In five days, the U.S. will go over what’s being called, un-euphemistically, a “childcare cliff.” September 30 marks the day that federal funding for childcare expires—closing a pipeline to $24 billion, which was earmarked by the American Rescue Plan in 2021, to prop up struggling daycare centers.
Going over the brink could tee up a scenario in which 70,000 childcare centers nationwide are forced to close their doors to 3.2 million children, according to an estimate by the progressive think tank Century Foundation. To appreciate that magnitude, it helps to understand that around 220,000 needy centers received federal funding under the American Rescue Plan; 70,000 would total almost a third of all those centers.
The timing is also bad because working mothers have just reached a high point in the U.S. workforce. Their participation climbed to all-new highs this year, at the same time the gender pay gap shrunk to a record low. A childcare crisis threatens to undermine their progress with increasing costs that could drive parents—single moms, in particular—out of the workforce. The Treasury Department estimates the annual cost to care for one child is $10,000, which is double what the government believes is affordable. Also, odds are good that young parents also have student loan debt, payments for which will restart in October after a three-year pause. Top this off with the fact that Americans just hit a record $1 trillion in credit card debt, and that cliff starts looking pretty slippery.
A dip in the labor force participation rate would be bad news in a market where employers are already struggling to find and retain workers. But some experts note they’re expecting to see more of a protracted slide, rather than a cliff-like drop. “Families will internalize the cost of childcare the way they have for years: by having fewer children and working less,” labor economist Kathryn Anne Edwards has said.
America is an outlier on childcare in the developed world. The governments of countries ranging from Slovenia to New Zealand spend at least $10,000 per toddler. The U.S. spends $500. And it wasn’t that childcare in America was flourishing until COVID kneecapped it, either, as was the case for other industries. Treasury Secretary Janet Yellen was blunt back in 2021 about the childcare calamity Americans face: She called it “a textbook example of a broken market,” arguing that “it does not work for the caregivers. It does not work for the parents. It does not work for the kids. And because it does not work for them, it does not work for the country.”
Despite billions in federal funding, the childcare industry is still short 65,000 jobs compared to pre-pandemic levels. Centers operate on very thin margins, the buildings often need serious TLC, and the workers—90% of whom are women, many from marginalized groups—earn $27,000 a year on average, not even half of the income that a recent study found is needed to live comfortably in America. The job of childcare worker is among the country’s lowest paid, but employers counter that to pay workers more, they’d have to raise tuition costs even higher—and that would likely backfire because, right now, budget-conscious parents would scream at any cost hike.
President Joe Biden says that lowering Americans’ childcare costs is “a core pillar of Bidenomics,” and his administration has taken some proactive steps. However, those have mostly been in the form of tax benefits or executive orders proposing rule changes that could rein in costs—not attempts to secure emergency funding now. With another government shutdown looming, Congress’s attention is also diverted. A group of Democrats is pushing to give the industry a new lifeline, via a bill that would invest $16 billion a year for the next five years. However, with zero Republican support, the Child Care Stabilization Act looks like a doomed effort.
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