Child care prices have been skyrocketing over the past thirty years—rising faster than the price of food, housing, and other items. To access child care, families are forced either to pay an amount equivalent to that for college tuition, rent, or a mortgage, or put together patchwork solutions that create instability for their work lives and for their children. Meanwhile, staffing shortages in the early care and education sector will continue to put upward pressure on prices as child care businesses will have to raise wages to attract early educators. Without intervention, child care and early education soon would be completely out of reach for all but the wealthiest of families, with the majority of families continuing to struggle to make it work.
The Build Back Better Act (BBBA) would address this challenge by covering the high costs of rising wages for early educators and by setting limits on the prices that parents would have to pay. By investing public dollars to solve the child care market failure, the bill would save the majority of families about $5,000 a year—making child care and early education free for many families, and ensuring the vast majority pay no more than 7 percent of their income.
Figure 1 shows the rising prices of child care with and without the Build Back Better Act for families with income at 150 percent of the state median income (SMI), which averages $136,000 for a family of four, with variation by state. Without Congressional action, prices would continue to rise—by more than 14 percent by 2025 as compared to pre-pandemic prices—and supply would continue to shrink. With the Build Back Better Act’s significant investment and sliding-scale copayments based on income, most families currently paying for child care would pay less than they are now by 2025, even after accounting for rising costs.
FIGURE 1
Figure 2 shows the rising prices of child care with and without the Build Back Better Act for families with income at or below 75 percent SMI, which averages across states at $68,000 for a family of four. Some of these families are currently receiving assistance through the Child Care Development Block Grant, but since the underfunded block grant only reaches one in nine eligible young children, most families are not receiving it. Those that are not are most likely struggling with makeshift child care arrangements and would benefit from the free stable, high quality, and convenient choices that Build Back Better will bring.
Figure 2
Methodology and Notes
Inflation Data
The Bureau of Labor Statistics tracks price movements on the average cost of child care, and other consumer goods, over time. To project child care costs into the future, we apply the average monthly change in child care costs since 2015, to all months until 2025. Likewise, we use the average annual change in household income for families with children—which is 4.7 percent from 2015 to 2020—and extend that to 2025. That rate is used to estimate the growth in household incomes for families at 150 percent of state median income, and thus the 7 percent cap in copayments. Build Back Better will reach families up to 250 percent of state median income, who will experience additional cost savings not highlighted here.
Since child care inflation data from the U.S. Bureau of Labor Statistics accounts for average price changes over time, and there is not available longitudinal data on child care costs for families in different income ranges, this analysis assumes that costs for all families grow at the same rates from 2015 to 2025.
Child Care Costs
Data on child care costs are estimated using the authors’ analysis of the Center for American Progress using the Census Survey on Income and Program Participation, and are specific to families with working mothers and at least one child under age 5 who are paying more than $0 for child care.
Time Horizon
The Build Back Better Act would be fully implemented in 2025 with $0 copayments for families below 75 percent SMI, and a progressive cost cap up to 7 percent of family income for families at 250 percent of state median income (SMI; up to $330,000 in some states), by 2025. During the three-year transition period starting in FY2022, states are required to provide child care assistance to children in families with incomes at or below a specified level: 100 percent of SMI in FY2022, 125 percent of SMI in FY2023, and 150 percent of SMI in FY2024. Family copayments would vary by income. States can serve families with higher incomes up to 250 percent of SMI sooner if they have already covered families with lower incomes.
Tags: build back better, child care
Unless Build Back Better Is Passed, Families Will Face Child Care Prices Rising by 14% by 2025
Child care prices have been skyrocketing over the past thirty years—rising faster than the price of food, housing, and other items. To access child care, families are forced either to pay an amount equivalent to that for college tuition, rent, or a mortgage, or put together patchwork solutions that create instability for their work lives and for their children. Meanwhile, staffing shortages in the early care and education sector will continue to put upward pressure on prices as child care businesses will have to raise wages to attract early educators. Without intervention, child care and early education soon would be completely out of reach for all but the wealthiest of families, with the majority of families continuing to struggle to make it work.
The Build Back Better Act (BBBA) would address this challenge by covering the high costs of rising wages for early educators and by setting limits on the prices that parents would have to pay. By investing public dollars to solve the child care market failure, the bill would save the majority of families about $5,000 a year—making child care and early education free for many families, and ensuring the vast majority pay no more than 7 percent of their income.
Figure 1 shows the rising prices of child care with and without the Build Back Better Act for families with income at 150 percent of the state median income (SMI), which averages $136,000 for a family of four, with variation by state. Without Congressional action, prices would continue to rise—by more than 14 percent by 2025 as compared to pre-pandemic prices—and supply would continue to shrink. With the Build Back Better Act’s significant investment and sliding-scale copayments based on income, most families currently paying for child care would pay less than they are now by 2025, even after accounting for rising costs.1
FIGURE 1
Figure 2 shows the rising prices of child care with and without the Build Back Better Act for families with income at or below 75 percent SMI, which averages across states at $68,000 for a family of four. Some of these families are currently receiving assistance through the Child Care Development Block Grant, but since the underfunded block grant only reaches one in nine eligible young children, most families are not receiving it. Those that are not are most likely struggling with makeshift child care arrangements and would benefit from the free stable, high quality, and convenient choices that Build Back Better will bring.2
Figure 2
Methodology and Notes
Inflation Data
The Bureau of Labor Statistics tracks price movements on the average cost of child care, and other consumer goods, over time.3 To project child care costs into the future, we apply the average monthly change in child care costs since 2015, to all months until 2025. Likewise, we use the average annual change in household income for families with children—which is 4.7 percent from 2015 to 2020—and extend that to 2025.4 That rate is used to estimate the growth in household incomes for families at 150 percent of state median income, and thus the 7 percent cap in copayments. Build Back Better will reach families up to 250 percent of state median income, who will experience additional cost savings not highlighted here.
Since child care inflation data from the U.S. Bureau of Labor Statistics accounts for average price changes over time, and there is not available longitudinal data on child care costs for families in different income ranges, this analysis assumes that costs for all families grow at the same rates from 2015 to 2025.
Child Care Costs
Data on child care costs are estimated using the authors’ analysis of the Center for American Progress using the Census Survey on Income and Program Participation, and are specific to families with working mothers and at least one child under age 5 who are paying more than $0 for child care.5
Time Horizon
The Build Back Better Act would be fully implemented in 2025 with $0 copayments for families below 75 percent SMI, and a progressive cost cap up to 7 percent of family income for families at 250 percent of state median income (SMI; up to $330,000 in some states), by 2025. During the three-year transition period starting in FY2022, states are required to provide child care assistance to children in families with incomes at or below a specified level: 100 percent of SMI in FY2022, 125 percent of SMI in FY2023, and 150 percent of SMI in FY2024. Family copayments would vary by income. States can serve families with higher incomes up to 250 percent of SMI sooner if they have already covered families with lower incomes.
Notes
Tags: build back better, child care