Why child care is so expensive when child care workers make so little—and what we can do about it

In 2017, my son began child care and I began my academic journey into understanding how child care works more deeply. Since then I have been in many situations in which other parents lamented the high cost of child care. “Why does my child’s teacher make so little when we pay so much?” they asked. I was invited to a Women’s Rights and Empowerment Network (WREN) event at which I began my talk about child care with asking the crowd how many of them had a difficult time getting their children into child care. Nearly all of the hands in the room shot up.

People wondered why child care was so inaccessible, and through my research, I’ve uncovered a lot. Here, I’ll share some of the answers to those questions: 1. why is child care so expensive, and 2. why does tuition continue to go up while child care workers make so little?

Why is child care so expensive?

Costs vary by state and city, especially facility costs and credentialing requirements. The budget estimates below were calculated based on minimal South Carolina child care center costs.

• Rent: Rent or leasing costs can consume a large part of child care expenses, including high-risk insurance rates and utilities for a child care center. Estimate about 16% of child care costs for rent.
• Classroom: May include educational supplies, classroom supplies, food, insurance, medical supplies and kitchen supplies. Estimate about 10% of the budget for the classroom.
• Office and Administrative Costs: May include office supplies and equipment, advertising, postage, Internet, telephone, professional fees, audit and legal fees. Estimate about 5% of the budget for office and administrative costs.
• Labor: The top expenses of child care are workforce-related (salary, unemployment, payroll taxes, benefits, training and others that differ between centers), which can consume 60-75% of a center’s budget.
  • Child care labor is costly in part due to the necessary quality and safety ratios required between teachers and students, which increases the younger the children are. For example, in South Carolina, the ratio for children ages birth-12 months is 1:5, while the ratio for 3-4 year olds is 1:12.

The average cost of child care tuition for four year olds in South Carolina is $500, and the median income of child care workers is $19,470. In the chart below (Figure 1), I added payroll taxes to the child care worker wages for a total of $21,612, then indicated increasing costs of child care operation compared to the cost per child, or tuition needed to break even.

Do child care workers receive benefits?

Some child care centers offer benefits, but they’re usually those that are federally-funded (Head Start) or affiliated with larger organizations like a church, university or a national child care center chain. Centers that are not funded or supported by additional streams other than tuition face greater difficulty in offering benefits or higher wages (compared to other child care centers).

Child care centers need more federal and state support in order to make ends meet, pay their workforce a living wage and offer benefits. Without federal and state support, much-needed wage increases and benefits will pass along the cost to already-burdened families. In turn, the workforce will be affected when families are forced to choose between earning an income or keeping a job.

To find out more about costs in your state, this helpful tool created by the Center for American Progress that will help you understand where your money is going, as well as how raising wages or offering different benefits adjusts the price of tuition.

Why does my tuition continue to go up, but my child’s teacher makes so little?

In the Figure 1 example, the monthly cost of your child’s teacher wage alone is about $1,800. Covering that cost would make tuition $150 per month for your four-year-old child. However, the rest of the operating budget must be covered, meaning that $734 is the break-even amount. Tuition under that amount would mean that your child’s teacher would make even less than what is already below the Federal Poverty Level (at 138%).

Currently, in the United States (US), the median income of child care workers is $24,230 but the Federal Poverty Level (FPL) (at 138%, the rate used to determine public assistance eligibility) for that same child care worker is only $20,040. The living wage for a family of 4 in the US was estimated to be $68,808 per year, before taxes, as of March 2020. Divide that living wage estimate by 2 for an idea of what the living wage would be for a family of 2: $34,404.

An estimate of the daily wage of child care workers is $66/day (at the $24,230 median annual salary), and the daily wage estimate for someone at 138% FPL is $55. This means that child care workers who are single parents with one child are making only $11.10 per day too much to qualify for getting assistance to access to healthcare (Medicaid) and other public assistance (e.g. SNAP, TANF, housing subsidies). This is especially troublesome because most child care workers do not have access to healthcare through their employers.

Child care centers are keeping their biggest operating cost (labor) as low as possible by paying your child’s teacher very low wages. Any increases would cut into the already-minimal profits or mean tuition increases—but we all know that child care costs to families are already unaffordable in many cases.

What you can do for child care centers in your state

A greater understanding of center costs in your state can be gained by using this tool developed by the Center for American Progress. Knowing the costs for your state can also help you in advocacy efforts to improve wages and benefits for child care workers.

Each state has its own standards for child care, but across the board, we can ask for federal and state funding to go to:

• Providing child care workers with bonuses now with the available COVID relief that has just been released to states.
• Medicaid access for child care workers at the 200% Federal Poverty Limit.
• Improving child care wages.
• When considering the $15 minimum wage increases, ask for additional funding or subsidies for child care centers so that they can accommodate this expense.

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