Investments in Child Care Are Needed to Improve Provider Pay and Reduce Parent Expense

By Alejandra Londono Gomez, Alycia Hardy, and Stephanie Schmit

For decades, insufficient public investments in child care have created a domino effect of economic burdens and instability for families and providers. The lack of public spending on child care disproportionately impacts families with low incomes and families of color, placing the cost of care on the backs of parents to sustain child care businesses and provide wages for providers. Families in poverty pay approximately 30 percent of their income on child care, much more than the federal affordability benchmark of 7 percent. However, child care subsidies provided by federal and state governments do not sufficiently cover the cost of care. Consequently, providers—who are disproportionately women of color—have an average annual wage of $24,230 and little-to-no employment benefits.

It is urgent that policymakers address these present realities and interconnected needs of families and providers. To do so, the child care crisis requires multifaceted and forward-looking solutions supported by adequate and equitable funding that:

  • Addresses the economic burdens placed on families in affording child care by establishing a capped co-payment structure. This would lift tremendous financial stress from eligible families and allow them to use the funds they currently spend on child care, on other expenses such as housing and food.
  • Reflects the true cost of care. Currently, provider reimbursement rates or subsidy vouchers only reflect the market value of child care—meaning the price is reflective of what some parents can afford instead of the true costs incurred by providers. To reduce the gaps between parent affordability, provider payment rates, and the true cost of care, provider reimbursement rates must incorporate wages for staff, proper facility maintenance, administrative, and other costs. Incorporating these costs supports high-quality care for children, economic stability for providers, and reduces cost burdens for families.
  • Supports investments in the child care work force in the form of higher wages and better benefits for providers. Investments in the workforce are vital to a demoralized profession that is plagued with burnout and high turnover rates due to extremely low wages, intense emotional labor, long hours, and a lack of health and other benefits.
  • Builds supply across provider types to reflect family needs and preferences. A majority of families today live in child care deserts, where there is a severe undersupply of child care options for families and a limited supply of the types of provider families with low-income rely on—including nontraditional hours care. By increasing supply, in a way that reflects the types of providers families need, families will have more access to affordable, appropriate child care options.

The Build Back Better Act, moving through Congress now, seeks to make significant progress toward the above policy solutions in a comprehensive way, backed by meaningful investments. If passed, this legislation could eliminate many barriers in access for families, alleviate the burden of cost for parents, provide increased wages for providers, and build the supply of high-quality care in a way that meets families’ needs. Combined, these pieces would have a tremendous impact and create a child care system that works for millions of families and providers.