Why Day Care for a Child Under 4 Costs More Than College

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To understand some of the difficulties facing America’s families today, you need to examine only one shocking data point: Day care for a single child under age four costs more than college and just about the same as monthly rent. At least that’s according to a recent report by the New America Foundation.

I’ve spent a lot of time writing about how average salaries don’t support purchase of average-priced homes across the country, why inexpensive starter homes are disappearing and how that’s driving Americans nuts.

But young parents have it even worse. The New America Foundation report laid out the stark statistics:

• The average cost of full-time care in child care centers for all children ages zero to four in the U.S. is $9,589 a year, higher than the average cost of in-state college tuition ($9,410).

• In four states — Kentucky, Montana, Oregon and Wisconsin — the cost of full-time care is more than the median rent in the state. In 11 states—Idaho, Illinois, Iowa, Kansas, Massachusetts, Michigan, Minnesota, Ohio, South Dakota, Vermont, Washington — and the District of Columbia, full-time care is greater than 90% of the typical cost of rent.

• Full-time infant care in centers ranges from a low of $6,590 in Arkansas, about 15% of median income, to a high of $16,682 in Massachusetts, where it costs one quarter of the median income.

• Full-time in-home care costs range between $25,774 a year in Wisconsin and $33,366 a year in Washington, D.C.

Consider now that these data points reflect the costs of a single child — families with siblings see those numbers rise accordingly.

For parents of the 12 million kids in America who are too young for kindergarten, the numbers simply don’t work.

Brigid Schulte, author of the New America report and director of the advocacy group’s Better Life Lab, had something perhaps even more shocking to say about her data: It isn’t new.

“Child care costing more than college … it’s not like that’s a new statistic,” she said. “The Economic Policy Institute had it, for example. But it just doesn’t seem to sink in.”

In my discussion of what I believe to be the broken housing market, I have often cited data showing that housing prices have risen far faster than incomes, which shouldn’t happen in a normal market. Prices of goods should rise roughly in line with the amount of money chasing after those goods. This disconnect, which has many causes, is the source of much strife for American families.

Child care is an equally broken market, and perhaps with even more dire consequences. While families are paying exorbitant prices to provide care for their children, child care workers barely earn more than the minimum wage. This contributes to high turnover — workers sometimes leave for more pay at fast-food restaurants, Schulte said — and quality issues.

With parents paying so much, why are workers paid so little? It’s a simple math problem, Schulte said.

“There’s a lot of misunderstanding out there … It’s about bodies. About labor costs. To have a high quality infant care, you need a ratio of 1:4. For toddlers, 1:6. Compare that to a kindergarten teacher who might have 1:12, or an elementary school teacher who might have 20 or even 30 kids,” she said.

While some large child care providers that contract with corporations earn decent profits, the punishing mathematics of child care mean most outfits are mom-and-pop operations clinging to thin profit margins. It’s a recipe for stress.

“We are subsidizing child care on the backs of paying low wages,” Schulte said. “We are limping along in this system where we pay the least we can [to workers], and the vast majority of child care in America is mediocre at best. And a portion of it is dangerous.”

In such an ad-hoc system, parents understand well the stress of finding day care for their kids. But a different study suggests they don’t understand its shortcomings. NPR, the Robert Wood Johnson Foundation, and Harvard T.H. Chan School of Public Health released survey results earlier this month showing a stunning disconnect about perceptions of child care quality. Far more than half of parents in the NPR poll (59%) rated their child care as “excellent.”

But experts think otherwise. The National Institute of Child Health and Human Development Study of Early Child Care and Youth Development, for example, found in 2006 that less than 10% is “very high” quality. Other expert studies have come to similar conclusions.

This could be simple confirmation bias at work — once parents find a child care solution for their families, they nearly have to believe it’s good. Other data in that study suggest why. When asked for the reasons they chose a child care provider, “location” ranked highest at 27%, with “cost” at 18%. “Trustworthy” was mentioned by 20% of parents. “Well-trained providers” was only 12%.

Families of young children are sensibly prioritizing getting through the day.

The fragility of the arrangement is clear from the study as well. A routine, occasional illness can put the family income in peril. Three out of four employed parents faced with a sick child said they had to miss work, and nearly half (47%) said it had an impact on their job. Of note: Mothers are more than three times more likely than fathers to stay home when a child is sick.

The study’s authors say that has more to do with work flexibility than gender, but traditional views on gender also play a role.

America’s seeming stubborn refusal to deal with the child care crisis has roots in such gender issues, Schulte argued. From the first efforts to establish early childhood programs in the 1970s through today, there’s been reluctance for the government to subsidize efforts that would encourage women to leave their young children for work, she said, or to challenge the traditional breadwinner-homemaker family structure. But that debate has been overtaken by reality: A majority of kids grow up in households where all parents or guardians work, in all regions of the country, the New America report said.

