Why Childcare Is So Expensive In The United States
(hint: it’s not lack of supply)
Last night in the United States Vice Presidential Debate, U.S. Senator J.D. Vance stated that “…unfortunately, look, we’re going to have to spend more money. We’re going to have to induce more people to want to provide child care options for American families because the reason it’s so expensive right now is because you’ve got way too few people providing this very essential service.”
After working as a strategist for KinderCare, one of the largest providers of childcare in the United States, I can tell you that this is decidedly not the reason why childcare is so expensive. Childcare is so expensive because… the math isn’t mathing. In other words, because of government controls, childcare is not a viable business model.
In the United States, every state sets standards for what are called “ratios” in childcare. These ratios describe the number of children that any given caregiver is permitted to care for at a given time. These numbers typically vary by age. In this article, I’ll focus on infant ratios, since infant care is the most costly childcare in the United States.
Most states allow that one professional caregiver may care for up to three infants under age 1 at a time. Some states have higher ratios, however, common sense tells us that a 3:1 ratio of babies to adult is probably pushing it. While advances in technology have made it so that we don’t have to worry about whether or not three babies are going to get fed when being cared for by one caregiver, a vast body of research suggests that we should continue to be concerned about the quality and quantity of attention that an infant is getting from their caregiver.
In the United States, according to the Center for American Progress, American families will pay, on average, $16,000 USD for childcare in their baby’s first year of life. If an individual caregiver provides care for three such babies, the net revenue would be $48,000 USD. That’s before factoring any costs in, like rent, utilities, toys, curriculum, and personal expenses like healthcare.
According to the MIT Living Wage Calculator, the only person who would be able to survive on such an annual wage is someone with no children themselves. What an irony, that we would expect people to sacrifice having their own children in order to care for the children of others.
Senator Vance is right. We’re going to have to spend more money. But it’s not to induce more people to provide this service. This is not an economic model where you increase the supply and the cost decreases, because it’s not a free market. The government controls on how many children may be cared for by a single caregiver. These controls are very reasonable and are designed to keep children safe, but result in expensive childcare.
This brings us to an important question: do we really want childcare to be objectively cheap? Last night in the Vice Presidential debate we heard that the U.S. Federal Reserve says that Americans with children will spend nearly as much on childcare as they spend on housing each month. We continue to talk about how expensive care is, but no one seems to have a perspective on what exact value we place on caring for the next generation of citizens of our country.
I don’t have the answer (yet), but let’s do a few quick cost comparisons that might help you form an opinion on this. The cost of a room in a nursing home is ~$104,000 USD per year, according to the National Council on Aging. the average length of stay is just 1 year, but over 20% of residents will stay for 5 years or more. On the other hand, children are in childcare for up to 5 years, which would cost $80,000 USD total, except that the cost decreases year over year due to increasing ratios.
Maybe you are thinking that the cost of long-term care is too niche of a comparison. Let’s look at a more mainstream expense for American families: their cars. The average price tag on a new car is close to $50,000 USD in 2024. We justify this expense as an investment, yet we balk at the relatively similar expense of childcare over the course of 5 years (when adjusted for decrease in cost over time).
Childcare is expensive in the United States because childcare is valuable. It is necessary, like long term elder care, and yet also an investment, like a new car. But unlike those comparisons, it is not efficient, it is not a viable business model. It is not meant to be. Childcare is akin to a public good, because we all benefit when our future citizens are well cared for. Those future citizens are going to keep our country running, are going to solve the world’s pressing problems, and will care for us when we are old (we hope).
So yes, we are going to have to spend more money, so we can ensure that our future citizens are being cared for by people who desire to care, who are trained to care, and who are supported to care. And yes, therefore hopefully increasing the supply of childcare, which is a current challenge in its own right.
However, we are not going to be able to inject some cash into this system, jump start the supply, and expect the problem to be solved. Whatever value we ultimately place on the critical task of caring for children, someone is going to have to pay the price, either American families, their employers, or the government. The current value that we place on care is less than the living wage for the caregiver in most cases. What’s the value that you put on childcare?
