Minnesota’s Economic News — W/E 9/24/21
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The following headline appeared in a Boston magazine on August 27: ‘Will We Ever Solve the Childcare Crisis?‘
The article explained,
We live in one of the most innovative and progressive regions in the country—not to mention one of the richest. Yet Massachusetts is also the state with the most expensive childcare in the nation, which is crippling families, mostly working moms. Will we ever figure out how to solve the childcare crisis?
The same thing can be asked about Minnesota. Despite investment and subsidies towards childcare, parents in Minnesota pay some of the most expensive prices for childcare.
For example, after accounting for differences in the cost of living, Minnesota is the third most expensive state for center-based infant care only surpassed by Washington, D.C., and Massachusetts (as shown in the figure below).
Figure: Annual cost of center-based infant care by state (Adjusted for differences in the cost of living
And apart from high prices, parents are also crippled by an extreme shortage that has only gotten worse coming out of the pandemic.
Efforts are, of course, underway to resolve the lack of affordable childcare. Just recently the Minnesota Department of Employment and Economic Development (DEED) announced that they are opening up grants geared towards the provision of childcare.
According to their press release, the grants can be used “for child care business startups or expansions, training, facility modifications, direct subsidies or incentives to retain employees, or improvements required for licensing, and assistance with licensing and other regulatory requirements.”
But given that similar efforts have already been taken in the past, it is logical to wonder if things will be different this time.
The answer to that is “it’s highly unlikely.” If efforts to solving the childcare merely focus on expanding investment and subsidies into childcare, we will not solve the root causes of the high prices –– namely shortage of supply.
Childcare is a complex labor-intensive industry, which partly explains the high costs. However, that is not the entire part of the story. Providers are also burdened and discouraged by a myriad of rules that barely contribute to safety or quality but make it costly for them to provide care.
If solutions to childcare do not incorporate regulatory reform, legislators only risk making childcare even more expensive while shifting the costs onto Minnesota taxpayers.