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.
Childcare costs were high before the pandemic. In Minnesota, childcare costs were among some of the highest in the nation. Unfortunately, the coronavirus pandemic has exacerbated this issue. Social distancing rules as well as cleaning requirements, coupled with low attendance, have contributed to higher childcare costs for parents and permanent closures of some providers.
It is not hard to imagine therefore that states will have to grapple with a worse childcare crisis after the pandemic. However, studies show that some states have been more significantly impacted by the pandemic than others. And Minnesota is one of those states.
Using data from Childcare Aware and Center for American Progress, for instance, Lending Tree recently published a study that found the following:
The COVID-19 crisis is costing center-based child care providers an extra 41% annually per child — $14,117, up from $9,977 pre-pandemic. The spike in costs for these care providers impacts households with children younger than 5 especially hard.
Looking among the states, Minnesota faced one of the biggest increases in costs despite already having higher costs. Before COVID-19, childcare centers on average cost about $11,200 in Minnesota- the 13th highest in the nation. During the pandemic, the annual cost of childcare grew 60% to about $18,000 per child- 6th highest. Minnesota experienced the 13th highest rate of growth in the country.
Source: Lending Tree
Source: Lending Tree
I have long argued that the legislature should look into loosening regulations for childcare to tackle both prices and shortage. This increase in cost is the more reason to do that. High childcare costs, as well as scarcity, are a hindrance to a growing economy. And these high prices will be a restraint to Minnesota’s recovery.
While suggestions to cap tuition or subsidize childcare seem appealing and are all around, we need to understand that these come with their own issues. Government subsidization in recent years, for instance, has been closely linked to excessive government oversight and higher costs, as well as limited choice. In the long-run, solutions should be more focused on the root cause of the crisis which is overregulation. Otherwise, anything else will end up making services more expensive and restrict supply even further.