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 is expensive in Minnesota. According to the Economic Policy Institute (EPI) Minnesota is the 4th most expensive state for infant care only behind Massachusetts, Washington D.C., and California. Every year, Minnesotan parents spend about $16,000 on infant care. By most metrics, childcare is very unaffordable in Minnesota, as I illustrate in this post.
The US Department of Health and Human Services defines affordable childcare as not exceeding 7% of a family’s income. And when we look at the numbers, the cost of childcare in Minnesota exceeds that by a long shot. According to data from Childcare Aware, in 2018, all childcare exceeded 7% of median family income, with infant care at an accredited center being the most expensive. While family childcare is less expensive it still exceeded the affordability threshold for all types of care, four-year-old being the least expensive.
Source: Childcare Aware
When compared to other states, Minnesota is one of the least affordable states in the country for childcare. Take for instance infant care, which is generally the most expensive type of care to pay for. Infant care is so expensive in Minnesota that only 5.8% of families can afford to pay no more than 7% of their income to access care. In fact, Minnesota is the third least affordable state for infant care as illustrated by the figure below.
Source: Economic Policy Institute
To paint a clear picture of how much Minnesota parents spend on infant care, the EPI also compared the cost of infant care to other major household expenses. In Minnesota for instance, infant care costs about 144% of the average rent cost. Minnesota ranked the second highest in this metric.
Source: Economic Policy Institute
Minnesota parents also spend about 43% more on infant care than they do on one-year in-state tuition for a four-year public college. Minnesota ranks 15th highest on this metric, mostly because tuition costs are lower in other states which makes infant care look relatively more expensive for other states. For instance, Washington DC has the highest cost of infant care in the nation has an average tuition cost of about $5,800, hence infant care being 420% higher. Minnesota’s tuition costs are only second to Massachusetts, making Minnesota a relatively expensive state for both college and infant care.
One of the big contributing factors to the high cost of childcare in Minnesota is regulation. Childcare is a labor-intensive industry so it will always be plagued by high labor costs. However, this doesn’t explain why Minnesota’s cost of childcare is so high compared to other states. That can be explained by other differences, one of which is regulation.
Compared to other states, Minnesota has high standards for the childcare industry. Minnesota’s low student-to-teacher ratios as well as stringent hiring requirements, for instance, have been cited as contributing factors to high costs for childcare. Worse yet, research shows these regulations, which often focus on structural measures, show no discernible effect on quality.
As I have written before,
Proponents of strict childcare regulation in Minnesota usually regard current strict standards as responsible for high-quality childcare. However, evidence shows that this is not factual. Most measures that the Minnesota Department of Services uses to analyze quality like child-staff ratios and group sizes have no discernible effect on quality. Instead, they only work to raise prices for parents and make it harder for providers to make profits.