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Child care is unaffordable in the U.S. — could the American Families Plan help? What the numbers show

The proposal would help roughly three-quarters of families with children under the age of 6.

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The Department of Health and Human Services considers child care to be affordable if it costs no more than 7% of a family's income. By this standard, less than 15% of American families can afford infant care in a licensed child-care center.

The high costs, along with low wages for industry workers and supply that exceeds demand, have created a child-care crisis in the United States. The coronavirus pandemic has only exacerbated these problems as centers shut down — first during stay-at-home orders, then many for good as they became too expensive to run with restrictions in place.

President Joe Biden unveiled the $1.8 trillion American Families Plan in April to address the problem. If it became law, it would put $225 billion over the next decade toward high-quality care for children under the age of 5. The average American family with young children could save $14,800 a year on child care, the administration says.

Would the plan, if implemented, actually make child care affordable? Here's what the data shows.

The problem: Child care is unaffordable across the U.S.

The average cost for an infant in a licensed child-care center was $215 per week, or $11,180 per year, in 2019, according to Care.com. In order for this amount to make up 7% or less of a family's income, the household would need to bring in nearly $160,000 per year, roughly 2.5 times the median household income in the U.S.

Child-care affordability varies across the country, but in no state does it fall below the 7% threshold. Infant care comes closest to being affordable in South Dakota, where it makes up 10% of the median household income for a family with at least one child under 6, according to data from the Economic Policy Institute.

Infant care is most expensive in California and Washington, D.C., where the average price makes up roughly 25% of the median income. In nine other states, infant care costs make up more than a fifth of the median income.

Child care tends to get less expensive as children get older. Still, in no state does the cost of care for a 4-year-old meet the affordability threshold.

Data for 2020 is not yet available, but experts predict the pandemic made child care even more expensive. Social distancing regulations requiring smaller capacities have reduced the amount of available spots, cutting into centers' budgets and forcing many to close. The number of child-care centers was 13% lower in December 2020 than a year earlier, according to research and advocacy group Child Care Aware of America. Of those that remain open, 56% said they were losing money in a November 2020 survey from the National Association for the Education of Young Children.

About 60% of married couples with children have both parents employed, according to the Department of Labor. Before the pandemic, 90% of these dual-income couples relied on child care, according to the Department of Education, with 60% using center-based care. For parents to be able to work, the country needs these centers.

All of these problems with child-care access add up. The crisis costs the U.S. $57 billion annually in lost productivity, earnings, and revenue, according to a 2019 study from the Council for a Strong America.

The potential solution: Free and subsidized child care

Biden's plan would significantly reduce child-care costs for the vast majority of parents. Under the proposal, high-quality care would be free for low-income families and capped at 7% of a household's income for those making up to 1.5 times their state's median income. This provision would help roughly three-quarters of families with children under the age of 6.

A family making 1.5 times the median income would see a reduction in child-care costs in all 50 states and Washington, D.C. In five states — California, Indiana, Massachusetts, Minnesota, and New York — and Washington, D.C., this provision would reduce costs by more than half for these families.

The plan also includes free, universal preschool for 3- and 4-year-olds, which could save families almost $10,000 per year per child.

Additionally, the plan would extend the American Rescue Plan's increased child tax credit through 2025, giving most parents $3,600 per year for every child under 6 and $3,000 per year for child age 6 to 17. While not earmarked for child care, the additional money could help parents cover the costs.

For struggling centers and child-care workers, who make an average of $11.65 an hour nationally, the plan would provide funding to help cover costs and increase the minimum wage for workers to $15 an hour.

To help offset costs, the plan would make permanent the increased child-care tax credit passed as part of the American Rescue Plan in March. The credit would provide up to $4,000 for one child or $8,000 for two or more children up to age 13 for families making less than $125,000 per year, with families making between $125,000 and $400,000 eligible for a partial credit.

The chances of child-care reform becoming law

In order to be enacted, these proposals would have to be written into a bill and passed by both houses of Congress. Legislators have introduced bills such as the Child Care for Working Families Act that would implement elements of Biden's plan. But with the Senate split 50-50 between Democrats and Republicans, it's unlikely that an extensive bill would get enough support to reach Biden's desk.

Republicans oppose reform efforts: They have called Biden's plan divisive and balked at the cost. Sen. Tim Scott, R-SC, called the proposal a "partisan wish list" during the party's response to Biden's speech announcing the plan, and Minority Leader Mitch McConnell, R-KY, called it "a multitrillion-dollar shopping list." He has also said the party would not support rolling back the 2017 tax cuts to pay for this or Biden's infrastructure plan.

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Meanwhile, the costs to fully implement the plan could far exceed the White House's estimates. A study from the Penn Wharton Budget Model estimated that the plan would actually cost American taxpayers $2.5 trillion over 10 years, about $700 billion more than the White House's figure. The study also found that the Biden administration's proposed revenue-raising methods would not generate enough money to cover the costs.

Because of this budget shortfall, the study found the plan would increase government debt by almost 5% by 2050. The researchers say this debt would outweigh the productivity gains associated with the spending programs and lead to a 0.4% decrease in GDP by 2050.

Still, experts see value in investing in child care. Nobel Prize-winning economist James Heckman found that high-quality, comprehensive, early childhood programs provide a 13% return on investment. Other research has shown anywhere from a $4 to $12 return per $1 invested.

"Child care is part of the bedrock of our economy," Assistant House Speaker Katherine Clark, D-MA, said at a news conference announcing the reintroduction of the Child Care is Infrastructure Act in March. "The economic benefits of child care are well documented, but so are the economic losses associated with its inaccessibility and our nation's repeated refusal to invest in child care with the significance that it deserves."

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