America’s families need reliable child care options that are affordable, convenient, with no wait list and ensure their children are safe, happy, healthy, and learning. Unfortunately, today’s child care landscape remains far from that vision. Across the United States, communities have fewer child care slots available than the number of children that need them, available slots are too expensive, and recruiting and retaining early educators is challenging because of the low wages. A few states have invested boldly in child care, but transformation across a whole system that has been chronically underfunded takes significant resources and time.
The lack of affordable child care has long been a problem, but it is particularly devastating for families at this moment. At a time when they are facing rising utility bills and food prices, a more expensive holiday season, and are about to be hit with staggering health care coverage cost increases, the lack of affordable child care options will pile on more expenses. Some families may be forced to forgo child care and instead work less, reducing their ability to cope with these rising costs.
The ongoing child care crisis is the textbook example of market failure—a sector that requires public investment if it is to work well for all stakeholders. We have seen what happens when the government invests resources in child care. When the pandemic hit, the U.S. Congress enacted unprecedented federal investments in the child care and early learning system. These funds were not a permanent solution, but they were game changers for providers to keep their doors open during the pandemic. The Century Foundation sounded the alarm about the potential repercussions for states as these funds dried up without additional federal investments, with the underlying challenges facing the sector remaining unresolved. Now, some states have stepped up to bolster their child care sectors with new child care funding.
This commentary reviews the status of the child care sector since the 2023 expiration of pandemic-era funds. It finds that:
- Child care prices, already averaging $13,000/year nationwide, are rising in all but five states, and rising faster than inflation in thirty-nine states and Washington, D.C.
- Only two states have as many licensed child care slots as children under age five.
- In forty-five states (including D.C.), there are fewer early educators than before the pandemic.
Child Care Prices Continue to Climb Faster than Inflation
Nationally, child care prices are high—currently averaging $13,000 a year for one child in a center—and growing faster than overall inflation. Since 2020, child care prices grew by 7 percentage points more than overall inflation. While pandemic-era relief funds helped child care providers keep prices low, the expiration of these funds means many providers are forced to raise prices to try to cover their costs.
Despite the high cost to parents, prices do not cover the true costs of providing child care, which is labor intensive. Providers cannot charge parents the true cost of running a child care program—it would be too expensive for parents. Currently, providers charge what parents are able to pay and, in return, operate on thin margins, often needing to pay early educators wages that are unsustainable, leading to high turnover and classroom closures due to lack of staff. Parents—particularly lower-income parents who don’t qualify for or access assistance—often rely on informal caregivers, reduce their work hours, or leave the workforce altogether to cover their care needs.
Figure 1
Figure 2
In the past year, child care prices have skyrocketed. In most states including Washington, D.C., child care prices grew by more than twice the overall rate of inflation. Price increases make it even harder for families to afford child care. Guidelines for affordability dictate that child care should be less than 7 percent of a family’s annual household income. Average child care prices exceed this benchmark in every state and Washington, D.C.
Table 1
|
Child Care Costs in the States with the Highest Price Increases from 2023 to 2024
|
| State |
Child care cost as a percentage of state median income (one infant, two-earner household) |
Child care cost as a percentage of state median income (one infant, single earner household) |
Child care cost for two children relative to housing |
Child care cost for two children relative to in-state college tuition |
| Nebraska |
15% |
43% |
$12,000 more |
3x more |
| Wisconsin |
14% |
44% |
$13,000 more |
3x more |
| Kentucky |
12% |
45% |
$6,700 more |
2x more |
| Maine |
13% |
39% |
$10,000 more |
2x more |
| Montana |
13% |
36% |
$8,500 more |
3x more |
| Source: Data retrieved via Child Care Aware® of America. |
However, because prices reflect what parents are able to pay, average price decreases—in the few states that have experienced them—may also be a worrying sign: providers may be lowering prices because parents simply can’t pay more, making up the difference by cutting costs through shorter staffing or lower wages for early educators, or more expensive programs have closed. In short, prices offer insight into one component of the child care landscape but do not reflect the supply or quality of care in a community. More information is needed to know what is driving prices down in some states; lower prices on their own may not tell the full story.
