Minnesota has the fourth most expensive childcare in the country. Is this lowering female employment?

According to data from the Bureau of Labor Statistics, the share of Minnesota’s population in employment – the employment ratio – in 2018 was 67.7%, second only to Nebraska. This was down from 72.6% in 2000. To some extent, this is part of a general trend which has seen the employment ratio fall nationwide from 64.5% in 2000 to 60.4 in 2018.

It is often said that this is the result of an aging population. But, between 2000 and 2018, the employment ratio for those aged 55 to 64 rose by 9.5 percentage points nationally and 5.4 percentage points in Minnesota. For workers aged 65 and over, the increase was 4.5 percentage points nationally and 6.5 percentage points in Minnesota.

The declines in employment ratios have been seen in other sections of the labor force. One of these is among women. Across the United States, the employment ratio for women fell by 2.9 percentage points between 2000 and 2018. But in Minnesota the fall was steeper, 3.6 percentage points, as shown in Figure 1. We also see that our state under-performed the national average among women aged 45 to 54, white women, and women aged 20 to 24.

Figure 1: Percentage point changes in employment ratios, 2000-2018

Source: Bureau of Labor Statistics

There is a large body of research into the causes of these declines. One of these is higher child care costs which standard labor supply models imply should be associated with lower parental labor force participation rates. According to economists Katharine G. Abraham and Melissa S. Kearney, “the available evidence shows clearly that the cost of child care can be an important impediment to mothers’ employment.”

Where childcare costs are particularly high you would expect to see these effects even more strongly. And a new report from the Economic Policy Institute finds that Minnesota ranks 4th out of 50 states and the District of Columbia for most expensive infant care. The EPI finds that

  • The average annual cost of infant care in Minnesota is $16,087—that’s $1,341 per month.
  • Child care for a 4-year-old costs $12,252, or $1,021 each month.
  • Infant care in Minnesota costs $4,861 (43.3%) more per year than in-state tuition for four-year public college, making Minnesota one of 33 states and DC where infant care is more expensive than college.
  • In Minnesota, infant care costs 30.8% more than average rent.
  • Infant care for one child would take up 21.2% of a median family’s income 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 5.8% of Minnesota families can afford infant care.
  • Child care for two children—an infant and a 4-year-old—costs $28,338. That’s 60.7% more than average rent in Minnesota.
  • A typical family in Minnesota would have to spend 37.4% of its income on child care for an infant and a 4-year-old.
  • A minimum wage worker in Minnesota would need to work full time for 41 weeks, or from January to October, just to pay for child care for one infant.
  • Even in Minneapolis, where the local minimum wage is the highest in the state ($11.25), it would take 36 weeks to cover the costs.
  • A median child care worker in Minnesota would have to spend 72.6% of her earnings to put her own child in infant care.

Minnesota’s child care expenses are a real problem for families and even moderate earners. It is highly likely that they account for some of our state’s lagging performance on female employment.

John Phelan is an economist at the Center of the American Experiment.