Policy-makers should shy away from efforts to nationalize child-rearing.
Despite growing bipartisan enthusiasm for more government spending on child care, cutting red tape is a better fix for high costs.
S hould the government be paying for child care? Senator Mitt Romney (R., Utah) sure thinks so. He has recently introduced a child-care plan that would see the federal government sending most parents checks of up to $350 per month per child.
Romney’s plan is just the most recent episode in a burgeoning and bipartisan effort to expand the role of the federal government in American family affairs. The Biden administration’s American Families Plan includes federally mandated paid leave, a massive expansion in child-care subsidies, and expanded tax credits, much of which was not paid for with corresponding revenue.
But it isn’t just progressive policy-makers who are driving this agenda. Non-left advocacy groups are also calling for these policies to be implemented, while conservative policy-makers have recently introduced legislation to expand Child Tax Credits (CTC) and fund paid leave by pulling from already financially fragile Social Security funds.
However, few of these proposals do anything to address the underlying driver of high child-care costs — namely the dwindling supply of care providers. Instead of throwing money that we just don’t have at the problem, policy-makers would do better to remove the regulatory hurdles that are keeping prices high and potential care workers jobless.
For example, child-care costs are significantly higher in cities and states that mandate low child-to-staff ratios — the maximum number of children one staffer can supervise. A 2015 Mercatus Center study found that raising the ratio by one reduces costs by up to 20 percent.
Licensing burdens also play a big role in limiting the supply of child care and driving up costs. An analysis by the Institute for Justice found that 44 states require a license to start a child-care business, and 24 states require staff to hold a high-school diploma. Some states charge up to $300 in licensing fees, and it can take a year or longer to get a license.
Parents don’t need a government mandate to tell them they need to be able to trust the people caring for their kids while they’re away. Those who are willing and able can pay a premium to send their children to a center where staff have college degrees. But what about people who need a more affordable option? They ought to be able to hire a nanny or an experienced care provider, regardless of whether that person has finished high school. Mandates and requirements limit these options, shut out workers, and increase prices.
Proposals for free child care often include a mandated “living wage” rate for child-care workers. According to the Massachusetts Institute of Technology’s living-wage calculator, the hourly living wage for a single mother of one child is $51.91 in San Francisco, and $28.13 in Memphis.
Far from improving child-care affordability, Rachel Greszler of the Heritage Foundation estimates that the living-wage requirement alone could increase child-care costs by between 50 percent and 75 percent, depending on the interpretation of “living wage.”
Another problem with proposals for child-care affordability is the regressive nature of such policies in action. The federal focus on child-care centers will ultimately benefit high-income families, not the poor. According to survey data, 57 percent of parents prefer child care from a parent or relative, while 22 percent prefer full-time paid child care. Among those with low income, 67 percent prefer family care and only 14 percent prefer full-time paid care.
Paid-leave programs in particular disproportionately benefit high-income families. A study by the Center for Poverty Research found that the median beneficiary of California’s paid-leave program makes about $10,000 more than the median working California woman. Similarly, a 2019 Berkeley survey of employed women in San Francisco found that 79 percent of new moms with household income above $97,000 received government-provided paid leave, while only 36 percent with incomes below $32,000 received it — hardly the sign of a well-targeted anti-poverty program.
Child-care subsidies may also unintentionally encourage the disintegration of the family. Under proposed plans, for a couple with children under the age of five, being separated would save them over $10,000 per year in child-care costs compared to being married, according to University of Chicago economist Casey Mulligan. Strong marriages and stable families are one of the greatest preventatives of childhood poverty.
The regressive nature of paid-leave programs isn’t just observed in the U.S. either. A study of Canada’s leave program found that primarily high-income mothers receive benefits from the government, while in the U.K., high-income mothers receive paid-leave benefits for far longer than low-income mothers.
Moreover, the popular claim that only around one in four workers have access to paid family leave in the United States is deeply misleading. The Bureau of Labor Statistics doesn’t count most instances of paid family leave due to its survey methods. For instance, many parents take paid leave after giving birth or adopting a new child by pooling their employer’s parental leave, sick leave, vacation, and disability. A national survey of employed mothers finds that almost two in three were provided with some form of paid maternity leave.
Then there’s the issue of sole proprietors or independent contractors, who make up a fifth of the American workforce. Many of them choose not to opt into their state’s insurance programs. Mandated paid leave will force these workers to take on additional costs for a benefit they may never receive.
Parents should be allowed to hire in-home care providers without being required to treat providers as a household employee. Currently, if a babysitter or in-home childcare provider is paid more than $2,400 a year, Social Security and Medicare taxes must be paid, and various rules and regulations must be complied with. Such barriers should be lifted to allow for more flexible in-home arrangements.
At the state level, policy-makers should increase child-to-staff ratios to reduce the costs of care centers. Ratios can be raised to at least 6:1 with no risks to childcare quality or safety.
Finally, policy-makers should reject proposals for increasingly stringent education and licensing requirements, as well as “living wage” proposals that only work to reduce the already dwindling number of available care providers.
Policy-makers should shy away from efforts to nationalize child-rearing. Instead, they should focus on real supply-side solutions to lowering costs for hard-pressed American families.