New study finds cost of child care is not out-of-control

A new report from Arizona State University asks a seemingly simple question: to what extent has the cost of child care in the U.S. increased over the past few decades? Interest in this question has grown considerably in recent years. Many parents and policy makers assume that child care costs have risen to an unsustainable level -- to the point of threatening family budgets. Public anxiety over this perception has led to a series of policy proposals at the state and national levels, all aimed at increasing the generosity of various child care subsidies.

Yet, there is little evidence to support the claim that the cost of child care has increased, or that it has become more financially burdensome for families. Perhaps the most widely cited evidence comes from a Census Bureau report entitled "Who's Minding the Kids?" which finds that between 1985 and 2011 families' weekly expenditures on child care rose from $87 to $148 (or 71%).

But an analysis of data used to make that claim shows that costs have remained the same or decreased for low-income households over that time frame. The study, by ASU School of Public Affairs associate professor Christ Herbst, found that while child care costs have increased for high-income families, the percentage of family income spent on child care for all families has remained the same for more than two decades.

Titled: "The Rising Cost of Child Care in the United States: A Reassessment of the Evidence," the new report draws on a large number of data sources to tackle this question from multiple angles. Specifically, it’s divided into three sections, each one investigating a different topic. Here is a summary of each section along with the key findings:

Section 1: Families' Child Care Expenditures
Analysis of survey data used in "Who's Minding the Kids?" to study the evolution in families' child care expenditures between 1990 and 2011.

            Key Findings:

  • The proportion of families that actually pay for child care declined substantially between 1990 and 2011 -- from 37% to 27%
  • Among those that pay, expenditures by the "typical" family increased 14% over this period. This is less than half the increase documented in "Who's Minding the Kids?"
  • However, there is a lot of variation across different types of families. For example, low-income families currently spend the same amount or less on child care, while high-income families spend considerably more.
  • Despite this divergence, families at all income levels allocate the same share of income to child care as they did several decades ago (10%). In other words, it appears that child care is no more burdensome today than it was 20 years ago.

Section 2: The Market Price of Child Care
Analysis of trends in the market price of child care.

Key Findings:

  • Over the past few decades, the market price of child care increased only modestly.
    However, this is a tale of two periods.
  • It appears that market prices increased persistently (though modestly) throughout the 1990s, and peaked in the early-2000s. Since then, market prices have been flat.
  • The overall conclusion is that the market price of child care in the U.S. has not increased in at least decade.

Section 3: Supplementary Analysis of the Child Care Market
A detailed analysis of several other features of the child care market that may affect (and explain) the trend market in prices, including (i) the demand for child care, (ii) the skill-level of the child care workforce, and (iii) child care regulations.

Key Findings:

  • Like the trend in market prices, the demand for child care peaked in the early-2000s--and has been flat ever since. In other words, demand has been stagnant for at least as long as child care prices have been flat.
  • Although the skill-level of the child care workforce increased in absolute terms, it appears that highly-educated women increasingly find child care employment less attractive than other occupations.
  • States' child care regulations have not become tougher. In fact, several regulatory domains are more lenient now. In addition, results from a formal statistical analysis suggest that tightening regulations is not consistently associated with higher child care prices.
  • Together, these three results indicate that the production of child care has not become more costly, which may explain the decade-long stagnation in market prices.

So, what do these findings mean? The typical family is paying more for child care, but only slightly more. And the share of family income going toward child care expenses is the same now as it was several decades ago. Meanwhile, the market price of child care increased only modestly throughout the 1990s--and it has been flat for at least a decade. Consistent with this trend, the market forces that would typically place upward pressure on prices (higher demand, rising skill levels, and stricter regulations) do not seem to be behaving in this manner.

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