensive than in-state university tuition.
The high prices are both sobering and only part of the story. In 2022, the most recent data available, the average price of child care in the United States was $10,853 per year. Child care prices vary widely based on the cost of living, child care program type, and the child’s age. In 2022, the average cost of child care for an infant in center-based care in Maine was $11,960. In Arizona, the annual price of child care for an infant and child in center-based care is $24,960 per year, 35 percent higher than the average cost of housing and twice as much as in-state college tuition. However, despite these high prices, they still do not represent the true cost of care because, as Treasury Secretary Janet Yellen has said, “child care is a textbook example of a broken market.” Providers cannot charge parents the true cost of care because that cost is unaffordable for most families.
Providers cannot charge parents the true cost of care because that cost is unaffordable for most families.
Child care costs include expenses like early educator wages, and operating costs like rent or mortgage payments, utilities, and supplies for children’s care, including food, age-appropriate toys, and more. Because the current child care market is based on what families can afford, not the true cost of care, early educators are paid low wages, with a national median wage of $13.71 per hour. Few early educators receive additional benefits like health insurance and retirement savings plans. Furthermore, programs struggle to attract and retain early educators. Quality child care requires quality jobs for early educators to be able to do the work they love. A 2021 study found that to cover the true cost of care would cost an average of $16,000 a year per child, roughly $18,000 in 2023 dollars.
The stabilization grants enabled providers to cover some of the gap between the price of care that families could afford and the true cost of care. Without these grants, providers will need to raise prices to cover their expenses and, importantly, to attract and retain early educators. Child care employment is still nearly 4 percent below pre-pandemic levels. As prices rise, child care will become exceedingly unaffordable for families. This is especially true for single parents, like DeVonne Stewart in Tennessee. DeVonne, a single mother of three children, said she took on three jobs to help pay for child care.
Child Care Prices Increasing, and Outpacing Overall Inflation
As noted above, according to the latest BLS data release, child care prices increased by 1.7 percent from August to September. From September 2022 to September 2023, child care prices increased by 4.8 percent. During this same time, prices for other goods and services grew by 3.7 percent. Child care prices have historically outpaced inflation, although the high inflation of the post-pandemic economy has attenuated the gap between overall inflation and child care inflation. However, stabilization grants likely helped reduce the need for providers to raise prices during this period of high inflation.
For example, Fran Bush, a child care provider in Nashville, Tennessee, received $174,000 in federal pandemic aid, which helped her program keep the doors open, workers paid, and costs affordable. Now, she reports, she has had to raise her tuition prices by about a third since before the pandemic in order to boost her workers’ starting wages to $15 an hour, from between $13 and $14, to attract and retain teachers. In Ohio, Tricia Harrel, the executive director of a center, has been facing tremendous hiring challenges: “I’ve been looking for a teacher for two years. We are a five-star rated center and that means we have to have teachers that have associate degrees and things like that. Trying to get new people in at the pay rate that we can offer has been a battle.”
ARPA grants helped support the child care sector by allowing providers to increase wages, at least temporarily, through wage stipends and hiring and retention bonuses. As the National Women’s Law Center shows, stabilization grants helped improve early educator wages in the past two years. Yet the wage growth early educators saw, 3.1 percent on average, pales in comparison to the wage growth seen in other low-wage sectors. For example, fast food workers’ wages grew by 8.7 percent during the time period. Without stabilization grants, providers will need to raise prices on families to maintain the current wage levels. However, these wages aren’t high enough to build the supply of early educators that is necessary for a child care workforce capable of meeting the current demand for care.
States have made significant investments over the past several years, buoyed by effectively targeted federal funds for child care. As these funds have expired, many states have stepped in with their own investments to support the child care industry. But after decades of underinvestment, and a pandemic that shocked the sector overall, too many states have failed to act and, in those that have, state investments cannot fill the significant funding needs for the child care sector. We expect to continue to see more price increases, as well as rising staffing shortages, and, ultimately, program closures.
Congress must invest in child care. Providers need emergency funding to be able to attract and retain early educators and stay open. In the long-run, Congress must make sustainable investments in child care to help support and build the supply of child care providers while lowering costs for families. As Doris Irizarry, a Bronx-based child care provider who recently closed her doors after twenty-five years, said, “This industry is going to die. We cannot survive without the parents, and the parents cannot survive without us. We’re a unit.”