Vance and Walz agree child care costs too much. Here are 3 reasons why it's so expensive.

By Venessa Wong

Democrat or Republican, no one is winning from the current shortage of affordable child care

The shortage of affordable child care emerged as a bipartisan concern between vice-presidential candidates Sen. J.D. Vance and Gov. Tim Walz during their debate on Tuesday night.

"This is the biggest issue, everybody listening tonight knows," Walz, the Democratic nominee as current Vice President Kamala Harris's running mate, said at the debate. "When I go to businesses, sure, they'll talk about taxes sometimes - but they will lead with child care, and they will lead with housing."

Vance, his Republican counterpart as former President Donald Trump's running mate, said: "One of the biggest complaints I hear from young families is people who feel like they don't have options, like they're choosing between going to work or taking care of their kids. That is an incredible burden to put on American families."

Monthly child-care expenses for families with two children have grown faster than overall inflation and now exceed housing costs around the country. The typical cost of care for one child was $11,582 on average in 2023, or 10% of income for married households and 32% of income for single parents, according to Child Care Aware of America. The Department of Health and Human Services considers child care affordable if it costs 7% or less of a household's income.

There are a number of reasons behind the soaring cost of child care - and none of them is related to pay levels for child-care workers. The median annual wage for child-care workers last year was $30,370, according to the Bureau of Labor Statistics - barely enough to cover basic necessities in many places. "Yet, families cannot afford to pay more, meaning the child-care sector needs substantial government investment to function adequately and eventually prosper," the Labor Department report stated.

In nearly every county in the U.S., "child-care prices were high relative to family income," according to a 2023 analysis from the Department of Labor. This disparity is "especially detrimental to maternal employment as mothers' employment drops in areas with more expensive child care, even in places where women's wages are higher."

Here are some of the factors contributing to America's burdensome child-care costs.

There are no productivity gains in child care

One of the issues the child-care industry faces is that it's not a business that can scale, or that benefits much from efficiencies as it grows. It is labor intensive, difficult to automate and subject to a host of regulations for health and safety reasons.

"In the economics jargon, humans are nonsubstitutable and achieving productivity gains (doing more with less) in child care is difficult. Wages are typically at least 60 [to] 85% of child-care-center expenses," the Cato Institute, a libertarian think tank, reported. "Rising costs and flatlining productivity is a recipe for child care becoming more and more expensive relative to other goods and services, so taking up a greater share of people's rising incomes."

There's an inadequate supply of child care

Child-care workers have been among the lowest-paid workers before, during and after the pandemic, according to the BLS. While employment in the industry has rebounded, low worker pay "raises the question about the ability of child-care centers to attract and retain workers in an already tight labor market," according to research from KPMG. Some states are rolling out government-funded universal pre-K programs, but "care for infants and toddlers is still lacking."

The problems with child care have to be addressed from "both the supply and the demand side. You can't expect the most important people in our lives to take [care of] either our children, or our parents, to get paid the least amount of money," Walz said during the debate. "We have to make it easier for folks to be able to get into that business."

Vance agreed, saying, "We just don't have enough resources going into the multiple people who could be providing family-care options." The Ohio senator had suggested last month that child-care costs could be lowered if grandparents took on more caregiving responsibilities, an idea that drew backlash from critics who said it wasn't realistic, especially without a plan to fund it.

Today, both parents work in a majority of married American households, often to make ends meet. Yet replacing the free labor that was traditionally provided by women at home has created a multitude of challenges.

"We are in this gigantic care mess in our country, because we don't value the critical work that care plays in all of our lives," Lauren Hipp, national director of early learning at MomsRising, a parent advocacy group that has endorsed Kamala Harris for president, previously told MarketWatch.

Vance's wife, a Yale-educated attorney, said she resigned from her job as a corporate litigator when he became the Republican nominee this year "to focus on caring for our family."

"Being a working mom, even for somebody with all of the advantages of my wife, is extraordinarily difficult," Vance said on the debate stage. "And it's not just difficult from a policy perspective. She actually had access to paid family leave because she worked for a bigger company, but the cultural pressure on young families, and especially young women, I think, makes it really hard for people to choose the family model they want."

There's a lack of government funding for child care

While former President Donald Trump has repeatedly asserted the need to cut federal spending, during last night's debate, Vance said that when it comes to solving the child-care crisis, "Unfortunately, look, we're going to have to spend more money." Trump suggested last month that revenue from increased tariffs could fund child care.

Vance proposed increasing child-care supply through government funding for noncenter-based care.

"Let's say you'd like your church, maybe, to help you out with child care. Maybe you live in a rural area or an urban area, and you'd like to get together with families in your neighborhood to provide child care in the way that makes the most sense," he said at the debate. As it stands now, "You don't get access to any of these federal monies [for that]. We want to promote choice in how we deliver family care and how we promote childcare."

Walz responded that while it is not realistic to fund child care through tariffs, "I don't think Sen. Vance and I are that far apart. I'm not opposed to what he's talking about on options."

-Venessa Wong

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10-02-24 1503ET

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