What Biden’s presidency could mean for childcare

It is no big secret that childcare is in a crisis. And this crisis has been long brewing. The coronavirus pandemic has just placed it at the forefront of many of our other issues. Nationally, childcare is becoming more expensive and scarcer.  This is a trend that existed before Covid but was made worse during the pandemic, nonetheless.

Lockdown and social distancing orders raised costs for providers while effectively reducing their revenue forcing many to close. One factor also leading to low revenues were parents voluntarily letting their kids stay home. States like Minnesota that are plagued by extremely high costs will likely face rising costs. All things considered; it is not surprising addressing childcare costs was one of the biggest talking points of Biden’s candidacy.

Joe Biden plan

During his campaign in July 2020, Biden unveiled his plan about childcare. And in order to tackle issues regarding childcare, his solutions included, in summary, among the following proposals:

• Provide all three- and four-year-olds with free pre-kindergarten.
• Offer a refundable tax credit covering 50 percent of childcare costs up to $8,000 per child and $16,000 for two or more children. This credit would phase out completely for households with an income of $400,000.
• Increase funding for the Child Care Development Block Grant (CCDBG) program to enroll more children in after-school care, offer a sliding scale of assistance to families with children ages five and under and incomes below 150 percent of the median, and cap childcare costs at 7 percent of annual income families under 150 percent of the median.
• Regulate childcare providers to ensure “high-quality” care, using the government to ensure: “a developmentally appropriate curriculum, small class sizes, and support positive interactions between educators and children that promote children’s socio-emotional development”.
• Provide bonuses to childcare providers who offer hard-to-find care, such as nontraditional hours, care for children with special needs, and care in rural areas.
• Offer a construction tax credit to businesses that build childcare facilities at places of work, as well as funding new childcare facilities and upgrades to existing facilities.
• Pay childcare workers more.

Just recently, Joe Biden announced a sweeping $1.9 Trillion stimulus package. Among other things, the package includes increased funding to make childcare more affordable. With his inauguration coming closer it is clear that some of the proposals he outlined may start to come to life once he is in office.

So, what should Minnesotans expect to happen to the childcare industry under Biden’s plan? Research evidence warns it will most likely be expanded government outreach with no improved outcomes.

Will the new plan address affordability and shortage?

If you talk to parents in greater Minnesota, what plagues them is the shortage of Family Childcare Centers (FCCs). FCCs are usually more affordable and they make up the majority of capacity in rural areas. But in recent years, they have been exiting the market in large numbers, partly due to increased regulation. The state of Minnesota generally has higher standards compared to other states.

State regulation is however not the sole blame. At the federal level, changes like the reauthorization of the Child Care and Development Block Grant (CCDBG) increased regulatory requirements for providers. This presented an especially bigger issue to small providers that have limited resources to invest in training or paperwork. And in greater Minnesota where training resources are scarce, that prevented an even bigger issue.

The current plan, unfortunately, does not improve on that. For one, the plan, in a nutshell, is a top-down approach that intends to impose significant changes at the federal level possibly without improving quality nor affordability. For instance, in addition to funding, the plan layers on increased regulation to ensure quality. This should come off as no surprise. Government subsidies, especially in childcare, tend to come with increased government oversight.

Additionally, the plan relies on the expansion of the subsidy program which highly favors high-priced center care which is neither preferable nor widely available in most rural areas. Relying on centers drives out family childcare providers. But in rural areas, FCCs are preferred due to their low cost and structure. Additionally, they can accommodate workers that have nontraditional work schedules.

Another big proposal that is harmful to childcare in this plan is Universal pre-K. Providers generally make a profit on pre-schoolers and make losses on caring for infants as well as toddlers. Taking pre-school kids out of the childcare industry, therefore, will financially squeeze providers and render them completely unprofitable and unable to care for younger kids.

What to keep in mind

While it is true that childcare is in a crisis, increasing government outreach and transferring costs to taxpayers won’t make it affordable nor improve shortage. What it does is however make it even more expensive for those who cannot access subsidies while eliminating choice and control from parents.

During the pandemic, we saw states loosen laws in order to ensure working parents had access to childcare. This partly affirms the idea that leaders are aware of the negative effect that strict regulation has on supply. And additionally, it also means state policymakers are more suited to make policy changes to address childcare issues in their individual jurisdictions.

State regulations usually differ among states. And it is through this fact that we are able to understand the harmful effects of strict regulation on childcare costs. Research generally agrees that states with strict standards face higher costs compared to states with less strict standards. This should tell us that outside expanding childcare tax credits, there is very little that increasing federal government outreach into the childcare industry will do to help improve childcare.