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How Much Are You Paying for Child Care? Maybe Not as Much as You Think

Preschool_iSTOCK.jpgFor many early-childhood advocates—and parents of young children—it's an unquestioned assumption that child-care costs are spiraling out of control.

To bolster that view, many cite a Census Bureau survey of parents and child-care arrangements, the results of which are gathered into a periodic report issued by the Bureau called Who's Minding the Kids? The most recent report was released in April 2013, and found that families were paying an average of $143 per week for child care in 2011, compared to $84 a week in 1985 (adjusted for inflation to match 2011 dollars.) That's an eye-popping increase of about 70 percent over that time period. 

But a new analysis of those Census-collected data by Arizona State University associate professor Chris Herbst, turns that narrative on its head.

To be sure, child-care costs have gone up over the time that Herbst examined, 1990 to about 2011. But the cost increase is a much more modest 14 percent, not the 39 percent increase that the Census Bureau reports for that particular time period. And it's not equally borne—rich families and families with preschool children are the ones who have seen their costs increase the most.

"I, like many people, just accepted as an article of faith that the cost of child care is a runaway train," said Herbst, who teaches in ASU's School of Public Affairs. His 80-page paper, "The Rising Cost of Child Care in America: A Reassessment of the Evidence," was published Thursday on the website of the Institute for the Study of Labor, an economic research institute in Bonn, Germany. 

"Frankly, a lot of the extra length of the paper is me trying to convince myself that what I found is true," he said. 

Different Analysis

So why are Herbst's conclusions so different from the figures produced in the Who's Minding the Kids report? 

One choice Herbst made was to find the median of the child-care costs collected by the Census Bureau survey, rather than report an average, as the Census report does.

Over the years that the Census Bureau has gathered these figures, there has been a small number of outlier families who pay more than average for their child care—sometimes a lot more. The influence of these high-paying families has made the average less representative of typical household expenses, Herbst said. 

A second analytical decision was to express child-care costs per hour of employment by the household's primary caretaker. So, if that caretaker works 40 hours a week and pays $100 per week in child care, the cost of child care per hour worked is $2.50.

"One of the things I wondered is if the typical parent today works more hours a week than the typical parent back in 1990," Herbst said. If so, then child-care expenses would indeed go up for that hard-working household—but that cost increase would be driven by needing more care, not by a day care center hiking its prices. Expressing the child-care costs per hours worked eliminates that factor. 

Rich Families Paying More

Herbst found that the median cost of child care in 1990, per hour worked, was $2.27. In 2011, it was $2.59, an increase of 14 percent. 

Digging deeper, the numbers showed that much of that cost was linked to higher costs for preschool-aged children. Costs for younger children rose from $2.67 to $3.45 per hour of employment by the household's primary caregiver, for an increase of 29 percent. Costs for families with school-age children actually went down 8 percent from 1990 to 2011—$1.34 to $1.24.

And affluent families really saw an increase in child-care prices. Their median expense rose from $3.34 to $4.93 per hour of employment by the household's primary caregiver. In contrast, the households in the lowest quartile saw costs rise from $2.23 to $2.46, or 10 percent.

That could be good news or bad news, Herbst says. The various subsidies and other programs for lower-income families could be successfully keeping child-care costs down, as intended. But, if cost of care is directly related to quality of care, it could also mean that rich families are able to access super-high-quality child care that poor families have no chance of being able to afford, even with subsidies. Both of these factors could be present here, he said. 

(In the Census data, the top quartile families earned $8,056 or more a month in 1990, and $8,630 or more a month in 2011. The bottom quartile families were earning $3,579 or less a month in 1990 and $2,895 a month or less in 2011. All figures are expressed in 2013 dollars.)  

Census Response and Implications

Lynda Laughlin, a family demographer at the U.S. Census Bureau and the author of the most recent Who's Minding the Kids report, said she has read Herbst's paper and finds its conclusions valid. Calculating the average child-care costs has been the bureau's usual practice, but "I agree we should probably be presenting the median as well," she said.

The next report from the Census Bureau will likely do that, though it will look different from previous reports because the bureau has revamped many of its survey questions, Laughlin said.

Herbst said that even if the price for child care has not jumped as high as many people think, the nation's child-care system could still use an overhaul.

"If there's a child-care crisis, it's not a child-care cost crisis—it's a child-care quality crisis," he said.

One idea he has is to scrap our current system of giving subsidies to families based primarily on family income. Instead, a broad cross-section of families could get financial assistance, with more assistance available for families who select higher-quality care. That way, lower-income families could have a chance to access high-quality care that they can't get now. And with more families looking for high quality, the market for good child care could ultimately grow. 

Child-care providers "like most other businesses, will respond to changes in demands," Herbst said. "Parents, as the consumers, have to be the first movers in this chess game."

If you'd like to follow Herbst on Twitter, click 

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