Child Care Remains Central to an Equitable Recovery

This post is the second in a six-part series titled “The State of Economic Equity.” This series examines the challenges facing vulnerable workers this year and possible ways to improve their economic security and resiliency in an economy reshaped by the pandemic.

The COVID-19 recession and the recovery that followed disproportionately affected mothers, particularly those who are women of color. Many challenges persist and threaten these women’s economic security. Day care closures and reduced operating hours, and virtual schooling continue in many areas, while mandatory quarantine periods and test-to-return policies affect the work schedules of parents whose children are exposed to the virus in their classrooms. Additionally, inflationary pressures may challenge families’ ability to pay for child care because they must devote more dollars to other expenses.

The pandemic highlighted that access to stable quality child care is essential. For example, lack of access to child care continues to be an important barrier to mothers’ economic participation. Moreover, in this blog post we suggest that child care is a public good, and investing in it accordingly can strengthen the broader economy and provide relief for labor market shortages. We conclude by examining the policy environment that is needed to help mothers and their families achieve economic security.

Child Care Is Critical to Mothers’ Workforce Engagement

Regardless of the health of the U.S. macroeconomy, prime-age (ages 25-54)The statistics in the remainder of this section refer to prime-age (ages 25-54) adults. mothers are much more likely to step back from the labor force when their children are young (ages 0-4)Parents are grouped by the age of their youngest child. than are fathers. (See the figure below.) Some mothers may prefer to stay home to care for young children, though others may feel constrained because of gender norms, economic pressures, lack of affordable and available quality child care, the inability to take paid leave, an inflexibly demanding job, and a multitude of other reasons.

Prime-Age Mothers with Young Children Step Out of Labor Market

SOURCES: Integrated Public Use Microdata Series, Current Population Survey (IPUMS CPS) data and authors’ calculations.

NOTE: Prime age is considered 25-54 years old.

Lack of a supportive care system in the U.S. is an important explanation for mothers’ lower labor force participation rates. This issue predates the pandemic, however. The U.S. Census Bureau’s Current Population Survey asks those who are not in the labor force but want jobs why they have not looked for work. In 2021, the most frequently listed reasons given by mothers of young children were family responsibilities and the inability to arrange child care. Better access to child care could thus affect employment decisions for mothers and improve gender equity among parents.

Access to quality care is also instrumental in increasing racial equity. Black and Hispanic/Latina mothers of young children are more likely than white mothers to say that they haven’t looked for work due to being unable to arrange child care, as is reflected in the next figure. Moreover, listing child care as a barrier to job-seeking has increased for all races and ethnicities during the recovery, suggesting difficulties continued. Addressing this challenge could make a meaningful difference for many mothers, increase their engagement with the workforce and help alleviate current labor market shortages.

Child Care Pressures Block Some Black and Hispanic/Latina Mothers from Work

SOURCES: IPUMS CPS data and authors’ calculations.

NOTE: These statistics refer to mothers, of young children, who want to work but have not looked for a job in the past four weeks.

Child Care as a Public Good

Our economy expands with higher labor force participation; it thus benefits us all to have more people in the workforce, as panelist Kathryn Edwards discussed at an October 2021 Federal Reserve research seminar. Prioritizing reliable child care can accomplish this by pulling more mothers into the workforce and increasing productivity among employed parents. This also could translate into greater tax revenue: One study found families forgo $8.3 billion in wages (PDF) per year because of a lack of child care, which means the government misses out on taxing that income. Furthermore, consistent engagement with the labor force can mean more stable income, promotion opportunities and greater retirement security, and thus less reliance on public benefits.

The issue of quality, affordable child care affects not just working parents but the current and future economy as well. Children, particularly those from disadvantaged environments, who attend high-quality child care also see benefits that extend into adulthood. Research indicates these children have improved outcomes, including higher education and wages, better health and less involvement with the criminal justice system.

Public Investment Can Aid in Reimagining Childcare

Child care supports the economy, yet it remains unaffordable for many (PDF). Child care costs make up a significant share of a family’s total income, exceeding all other budget items (PDF) in every region except for housing expenditures in the West. Additionally, the expense of child care has been rising much faster than overall prices, putting additional stress on families’ finances. For example, in 2019, the national annual average per-child price of care was around $9,000 per year. While costs vary widely depending on geography, teacher-child ratios and other factors, these costs are approximately 14% of the U.S. median household income—twice what would be considered affordable.

Black families are more likely to cite cost as a barrier to child care than are white or Asian families. Additionally, Black and Hispanic/Latina mothers are more likely to work in low-wage jobs in the service and hospitality industry—working irregular hours, weekends and second or third shifts when child care is less available—and less likely to have access to benefits such as paid family leave or full medical benefits.

Already we have seen communities and states use coronavirus relief funds to stabilize the child care sector. In the Eighth Federal Reserve District,The Eighth District includes all of Arkansas, eastern Missouri, southern Illinois, southern Indiana, western Kentucky, western Tennessee and northern Mississippi. states like Arkansas and Missouri seek to use the additional funds from the American Rescue Plan to provide financial incentives to support teachers and staff. This is significant given the research that supports the benefits of stable, quality child-teacher interactions and the connection sufficient wages and benefits have in retaining staff.

Another financial incentive includes increasing subsidies based on enrollment rather than attendance—a policy that allowed child care providers to access reimbursement funds even when a child was absent due to being sick or having to quarantine. This practice allowed states to pay providers in advance to reserve capacity and serve eligible families, or base reimbursement payments on provider enrollment or capacity instead of attendance.

Child Care in 2022 and Beyond

The economic benefits of affordable, quality child care are clear. Keeping women engaged in the workforce when their children are young promotes productivity, ensures that economic potential is fully utilized and generates economic growth. COVID-19 relief funds provided an infusion of child care relief and recovery resources, the momentum from which will be only temporary as these funds expire.

Workers, as well as the overall economy, could benefit from a more equitable and sustained approach to addressing long-term child care challenges, many that existed prior to the pandemic. As policies such as expanding parental leave and universal pre-K programs are considered, examining how these policies can be equitable and support those most affected—like Black and Hispanic/Latina mothers—could have both immediate and long-lasting economic benefits for families and communities for generations.

Notes and References

1. The statistics in the remainder of this section refer to prime-age (ages 25-54) adults.
2. Parents are grouped by the age of their youngest child.
3. The Eighth District includes all of Arkansas, eastern Missouri, southern Illinois, southern Indiana, western Kentucky, western Tennessee and northern Mississippi.