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Child Care Eats up to Quarter of Family Income

Friday, January 26, 2001

High costs and increasing demands for child care highlight the importance of subsidies, Head Start, state-funded pre-kindergarten, pretax savings accounts and tax credits that can make child care more affordable for working families.

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High costs and increasing demands for child care highlight the importance of subsidies, Head Start, state-funded pre-kindergarten, pretax savings accounts and tax credits that can make child care more affordable for working families.
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High costs and increasing demands for child care highlight the importance of subsidies, Head Start, state-funded pre-kindergarten, pretax savings accounts and tax credits that can make child care more affordable for working families.

(WOMENSENEWS)--The poorest American families pay a staggering 23 percent of their gross earnings for child care, according to a cost study by the Urban Institute. Among all working families that buy care for children under 13, those expenses average 9 percent of monthly income.

Low-income working families, single-parent families and all families with young children are hit the hardest by child care costs as a percentage of gross income, according to Urban Institute researchers who studied information from its 1997 National Survey of America's Families, a survey of 44,000 households on a variety of topics, mostly about social services.

While Washington is focused on the new Bush administration's education and tax cut proposals, the crisis in access to child care does not appear to figure in the policy discussions. Republican and some Democratic leadership in the legislative and executive branches would appear to argue for devolving more responsibility to states and for less federal assistance.

The Urban Institute's report, "Child Care Expenses of America's Families," by Linda Giannarelli and James Barsimantov, provides a look at the child care expenses of working families across 12 representative states. It also provides information on expenditures by child's age and family structure. The Washington-based institute is a policy research and education organization that focuses on social, economic and governance issues.

"Child care expenses are a major financial commitment for millions of families across the nation," said Gina Adams, research team leader for the child care cost report. "The burden is particularly great for working low-income families, single parents and parents of young children."

Child Care Costs Affect Many Family Decisions

"These facts have very real implications for American families and children," the report says. "Child care expenses can affect a family's decisions about work, as the cost of child care can affect whether a mother who wants to work outside the home will be able to do so. Child care costs also can affect children's development, by determining not only the type but also the quality of care that the family can afford."

These findings highlight the importance of policies such as child care subsidies, Head Start, state-funded pre-kindergarten, pre-tax child care savings accounts and tax credits that can help make child care more affordable for working families, Adams said.

Deborah Schlick, a policy planner for Ramsey County, Minn., and a St. Paul mother of two young children, puts this burden in context: "My middle class family," she said, "spends slightly more for child care than for mortgage payments."

In Minnesota, one of the 12 states studied, the average monthly child care expense for families buying it was $315. The average costs ranged from a low of $209 in Mississippi to a high of $370 in Massachusetts.

The 12 states studied and average child care costs per month: Alabama, $241; California, $343; Florida, $239; Massachusetts, $370; Michigan, $285; Minnesota, $315; Mississippi, $209; New Jersey, $362; New York, $332; Texas, $268; Washington, $300; Wisconsin, $279. While the average amount spent for care varied, the difference in median income by state meant that across the country, the average child care costs hover around 9 percent.

Low Income Families Seek Unpaid Child Care With Relatives

Key findings:

  • Low-income families are less likely to pay for child care than higher-income families, seeking unpaid arrangements with relatives or leaving children on their own.
  • Families with at least one child under five are more likely to pay for care--and spend a higher share of their earnings for it--than parents of older children.
  • Single-parent families pay a much higher share of family income for care and more often purchase care than two-parent households.
  • The differences in cost across the country reflect different costs of living. Other factors may also account for the cost differences, such as state mandates for care standards that raise the quality and the cost for providers.

Schlick has studied child care needs over the years as well as other social policy problems. She noted that with affordable housing in short supply in many American cities, the currently poor working family could also be paying rent in excess of 30 percent of its income.

Both Schlick and the Urban Institute researchers emphasized, however, that dollar estimates alone mask variables such as the value of child care assistance that families do receive. Examples are tax credits and employee benefit plans that allow the use of pre-tax dollars to buy child care.

The crunch is obvious, however.
 

Child Care Expenses, State by State
  U.S. AL CA FL MA MI MN MS NJ NY TX WA WI
All Families
Percentage Paying 48 54 49 55 51 47 54 52 49 48 47 47 48
Families That Pay for Care
Average Monthly Expenses ($) 286 241 343 239 370 285 315 209 362 332 268 300 279
Average Percentage of Earnings Used for Child Care 9 9 11 9 10 10 9 9 9 11 9 9 9
Average Monthly Earnings ($) 4,433 3,813 4,545 4,135 5,212 4,168 4,862 3,141 5,481 4,338 4,571 4,957 4,146
Source: Urban Institute calculations from the National Survey of America's Families.
Note: Bold type indicates estimate is significantly different from the national average.

 

Priorities: Housing, Food and Child Care

"Child care is one of the major monthly out-of-pocket expenses for families across the country, often coming right after housing and food," said study co-author Giannarelli.

"The burden is significantly higher for working low-income families, who pay an average of 16 percent of earnings on child care, and for those living in poverty, who spend an average of 23 percent of earnings on child care," she added.

Even when paying so much of their earnings, currently poor families might not be able to purchase high-quality care, the very kind of early childhood education that helps at-risk kids enter school on a par with their more prosperous classmates, the Urban Institute study says.

Meanwhile, Demand for Care Is Increasing

Add the imperative to move from welfare to work, and affordable child care becomes a larger issue for more families, according to the study.

"Child care subsidies are not an entitlement and not all low-income families receive help," it notes. "For instance, the primary source of federal funding for subsidized child care, the Child Care and Development Fund, serves only 10 percent to 15 percent of the children who are eligible. ... Most families that have left the welfare system and are working are not receiving child care subsidies."

Schlick, now studying other welfare-related issues, suggests that the movement of more women into the work force reduces the number of women working full-time inside the home, thereby reducing the number of mothers available to provide home-based child care for the children of others.

Glenda Crank Holste is a Twin Cities journalist who covers economic and social issues.


 

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