For a couple making 67% of the average wage in the United States, childcare costs on average 41% of household income.

Katherine Plumhoff
February 18, 2020 4:13 pm
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Let’s say you’re a mother with an infant daughter who needs childcare while you go to work. You live in Michigan, where the average annual cost of infant care is $10,861, or $905 per month. But the median annual salary in Michigan is $57,054, meaning your daughter’s childcare costs eat up 19% of your annual income—more than your annual housing costs, which is $10,129. So what options do you have? If you own your home, you could refinance your mortgage; if you’re renting, you could try to find a more affordable place. Or, like many working parents, you can take money from your retirement savings to cover childcare costs and push off the problem of paying for your later years.

While I used my home state for this example, this disparity is true across the United States (which you can see by using this Economic Policy Institute calculator). Even though the Department of Health and Human Services has set a standard for childcare—saying it shouldn’t cost more than 7% of a family’s annual income—it costs more than that in each of the 50 states. Per Fortune, in 28 states and Washington D.C., childcare actually costs more than the average tuition and fees at a state college.

And with almost two-thirds of two-parent households reporting that both parents work outside of the home, not to mention 71% of single mothers and 88% of single fathers working, childcare, in all its unaffordability, is a necessity for the large majority of American families.

That is, for the American families who decide to have children in the first place. A 2018 survey of 1,858 Americans between 20 and 45 years old found that for respondents who have or expect to have fewer children than they considered ideal, childcare being too expensive was the number-one reason their families stayed small (64%), beating out reasons like wanting more time for children they already have (54%) and worrying about the economy (49%).

It’s not only the U.S. that has this problem—childcare is prohibitively expensive in Ireland, England, and Australia, among other places. For a couple making 67% of the average wage in the United States, childcare costs on average 41% of household income. In Ireland, it costs 30%; in the U.K., 46%; and in Australia, 27%. That compares to countries like Canada, 12%; Germany, 6%; and Turkey, 0%.

If countries can figure out how to make childcare more affordable, more parents, especially mothers, can afford to stay in the workplace. A 2018 survey conducted by the Center for American Progress found that mothers were 40% more likely than fathers to have felt the negative impact of childcare issues on their careers.

Childcare issues are especially problematic for LQBTQ families. Taking into account geography, the average married lesbian couple makes $124,000/year compared to a married heterosexual couple’s $132,000. “Often one parent will choose to stay home because the costs of childcare may be greater than they would have been taking home from their employment, after childcare expenses are factored in,” says Trystan Reese, director of family formation at Family Equality, a nonprofit focused on advancing equality for LQBTQ families.

These issues hurt individual families and they hurt the economy as a whole, too: childcare issues faced by working parents contribute to an estimated $57 billion in lost productivity annually.

Something needs to change.

Whether public or private, a universal childcare plan for Americans is needed

The U.S. could go the way of Nordic countries, who won the top three spots in the Best Countries for Raising Kids spots in 2020. These countries—Denmark, Sweden, and Norway, respectively—offer things like generous parental leave policies, free (tax-subtilized) preschool starting at 18 months, and government allowances for each child. But since we haven’t yet been able to rally our country around universal health care, that concept and comprehensive parental benefits are probably far off for Americans.

Considering the United States’ history of using job benefits like healthcare as a way to attract employees in competitive labor markets—something that persists today, even though we know that a private healthcare system is more inefficient than a public alternative—we may see employers built out childcare benefits before the government does.

A 2020 survey by market insight firm Clutch found that only 6% of American companies offer childcare benefits, which can range from flexible schedules on the low end to on-site childcare on the high end, though more than one in 10 women wish their companies had them. However, the companies surveyed most often cited cost as the reason they hadn’t expanded their offerings.

But employers paying for an expensive on-site childcare center isn’t the only option. Benefits could take a range of forms, including:

  • Flexible scheduling options (including telecommuting options), letting parents work around family obligations like school pick-up and drop-off times.
  • Subsidies for childcare costs.
  • On-site childcare at a reduced or free rate for children of a certain age, like Patagonia, Disney, Google, and Nike and other companies currently provide. In an open letter posted on FastCompany, Patagonia CEO Rose Marcario explained how their program works and why they do it. “Supporting our working families isn’t just the ethical thing to do (which, frankly, should be reason enough for responsible leaders); it will also balance out financially,” she wrote, explaining that with tax benefits, employee retention gains, and improved employee engagement, Patagonia recouped 91% of the cost of instituting the childcare program. The childcare program isn’t free for employees; they pay market rates for childcare, subsidized based on household income.
  • Back-up childcare assistance, which is usually offered for free for a certain number of days per year and at a reduced daily fee for additional days.

Childcare benefits should be available to all parents

While it’s especially important that mothers, whether single or married, have access to childcare benefits—mothers do an oversized share of parenting when it comes to taking care of sick children, running households, and managing children’s activities—both fathers and mothers need to have access to these benefits and be encouraged to use them. It’s better for employees of all genders to not be pigeonholed into a certain role at home or at work, and in the case of two-parent households, it’s better for children to have both parents take active roles in their care.

Elliot Haspel is an education policymaker and author of Crawling Behind: America’s Childcare Crisis and How to Fix It, in which he advocates for an annual $15,000 government-provided cash credit for parents. In a Quartz interview, Haspel explained why having widely-available, free- or reduced-cost childcare for all young children is so important:

“If we have thriving families of every socio-economic status, we’re going to have thriving children and that’s going to lead to a thriving society,” says Haspel.

Solutions going forward will be creative and collaborative

Until we make universal childcare or readily available and comprehensive childcare benefits happen, companies will need to continue to make decisions and investments based on their values and to experiment with different solutions to care for their employees’ childcare needs.

According to Slate, here are some new, innovative developments that are currently going on:

  • Organizations pooling resources to build or support child development centers, like a group of companies did in Atlanta.
  • Leaders forming community groups to invest in childcare options and publicize the cause, like Colorado’s Executives Partnering to Invest in Children.
  • Researchers sharing findings—like that investing in early care and learning provides a 16-to-one return on investment for taxpayers through higher graduation rates and wages and less future reliance on public assistance—in community forums and with policymakers and businesses to spur investment in childcare options.

With more and more parents returning to work after having children and relying on care options to facilitate that, childcare solutions will need to keep evolving to keep with the growing needs of families and workers. And with childcare policy a feature of many Democratic presidential candidates’ platforms, maybe we’ll even see federal leadership on the issue in the next few years. Until then, I hope more companies go the way of Patagonia, and see childcare benefits as an investment, not a burden.