Yahoo Finance 'We are in a crisis now:' Childcare costs outpace inflation
Rising prices combined with the expiration of pandemic funds could leave some children without access to quality care.
Parents are drowning in childcare costs, and high inflation is adding to their laundry list of daily expenses.
According to a recent survey from childcare platform Care.com, the average cost to enroll a child in a licensed day care can set you back $16,692 annually in 2024, or $321 a week for just one child. Infant care in a home day care costs $230 a week, or $11,960 a year.
Meanwhile, the price of a full-time nanny stood at an average of $766 per week, tallying up to $39,832 annually.
One major reason for the uptick in childcare costs is inflation, the same force driving up consumer prices across the board. According to the latest government measure, the cost of day care and preschool rose 4.4% in March compared to a year ago.
While that’s slightly down from the 5.5% year-over-year increase reported in February, it’s still a struggle for millions of families.
The problem has worsened as some childcare centers have been forced to shut down or are at risk of closing following the expiration of pandemic-era funds.
“It’s frustrating to know there are clear solutions that could help families and that we are not making it happen,” Ailen Arreaza, executive director at ParentsTogether Action, told Yahoo Finance. “Families are in dire need of additional investments in childcare. Childcare is absurdly expensive in our country, and people are struggling.”
Exceeding the cost of college
The cost of childcare accelerated during the pandemic, but in some areas, those costs now surpass the price tag of a college education.
In New York, the average cost of infant care is $15,394 annually per child, or $1,283 per month, according to the Economic Policy Institute. For a four-year-old, those expenses average $12,358 a year, or $1,030 each month.
Meanwhile, in-state tuition for a four-year public college in New York is just $7,938.
Across the US, there are 33 states where childcare is more expensive than college, the Economic Policy Institute found. In some areas, infant care can set you back tens of thousands of dollars more than a college education.
In Washington, D.C., childcare costs $18,487 more than in-state tuition for a four-year college.
“To think that … paying for childcare costs more than it would to send your kid to college is wild,” Arreaza said.
And parents across the country are taking out big chunks of their daily income to afford day care.
For example, a typical family with an income of $69,651 in New York would spend 22.1% of their annual income on childcare, while minimum-wage earners, making about $24,544, would spend 62.7% of their annual income on infant care.
According to the US Department of Health and Human Services, childcare is affordable if it costs no more than 7% of a family's income. By those measures, only 9.4% of New Yorkers can afford infant care.
In other words, a minimum wage earner in New York would have to work full-time for 33 weeks just to cover one child’s day care costs, the Economic Policy Institute found. Even in New York City, where the minimum wage is $15 — it would take about 26 weeks to afford childcare for one infant.
And parents are doing everything they can to just make ends meet.
“Childcare is too expensive. With a full-time job, I make too much to get government assistance,” said Amy Funes, parent of a 2-year-old in Queens, New York. “Then, when I got government assistance and worked during a seasonal position, they took me off food stamps. I was still not making enough money, but it was too much to keep my benefits.”
Funes works as a social worker and earns $35,000 annually. That’s too much to qualify for basics like the Supplemental Nutrition Assistance Program (SNAP), where a household size of three, for example, would have to earn under $32,328 to receive those benefits.
Read more: Child tax credit: Everything you need to know for the 2023 tax year
Following the 'childcare cliff’
Any parent will tell you that childcare costs are getting out of hand.
Some 70% of parents surveyed by Care.com said that childcare was more expensive last year. Families also reported that they were spending, on average, 24% of their income on childcare expenses. Nearly half said they were spending more than $18,000 annually.
However, while inflation has taken its toll on households, it is only part of the larger equation.
The childcare industry experienced what many have come to call the “childcare cliff” last year. That was the end of the $24 billion in pandemic-era federal funding for 220,000 childcare providers.
The US Department of Health and Human Services found that the pandemic aid helped save more than 1 million early educator jobs and helped 9.6 million children keep their spot in day care.
That aid expired in September 2023, and the impact has come in waves.
The Century Foundation, a progressive think tank, projects that nearly 70,000 childcare programs could close due to the steep drop off in federal funding. As a result, approximately 3.2 million children will likely lose their access to childcare.
The childcare workforce, which has already been struggling to recover from the pandemic, is projected to lose 232,000 jobs. Furthermore, five states — Arkansas, Montana, Utah, Virginia, and West Virginia — and Washington, D.C., could see their licensed programs cut by half or more.
“It’s getting harder and harder to make ends meet, and childcare is a big piece of that,” Arreaza said. “We are in a crisis now.”
Gabriella Cruz-Martinez is a personal finance and housing reporter at Yahoo Finance. Follow her on X @__gabriellacruz.
