Contrary to the trend of cooling prices nationwide, the cost of preschool and daycare services in the US continues to surge, adding financial strain to parents already grappling with inflation. The situation is set to worsen as a federal grant program for childcare is slated to conclude at the end of September.
Recent data from the Bureau of Labor Statistics reveals that the average price for daycare and preschool across the nation rose by 6% in July compared to the previous year. This increase comes at a time when headline inflation indicated a 3.2% rise in prices over the prior year in July, and 3% in June – the lowest in two years.
The dual pressures of staffing shortages and the impending end of pandemic-related funding are anticipated to exacerbate the financial challenges faced by parents.
Brad Wilson, CEO of Care.com, a platform connecting families with caregivers, highlighted the heavy financial burden families are enduring due to these escalating costs.
The National Association for the Education of Young Children conducted a survey among childcare providers, revealing that 43% of childcare center directors and 37% of family childcare providers intend to increase tuition fees once the federal grants expire.
Childcare provider Bright Horizons reported that the discontinuation of government funds would negatively impact its upcoming quarter. Having previously received around $9 million in government funding, the company anticipates this figure to shrink to as low as $5 million as the program concludes.
The Century Foundation’s recent report estimated that over three million children could lose access to childcare services nationwide, potentially leading to the closure of around 70,000 childcare programs as federal funding diminishes.
Surviving providers are likely to raise prices to offset the funding loss, adding to the financial burden faced by families.
Currently, childcare costs account for approximately 14% of median household income, as stated by researchers at the Federal Reserve Bank of St. Louis. However, the expenses vary significantly based on factors such as geography, family size, and the age of children.
A Department of Labor report highlighted that childcare costs can range from $5,357 per year for school-aged kids in residential care in small counties to an average of $17,171 for infants in commercial daycare in big cities.
The situation is especially challenging for parents of infants, as their care requires more staff supervision and smaller group sizes. Parents with multiple children face compounded costs.
While childcare costs have surged across the country, California, Massachusetts, and New York emerged as particularly expensive areas. The Bronx saw the highest costs for center-based infant care, nearly consuming half of the average family’s income.
Amid signs of the Federal Reserve’s progress in tackling inflation, prices continue to rise for consumers, particularly affecting parents of young children.
Bright Horizons emphasized that increased labor costs and margins, coupled with higher wages and staff reliance, are putting pressure on the company. However, the childcare sector remains a low-paying industry, with childcare workers among the lowest-paid professionals in the country.
Despite the challenges, Chloe Gibbs, an economics professor at the University of Notre Dame, noted that the childcare market’s issues have persisted even prior to the pandemic. A persistent gap between the cost of quality childcare and affordable prices for families has persisted.
Experts predict that factors such as parents returning to in-office work, a shrinking pool of childcare workers, and rising wages could continue driving up costs. The pandemic led to the permanent closure of numerous daycare centers, exacerbating the childcare desert crisis and further constraining supply, which in turn raises costs.
Congress introduced the American Rescue Plan Act in 2021, allocating $24 billion in grants to stabilize the childcare industry and around $15 billion to aid families in affording care. However, these funds are due to expire at the end of September, and the divided state of Washington makes it unlikely to offer additional financial relief.
Democratic officials have urged President Joe Biden to address the end of childcare subsidies by including funds in an emergency spending package up for consideration next month.
Brad Wilson of Care.com stressed the need for more supportive state and federal policies to alleviate families’ financial burdens. He also emphasized that more employers should prioritize childcare benefits, treating them on par with health benefits.
In essence, the childcare challenge is a systemic issue, one that has been growing more severe. Without adequate childcare, parents’ ability to work is deeply compromised.