Child Care Supply Remains Insufficient
In the United States, demand for child care far outpaces supply. Despite the mismatch between supply and demand, a chronic lack of public investment has meant that supply continues to lag. Nationally, over the past five years, while the number of licensed child care centers has slightly grown, there is significant variation across the states. Some have successfully boosted their supply with new investments, and some providers have found ways to stay open even without new public funds, but in many states the supply of child care has dwindled. More states had a decrease in programs (26) than an increase (23).
Figure 3
It’s important to remember that the number of child care programs in states only tells part of the story, as it doesn’t fully convey the number of available slots; that is, the number of available seats for children in a state. The number of child care programs is often correlated to slots, but it only refers to the number of licensed centers and family child care homes in a state. Nationwide, very few states have an adequate supply of child care slots (see Figure 4). Some programs may be operating with closed classrooms due to staffing shortages that result in failure to meet safe ratios between caregivers and the children in their care, therefore functioning below their authorized capacity. Other programs may be licensed or registered in the state but not included in these data, and still others may be operating informally, without a license from a state agency.
FIGURE 4
One area of particular concern nationwide is the decades-long trend of decreasing family child care providers. These providers—individuals who offer child care in a home-based setting—operate on the thinnest margins and are vital for providing flexible, culturally sensitive options for care. The net number of family child care homes increased from 2023 to 2024, but that increase was driven by significant growth in a few states that countered the decreases in the majority of the states.
Shifts in supply could be due to many factors, including state and federal funding shifts, early educator shortages, or changing prices. However, public investments are critical as they help lower costs for families and increase the supply of child care by providing funds that help cover operating costs. Flexible grants or stable contracts can help cover a wide range of costs from worker bonuses to classroom equipment. These supports help providers cover the gap between what parents can afford to pay and the true cost of operating a program that meets children’s needs.
In 2023 and 2024, many states, building on federal pandemic funds with their own investments, saw slot and program increases. Pairing federal investments with new state funds helped stabilize supply and made it easier for providers to plan long-term with the knowledge that state funding would be available. For states that have recently invested in child care with dedicated funding streams, success stories provide helpful evidence for how investments lead to supply increases.
Child Care Workforce Crisis
The early educator workforce is the foundation of the child care sector. Talented early educators are essential for a high-quality child care industry. Yet, low wages and staffing crises that place additional burden on the educators remaining in the program mean that providers struggle to recruit and retain early educators. Low wages are a result of under-investment in child care. Providers cannot afford to pay educators more without public investment that covers the true cost of care. At the price that parents are able to pay, early educators are paid some of the lowest wages in the United States. More than half rely on some form of public assistance—much of which just saw drastic cuts in the budget bill passed by Congress earlier this year.
Early educators are required to do challenging and essential work taking care of children. This, coupled with low pay, leads to high levels of burnout and turnover. Not only is this bad for business, as worker turnover is costly, it is bad for children who benefit from having stable relationships with those caring for them.
Even in places where the number of early educators is rising, employment in the sector still remains below pre-pandemic trends of where employment would have been had there not been the pandemic recession. Critically, employment remains below the levels needed to have a child care sector capable of meeting the demand for care. Amid worker shortages, providers are forced into tough choices, closing down classrooms or their programs altogether.
Fortunately, some states have been able to secure funds for programs that directly invest in the workforce. Many states used pandemic-era funds for workforce retention grants. Unfortunately, for most early educators, inflation has eaten into any wage gains that they may have seen in the past year. Sustained investment, both in the workforce and in the sector broadly, is necessary to support the workers caring for our nation’s children.
Figure 5
Figure 6
Figure 7
Key Takeaways
While there is a lot of variation across the country, with some bright spots, in most states child care prices are continuing to climb, putting child care increasingly out of reach for families. State investments are crucial to supporting child care, yet states may be facing mounting fiscal pressures, as cuts to Medicaid in the Republican budget law will put added strain on state budgets by reducing state tax revenues and federal funds to states. Every community in America should be a place where children can access high quality early education, and where parents can make the work and family decisions they want. For this reason, in addition to transformative federal investments, states must fight to secure greater investments in early care and education.
