A $15 minimum wage would also raise childcare prices
A new report by EPI is calling for a $15 minimum wage in order to help childcare workers, but that would also raise childcare costs for parents.
Earlier today, President Joe Biden presented an updated version of his trimmed-down Build Back Better spending plan. The plan, which originally proposed $3.5 trillion spending on numerous government projects has been scaled down to $1.75 trillion.
Among the biggest expenditures in the bill are climate change and childcare subsidies. The plan will provide $450 billion for Universal preschool for 3- and 4-year-olds and also provide subsidies that will cover the full cost of childcare for some families and cap costs at 7 percent for families earning up to 250% of their state’s Annual Median Household Income.
And in addition to providing subsidies, the plan calls for higher wages for childcare workers. Specifically, the plan proposes that childcare workers be paid similar wages as elementary teachers.
According to the Bureau of Labor Statistics, the typical childcare worker makes about $25,000 a year. Elementary teachers, on the other hand, make about $60,000 a year on average. Childcare workers will essentially get a raise of more than 140 percent under this plan.
One of the reasons that childcare is expensive is due to high labor costs. Childcare is a labor-intensive industry. Young kids, especially, require a lot of attention and thereby lower child-to-staff ratios compared to older kids. Consequently, parents pay higher tuition for younger kids compared to older kids.
By raising wages for childcare workers, Biden’s plan will raise the costs of providing care.
Certainly, parents who are able to access these subsidies –– especially full subsidies –– will greatly benefit from reduced childcare costs. However, parents unable to access subsidies will be on the hook for even higher childcare costs.
According to an analysis by the Center of American Progress, childcare costs might rise for as much as $13,000 for infants. As CNBC reports,
Democrats’ plan would offer subsidies and cap costs at up to 7% of a family’s income. As a result, working families may see costs fall between $5,000 and $6,500, according to Rasheed Malik, associate director of research for early childhood policy at the Center for American Progress.
But here’s where the tension arises: Subsidies would phase in over a three-year period, based on income.
Families ineligible for federal assistance during that period would be on the hook for cost increases. Matt Bruenig, the president of think tank the People’s Policy Project estimates their unsubsidized cost of quality infant care would rise about $13,000 a year, to almost $29,000. (That higher cost would be due to the wage increases for childcare workers.)
Currently, Minnesota parents pay roughly $16,000 to put an infant in a licensed childcare center. A $13,000 rise in costs means parents not eligible for subsidies will pay $29,000 a year for an infant in childcare.
In recent years, Minnesota has been losing in-home childcare providers at high rates which has left greater Minnesota lacking space. The Center for Rural Policy and Development, for example, estimated that between 2000 and 2020, greater Minnesota has lost more than 20,000 spaces for childcare.
Biden’s spending plan will do nothing to alleviate the shortage of childcare providers that is very common in most rural and low-income areas. In fact, the plan might actually worsen the shortage since it calls for quality ratings that will place an extra regulatory burden on providers, pushing them out of the market.