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.
According to the 2020 report from the state of Indiana’s Early Learning Advisory Committee, employers in the state lose about $1.8B from lack of affordable childcare. Indiana is one of the few states that conducts a statewide analysis of the impact of lack of access to affordable childcare on the economy.
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 cost of rent as well as the annual cost of tuition at a four-year public college institution. Indiana ranks 18th out of 50 states and D.C. as the most expensive state for infant care.
When it comes to affordability, parents in Indiana do a little worse than those in Minnesota. “According to the U.S. Department of Health and Human Services (HHS), child care is affordable if it costs no more than 7% of a family’s income. By this standard, only 5.0% of Indiana families can afford infant care.” This is slightly worse compared to Minnesota’s 5.8% affordability rate. Infant care takes up 22.0% of median family income in Indiana, but 21.2% of the median family income in 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.
While most people understand the struggles that parents face when they have trouble accessing childcare, fewer people understand how a lack of access to childcare affects employers or the economy. This research will help draw light on how crucial access to childcare is to employers and the whole economy.