Lack of access to affordable childcare costs states a lot of money

A few states conduct a statewide analysis of the impact of lack of access to affordable childcare on the economy. One of those is Indiana. And According to the 2020 report from the state of Indiana’s Early Learning Advisory Committee, employers in the state lose about $1.8 billion from a lack of affordable childcare.

Certainly, Minnesota and Indiana are different in a lot of ways. However, like most, if not all states, they both suffer from a lack of access to high-quality affordable childcare. While we cannot directly estimate how much the crisis costs Minnesota, based on Indiana’s estimate, we can infer that whatever the cost, it is pretty high.

How Childcare costs in Minnesota compared to Indiana

According to the Economic Policy Institute (EPI), the cost of accessing childcare for an infant in Indiana is $12,612 a year or $1,051 a month. Much like in Minnesota, infant care in Indiana costs more than the average annual rent as well as the annual cost of tuition at a four-year public college institution. Indiana ranks as the 18th most expensive state for infant care out of the 50 states and Washington D.C.

When it comes to affordability, parents in Indiana do a little worse than those in Minnesota. Generally, the US Department of Health and Human Services defines childcare as affordable if it does not exceed 7 percent of a family’s income. By this standard, only 5 percent of Indiana families can afford infant care. This is slightly worse compared to Minnesota’s 5.8 percent affordability rate. Infant care takes up 22 percent of household income for a family with a median income but 21.2 percent of a similarly situated household in Minnesota.

What this means for Minnesota

There exists research that shows the economic impact of lack of access to affordable childcare in some parts of Minnesota. For instance,

In 2018, Wilder research provided data showing how much Northeastern Minnesota’s economy loses due to childcare shortage. Among other things, the report showed that:

(1) Families in that region lose approximately $8.1 million in potential earnings due to lack of access to childcare.

(2) Employers face a 13% reduction in worker productivity which translates to loss in thousands of dollars  per worker without access to childcare.

(3) Local, state and federal governments lose an estimated $5 due to lost economic activity in that region.

(4) The region will experience an estimated loss of $13.3 million in life time earnings from children currently without child care who would probably not complete their high school education, reducing their future employability and earnings.

There are currently no estimates for the economic cost of lack of access to affordable childcare for Minnesota as a whole. But the high cost on employers due to lack of access to childcare in Indiana points to a similar high cost for employers in Minnesota. Minnesota and Indiana are both among the least affordable states for childcare, so the costs on their economies from lack of childcare are bound to be high.