Build Back Better: A Recipe for Higher Child-Care Prices

P resident Biden is facing an unusual problem: His economic advisers may have been right about some things. Among them is that lower child-care costs can lower inflation by allowing more parents to work rather than stay home. A decline in the overall cost of labor could reduce consumer prices. President Biden himself, his Council of Economic Advisers, his director of the National Economic Council, and his secretary of transportation have all voiced some version of this notion. President Biden’s problem? The Build Back Better Act passed by the U.S. House of Representatives would significantly raise rather than lower child-care costs. If the Biden administration’s own reasoning about child care’s role in inflation is correct, then the Build Back Better Act is inflationary.

The inflationary poison pill in the Build Back Better Act’s child-care legislation, highlighted by Matt Bruenig in The Atlantic, is a sweeping proposal to regulate compensation so that workers in child-care settings (e.g., care for infants and toddlers) earn the same wages as workers in elementary schools. Specifically, the Build Back Better Act would use federal dollars to try to coerce states into ensuring that wages in its child-care facilities “are equivalent to wages for elementary educators with similar credentials and experience in the State.” Fortuitously, Bruenig also pointed out, the District of Colombia last month released a detailed and evidence-based analysis of what would happen to child care in D.C. if it adopted a virtually identical proposal. The timing is apparently a coincidence: D.C. ordered the study in 2018 legislation. That legislation required a District of Colombia office to analyze a proposal to require subsidy-accepting DC child-care facilities to offer “compensation equivalent to an elementary school teacher employed by the District of Columbia Public Schools (DCPS) with the equivalent role, credentials, and experience.” If that sounds effectively identical to the Build Back Better Act’s proposed tethering of the wages of child care and elementary school workers, that’s because it is.

The chart above shows the results of the District of Colombia’s analysis. In the lowest-end scenario, child-care costs per child would rise by $6,335. In the highest-end scenario, as Bruenig also points out, the cost would rise by $12,175. These numbers can be derived from Table 4 of the D.C. analysis. In between these low-and-high bounds, estimated per-pupil cost increases vary based on the teacher’s qualifications and type of child-care facility; relative pay gaps between day care and elementary-school teachers vary based on characteristics like these. In turn, in any one American community, whether the expected increase in child-care costs from the Build Back Better Act’s proposed regulation of child-care wages is greater or less than in the District of Columbia would depend on the size of its current gap between the wages of child-care and elementary-school teachers.

Circumstantially, then, the outlook for child-care costs in the rest of America is even grimmer than for D.C. This is because many child-care workers are affected by the minimum wage, and D.C.’s minimum wage of $15.20 is already more than twice the federal minimum of $7.25. If the minimum wage is any harbinger, then, child-care workers in D.C. are already relatively well paid compared with those elsewhere. If true, the estimated child-care cost increase shown in the chart for D.C. is less than it would be for many parts of America, were it to be estimated using the same methodology.

The chasm between the economic principles articulated in the Build Back Better “framework” of the Biden administration and the sad realities of the Build Back Better Act that the House of Representatives actually wrote does not make them any less sad. The Senate, to be fair, may yet amend the Build Back Better legislation to remove its most self-destructive measures, such as the proposed tethering of child-care and elementary-school wages that D.C. recently modeled. But it also may not. If not, according to the past statements of his own economic advisers, President Biden would be signing America up for higher inflation. He may well even end up signing it into law while telling the American people that it will lower child-care costs and, therefore, inflation. If so, he may put a twist on Marx’s quip that history repeats itself twice — “first as tragedy, second as farce.” History, it would seem, can be a tragedy and a farce at the same time.