This story is part of Out of stockCNET’s coverage of how real people cope with the high cost of living in the US.
Brutal. That’s how Brandon Thompson sums up the childcare situation in his family.
Thompson and his wife, Kate, work during the day, and his hours are often long, from 7 a.m. to 7 p.m. Thompson’s almost 2-year-old daughter is too young to go to school, and when it’s time to figure out an affordable care plan children, they struggle to find an answer within their budget. “In Chicago, the average day care charges $1,500 a month,” Kate Thompson said.
For now, their daughter spends Mondays with Kate’s parents. From Tuesday to Thursday, the Thompsons split babysitting costs with another couple to save money. On Fridays, Kate works from home and looks after their daughter. “It’s working pretty well so far – as long as nobody puts a bunch of appointments on my calendar,” Kate said.
Still, the bill is big. In total, Thompson pays just over $1,000 a month for her part-time nanny, who earns $22 an hour, plus benefits.
With inflation squeezing household budgets, more parents are being forced to think outside the box to find childcare options. On average, families pay anywhere from $226 per week for daycare to $694 per week for a live-in nanny, according to the 2022 Care.com Cost of Care Study. Such high costs mean more than half of American households spend more than 20% of income for childcare costs. The US Department of Health and Human Services considers child care affordable when it is 7% or less of a family’s income.
The financial strain is even harder on lower-income families and blacks and Hispanics, and it’s harder on single parents and those with more than one child. Economically disadvantaged parents must spend more than a quarter of their annual income to afford care at the center. No wonder four out of 10 US parents are in debt due to childcare costs.
The system isn’t working for anyone, explained Sam Abbott, senior policy analyst at the Washington Center for Equitable Growth, which focuses on family economic security. “It’s overwhelming for parents, providers are running out, and workers and educators are not making money at the lowest wages in the economy,” Abbott said.
As the childcare system fails on both ends, parents are making heavy sacrifices and coming up with creative solutions to raise their children while still earning a living. While some people, like the Thompsons, team up with other families to afford live-in nannies, others take on second or side jobs, move to less expensive areas, or rely on family for free childcare. Many parents also find themselves cutting back on essentials and other things like clothing, food, eating out, family recreational activities, vacations and travel. In the most extreme scenario, some families are forced to consider reducing work hours, switching to shift work, or leaving the workforce altogether.
The childcare crisis is real
The lack of affordable and accessible childcare in this country is nothing new, but it has worsened since the pandemic, when the sector faced steep job losses and the closure of almost 16,000 childcare centres. There were 102,400 fewer child care jobs nationwide in September than in February 2020, according to the Center for Child Care Employment Research. Over the past few years, the total number of child care providers has decreased by 9%.
Fewer options for parents have also led to higher costs in most areas, although prices vary widely from state to state. For example, while the average annual cost of a full-time child care center for a toddler costs more than $24,000 in Washington, D.C., it comes out to roughly $6,800 in Arkansas, according to a calculator by the nonprofit Economic Policy Institute . States like California and New York have some of the least affordable child care options, costing nearly half the median income for a single-parent family, according to a 2021 report by Child Care Aware of America. The same data reveal that in most regions of the U.S., the annual cost of childcare is more expensive than housing and typically exceeds the cost of in-state tuition at a four-year college.
There are many factors that determine child care costs, Abbott said, and there is no easy fix. Most of the child care centers’ revenue goes to pay employees, Abbott said, even though the average child care worker makes a pittance — an average hourly wage of $13.31. Given the severe shortage of childcare staff, this creates a catch-22.
“We are in a quandary,” Abbott said. “Because so much of a provider’s costs are wages, you can’t raise wages to attract talent without raising costs.” But, he explained, the costs for most families are already too high.
Families find solutions to care for children
Even a modest increase in child care costs would hurt families who are already stretched thin. Brandi McNett, who lives in Spokane, Washington, with her husband and two children, says she pays $700 a month to send her 4-year-old to private daycare. If the supplier raises the price to $900, they probably won’t be able to make it work. When he first shopped around for options, most centers cost at least $1,400 a month, double what he’s paying now. “There’s no way I can afford that,” she said.
Like the Thompsons, the McNetts have tried various ways to solve the childcare dilemma. Because their older child attends home daycare nearby, their 2-year-old spends the day with McNett’s in-laws. Once their eldest starts school, they will be able to afford to move the younger one to kindergarten.
McNett herself previously worked at a day care center as a teacher’s aide, so she knows the issues plaguing the child care system inside and out. She and her husband have been considering moving to an area with a lower cost of living — specifically North Carolina, where her husband, who works for a railroad company, could relocate. This line of thinking is not uncommon. Over 25% of parents surveyed by The Penny Hoarder earlier this year reported moving to another home to afford better childcare.
Government assistance and creative childcare solutions
Despite the continuing financial strain that child care costs continue to place on families, policymakers have made little progress on the problem over the years, according to David Blau, an Ohio State University economics professor who has studied the issue for decades.
Blau explained that although government resources in the form of scholarships and vouchers exist, access to them depends on where you live and is often very difficult to obtain for the people who need them the most. And some federal, state and local programs for low-income parents, like the Child Care and Development Fund, simply don’t go far enough. “There are grants available, but it’s a nightmare to navigate,” Blau said.
The bigger problem is that the approach to providing child care services to working families is market-based, much like the private health care system, as opposed to a top-down decision by the federal or state government. Blau called it “a very uniquely American problem.” For example, he noted that in many European countries there is a different social and political arrangement whereby the population pays higher taxes in exchange for guaranteed access to healthcare and childcare. Expanding that safety net may be the best chance to implement a cost-effective and effective system in the U.S., Blau said.
In the meantime, there is family tax credits to help reduce the cost burden. The Child and Dependent Care Tax Credit, for example, offers up to $1,000 in credits for qualified child care expenses. And some employers offer childcare benefits. If you have access to a dependent flexible spending account, you can contribute pre-tax dollars to use for things like child care.
But these loans and programs are often not enough to offset the rising costs parents face. “At the end of the day, families with young children either collect what they can from relatives or simply decide that one parent is not going to work at all,” Blau said.
A parent’s decision to change jobs or leave the workforce to care for children has larger social consequences beyond a single household. In most cases, the stay-at-home parent is a woman, which has a long-lasting effect on labor force participation. Studies show that women who interrupt their careers due to childcare responsibilities find it more difficult to return to the workforce later in life.
Farnoosh Torabi, host of the So Money podcast and CNET Editor-in-Chief, has learned over the years some creative ways to cut childcare costs. If you’re a lower-income family, she suggests asking about scholarships or financial aid, as some preschool or aftercare programs offer scholarships but may not advertise them.
Signing up for community or school Facebook groups can also help you connect with other parents in your area who may also be struggling to find affordable child care, Torabi said. She suggests posting in these groups to see if there are other parents who want to share the responsibilities. For example, if you work very early in the morning, you can find another parent who can watch your child before school, and in return, you can help them watch their child in the evenings or on weekends. “These groups welcome this kind of problem solving,” Torabi said.
YMCAs are also great potential resources for families, Torabi said, because these programs are national, often heavily subsidized and more affordable than aftercare and in-home child care options.
After all, American parents rely on a range of Band-Aid solutions to help care for the next generation and make ends meet. But these systems are fragile. If there is even a slight change in price or access, the whole structure can fall.
You can find a comprehensive list of child care programs, resources and credits at Child Care Aware.