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Childcare costs accelerated throughout the pandemic. Many parents are now worried that there will be another surge in 2024.
A new Care.com survey of U.S. adults paying for professional child care finds that more than half of respondents expect their child care costs to increase by $7,000 this year, or more than $600 per month. It has been found.
They predict that the main reason this will happen is due to the expiration of pandemic-era safety nets that helped stabilize the child care industry across the United States. Labor shortages at daycare centers are also expected to put upward pressure on prices.
As prices for everything from food to housing have soared for years, American families are increasingly burdened by the costs associated with caring for children.
Over the past decade, child care costs have risen about 36%, outpacing the rise in inflation during that time, according to data from the Bureau of Labor Statistics.
The annual increase in these prices during December was 4.5%, which was also higher than the overall inflation rate.
Some economists and experts worry that these accumulated costs could spill over into the labor market and economy by making it harder for some parents to continue working and curbing consumer spending. That means there is.
“This is a major economic issue for America,” said Brad Wilson, CEO of Care.com.
Nursing care costs
How much of a burden is that on Americans? Last year, her family spent nearly a quarter of her household income on childcare, and more than a third of her family poured into savings to cover the cost, according to Care.com.
According to data from Care.com, full-time in-home infant care with a nanny costs an average of $39,832 per year per child. It’s even more expensive in cities like New York and San Francisco, which can exceed $48,000 and $58,800, respectively.
Day care is also expensive, averaging over $15,000 per year for infants. In expensive cities like Washington, DC, it can be as much as $22,000 per year.
There are signs that these costs are starting to burden some households. Customer bank account data analyzed by Bank of America (BAC) shows that households that pay for child care are spending it at a slower pace and adding to their savings faster than other households. .
Bank of America said average child care costs per customer household have increased more than 30% since 2019. Middle- and high-income households with annual incomes of $100,000 to $250,000 saw the biggest increases.
Bank of America economist Anna Zhou said the increase may be forcing some parents out of the workforce. You may not be able to provide the level of care your children need.
“We know that just because families don’t come to work, tens of billions of dollars come out of the economic ecosystem,” said Care.com’s Wilson.
retaining women’s employment
Many experts are paying attention to the female labor force participation rate. The majority of absenteeism usually affects women. A U.S. Census Bureau analysis found that women are more than 80% more likely than men to take time off from work to raise children.
Due to a tighter job market and more flexible working from home, female labor force participation rate hit a record high of 77.8% in 2023.
However, this percentage has declined slightly in recent months. And even with a participation rate of 77%, it still lags behind other rich countries. The U.S. ranked last among the 15 countries with the largest GDP per capita in 2023, according to a Department of Labor report.
But there are some signs of relief for struggling parents. As part of broader economy-wide price weakness, the rate of increase in childcare costs began to slow in the second half of 2023, from 6% in July to 4.5% in December. And over the past decade, wages have increased faster than childcare costs.
Nobel Prize-winning Harvard University economist Claudia Goldin said, “Generally speaking, child care costs will rise with a woman’s income.”
“And the more we continue to say we want our children to be taken care of by intelligent, capable, health-conscious, knowledgeable individuals, the more highly educated women will earn more.” Goldin added. Women’s labor force participation and the evolution of the gender wage gap in the United States.
Goldin said the country needs big economies of scale to make child care more affordable. She cited Sweden as an example, where childcare costs are subsidized by taxpayers.
When a couple has a baby, both parents receive paid leave for the first year to care for the child. When a child enters a nursery school, a subsidy that covers two-thirds of the cost is provided until the child turns 4 years old. As a result, Sweden’s female labor force participation rate is in the 90s.
“If you want very good care for your children, the price is not too high,” Goldin said.
aid from washington
In the United States, Care.com offers savings plans that allow families to save up to $10,500 per year before taxes to care for eligible dependents.
Unlike previous attempts in Washington to address the issue, this plan will not expire. In 2021, Congress passed the American Rescue Plan Act, which includes $24 billion in grants to help stabilize the child care industry and nearly $15 billion in grants to help families access care. .
This helped day care centers, which were struggling with staff shortages and low profit margins. Some stores were unable to stay open during the pandemic and had to close, putting further pressure on prices.
But funding from Congress expired at the end of September, and the bitterly divided U.S. government is unlikely to provide similar aid again.
There are new hopes that a bill currently under consideration could provide more funding to families with children. Lawmakers recently announced a bipartisan tax deal that includes an expansion of the child tax credit for low-income families.
The tax credit will increase from the current $1,600 per child to $1,800 in the 2023 tax year, $1,900 in the 2024 tax year, and $2,000 in the 2025 tax year, and will also be adjusted for inflation.
For it to apply to the current tax filing season, the bill must pass by the end of this month, a challenge for Congress.
“It certainly helps, but we’re only halfway there,” said Care.com’s Wilson.
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