Acknowledgment: The authors would like to thank Hailey Gibbs from the Center for American Progress for her insightful feedback.
Tags: care economy, childcare, child care crisis, family planning
Still Unaffordable: Child Care’s Rising Prices, Stretched Supply, and Staffing Shortages
America’s families need reliable child care options that are affordable, convenient, with no wait list and ensure their children are safe, happy, healthy, and learning. Unfortunately, today’s child care landscape remains far from that vision. Across the United States, communities have fewer child care slots available than the number of children that need them, available slots are too expensive, and recruiting and retaining early educators is challenging because of the low wages. A few states have invested boldly in child care, but transformation across a whole system that has been chronically underfunded takes significant resources and time.
The lack of affordable child care has long been a problem, but it is particularly devastating for families at this moment. At a time when they are facing rising utility bills and food prices, a more expensive holiday season, and are about to be hit with staggering health care coverage cost increases, the lack of affordable child care options will pile on more expenses. Some families may be forced to forgo child care and instead work less, reducing their ability to cope with these rising costs.
The ongoing child care crisis is the textbook example of market failure—a sector that requires public investment if it is to work well for all stakeholders. We have seen what happens when the government invests resources in child care. When the pandemic hit, the U.S. Congress enacted unprecedented federal investments in the child care and early learning system. These funds were not a permanent solution, but they were game changers for providers to keep their doors open during the pandemic. The Century Foundation sounded the alarm about the potential repercussions for states as these funds dried up without additional federal investments, with the underlying challenges facing the sector remaining unresolved. Now, some states have stepped up to bolster their child care sectors with new child care funding.
This commentary reviews the status of the child care sector since the 2023 expiration of pandemic-era funds.1 It finds that:
Child Care Prices Continue to Climb Faster than Inflation
Nationally, child care prices are high—currently averaging $13,000 a year for one child in a center—and growing faster than overall inflation. Since 2020, child care prices grew by 7 percentage points more than overall inflation. While pandemic-era relief funds helped child care providers keep prices low, the expiration of these funds means many providers are forced to raise prices to try to cover their costs.
Despite the high cost to parents, prices do not cover the true costs of providing child care, which is labor intensive. Providers cannot charge parents the true cost of running a child care program—it would be too expensive for parents. Currently, providers charge what parents are able to pay and, in return, operate on thin margins, often needing to pay early educators wages that are unsustainable, leading to high turnover and classroom closures due to lack of staff. Parents—particularly lower-income parents who don’t qualify for or access assistance—often rely on informal caregivers, reduce their work hours, or leave the workforce altogether to cover their care needs.
Figure 1
Figure 2
In the past year, child care prices have skyrocketed. In most states including Washington, D.C., child care prices grew by more than twice the overall rate of inflation.3 Price increases make it even harder for families to afford child care. Guidelines for affordability dictate that child care should be less than 7 percent of a family’s annual household income. Average child care prices exceed this benchmark in every state and Washington, D.C.
Table 1
Child Care Costs in the States with the Highest Price Increases from 2023 to 2024
However, because prices reflect what parents are able to pay, average price decreases—in the few states that have experienced them—may also be a worrying sign: providers may be lowering prices because parents simply can’t pay more, making up the difference by cutting costs through shorter staffing or lower wages for early educators, or more expensive programs have closed. In short, prices offer insight into one component of the child care landscape but do not reflect the supply or quality of care in a community. More information is needed to know what is driving prices down in some states; lower prices on their own may not tell the full story.
Child Care Supply Remains Insufficient
In the United States, demand for child care far outpaces supply. Despite the mismatch between supply and demand, a chronic lack of public investment has meant that supply continues to lag. Nationally, over the past five years, while the number of licensed child care centers has slightly grown, there is significant variation across the states. Some have successfully boosted their supply with new investments, and some providers have found ways to stay open even without new public funds, but in many states the supply of child care has dwindled. More states had a decrease in programs (26) than an increase (23).