Schulte argued Americans need to think of early child care as education; plenty of studies show critical brain development occurs in the years before public school kicks in. Studies show kids who show up behind on the first day of kindergarten often don’t catch up to their peers, she said. While the wealthiest families find a way to pay $10,000-per-child bills for high quality child care, most of America cannot.

“There is no education in the U.S. that is not subsidized — even private education is subsidized — except early childhood,” she said. “But we have to think of that as education … that is the time your brain is developing the fastest.”

Americans need to consider the broad consequences of kicking the issue down the road, she said.

“What we have now is a crazy patchwork, a fragmented unsustainable system that is a factory for inequality,” she said. “We are creating inequality from the very start. The achievement gap that shows in high school … can be traced back to the gap on the first day of kindergarten. Those zero to five years are really critical.”

Surprisingly, this year’s otherwise incendiary presidential election season gives Schulte a glimmer of hope. Both Donald Trump and Hillary Clinton have talked about the need for family-friendly policies such as parental leave. That might mean America is finally primed for a national discussion on early childhood issues.

“This brings up a very deep-seated argument about the role of government in the U.S.,” she said. “But there is a sea change right now in that both the Republican and Democratic candidates are saying the government should be involved in child care.”

[Editor’s Note: If you’re thinking of applying for a mortgage, it’s a good idea to take a look at your credit first. A good credit score can help you qualify for the best terms and conditions on the loan. You can do this by pulling your credit reports for free each year at AnnualCreditReport.com and by viewing two of your credit scores, updated every 14 days, for free on Credit.com.]

Image: David Clark

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The 10 Cheapest States for Day Care

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So you did your research, filled out applications and survived the interview process. Congratulations! Your child is off to the best day care in town. (Yes, day care is now this involved. It certainly wasn’t like that when we were kids!)

But with this accomplishment comes a seriously hefty price tag. The Economic Policy Institute recently released data about child care costs in the U.S. that found 33 states, plus Washington D.C., have day care facilities that charge more than college tuition for a four-year public school. That’s mind-blowing, especially for families with more than one kid.

Fortunately, some states’ child care won’t set parents back more than the cost of a mortgage. Using annual child care cost data from the Economic Policy Institute’s study, along with their stats on annual housing, we’ve listed 10 of them here.

10. Oklahoma

Annual child care costs: $6,788

With the average annual cost of housing at slightly more than $8,200 in Oklahoma, child care costs 17.2% less than average rent in the state.

9. Wyoming

Annual child care costs: $6,541

Wyoming parents face child care costs around $2,785 more per year than the cost of in-state tuition at a local college.

8. South Carolina

Annual child care costs: $6,475

Sending your little one off to child care in the Palmetto State costs around $70 less than in Wyoming, but it will still take about 12% of an average family’s income.

7. Kentucky

Annual child care costs: $6,294

In Kentucky, families look at around $525 of their annual salary going to child care each month — and that’s just for one child.

6. Arkansas

Annual child care costs: $5,995

In Arkansas, minimum-wage workers dropping their little one off for the day would need to work full-time for 19 weeks straight just to pay off the costs of child care. (For more tips on saving without feeling miserly, go here.)

5. Tennessee

Annual child care costs: $5,857

The average cost of housing in the Volunteer State is just more than $8,600 annually, which means caring for a child costs 67.8% of rent in the state.

4. Louisiana

Annual child care costs: $5,747

Parents working to pay for expenses like child care would need to earn minimum wage for 20 weeks on a full-time basis in order to pay for one year of child care — and the costs would still take more than 10% of their income.

3. South Dakota

Annual child care costs: $5,661

While annual housing costs in South Dakota ($8,120) are just $400 more than the average cost of in-state tuition, child care is right up there. In fact, care for one child can take almost 10% of a family’s income. 

2. Alabama

Annual child care costs: $5,637

Although it has one of the lowest price tags in the nation, Alabama still sees residents facing child care costs that are 33.7% less than in-state tuition at a local four-year college. (Read up on how to pay for college without creating a mountain of debt here.)

1. Mississippi

Annual child care costs: $4,822

As the state with the lowest child care costs, Mississippi still sees parents pay around $400 each month to send their little ones to child care.

To think these numbers are tied to the cost of sending toddlers to preschool seems ridiculous, but to put it in perspective, Washington D.C., has the most expensive preschool costs in the nation, at $22,631 per year. Massachusetts has the second-most expensive costs for preschool, at $17,062 per year.

The numbers don’t lie — paying for child care can get expensive and some parents who want the best for their kids may even overextend themselves financially. Just remember — maxing out credit cards or taking on debt to pay for child care can seriously damage your credit. You can see how your credit card balances are impacting your credit scores for free on Credit.com.

More Money-Saving Reads:

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