Figure 3
It’s important to remember that the number of child care programs in states only tells part of the story, as it doesn’t fully convey the number of available slots; that is, the number of available seats for children in a state. The number of child care programs is often correlated to slots, but it only refers to the number of licensed centers and family child care homes in a state.4 Nationwide, very few states have an adequate supply of child care slots (see Figure 4).5 Some programs may be operating with closed classrooms due to staffing shortages that result in failure to meet safe ratios between caregivers and the children in their care, therefore functioning below their authorized capacity. Other programs may be licensed or registered in the state but not included in these data, and still others may be operating informally, without a license from a state agency.
FIGURE 4
One area of particular concern nationwide is the decades-long trend of decreasing family child care providers. These providers—individuals who offer child care in a home-based setting—operate on the thinnest margins and are vital for providing flexible, culturally sensitive options for care. The net number of family child care homes increased from 2023 to 2024, but that increase was driven by significant growth in a few states that countered the decreases in the majority of the states.
Shifts in supply could be due to many factors, including state and federal funding shifts, early educator shortages, or changing prices. However, public investments are critical as they help lower costs for families and increase the supply of child care by providing funds that help cover operating costs. Flexible grants or stable contracts can help cover a wide range of costs from worker bonuses to classroom equipment. These supports help providers cover the gap between what parents can afford to pay and the true cost of operating a program that meets children’s needs.
In 2023 and 2024, many states, building on federal pandemic funds with their own investments, saw slot and program increases. Pairing federal investments with new state funds helped stabilize supply and made it easier for providers to plan long-term with the knowledge that state funding would be available. For states that have recently invested in child care with dedicated funding streams, success stories provide helpful evidence for how investments lead to supply increases.
Child Care Workforce Crisis
The early educator workforce is the foundation of the child care sector. Talented early educators are essential for a high-quality child care industry. Yet, low wages and staffing crises that place additional burden on the educators remaining in the program mean that providers struggle to recruit and retain early educators. Low wages are a result of under-investment in child care. Providers cannot afford to pay educators more without public investment that covers the true cost of care. At the price that parents are able to pay, early educators are paid some of the lowest wages in the United States. More than half rely on some form of public assistance—much of which just saw drastic cuts in the budget bill passed by Congress earlier this year.
Early educators are required to do challenging and essential work taking care of children. This, coupled with low pay, leads to high levels of burnout and turnover. Not only is this bad for business, as worker turnover is costly, it is bad for children who benefit from having stable relationships with those caring for them.
Even in places where the number of early educators is rising, employment in the sector still remains below pre-pandemic trends of where employment would have been had there not been the pandemic recession. Critically, employment remains below the levels needed to have a child care sector capable of meeting the demand for care. Amid worker shortages, providers are forced into tough choices, closing down classrooms or their programs altogether.
Fortunately, some states have been able to secure funds for programs that directly invest in the workforce. Many states used pandemic-era funds for workforce retention grants. Unfortunately, for most early educators, inflation has eaten into any wage gains that they may have seen in the past year. Sustained investment, both in the workforce and in the sector broadly, is necessary to support the workers caring for our nation’s children.
Figure 5
Figure 6
Figure 7
Key Takeaways
While there is a lot of variation across the country, with some bright spots, in most states child care prices are continuing to climb, putting child care increasingly out of reach for families. State investments are crucial to supporting child care, yet states may be facing mounting fiscal pressures, as cuts to Medicaid in the Republican budget law will put added strain on state budgets by reducing state tax revenues and federal funds to states. Every community in America should be a place where children can access high quality early education, and where parents can make the work and family decisions they want. For this reason, in addition to transformative federal investments, states must fight to secure greater investments in early care and education.
Acknowledgment: The authors would like to thank Hailey Gibbs from the Center for American Progress for her insightful feedback.
Notes
Tags: care economy, childcare, child care crisis, family planning