- US parents are already dealing with childcare shortages and steep prices.
- The problem could get worse as federal funds dry up.
Parents in the US are struggling to find childcare, and when they do, the price tends to be steep. With federal funds dwindling, the problem could get even worse.
That's because much of the $24 billion in funds allocated to states through the American Rescue Plan's childcare stabilization program has been used up. While states have until next September to distribute the funds, roughly 22% of childcare centers expect to stop receiving money in January, according to an October survey by the National Association for the Education of Young Children.
Much of the ARP funding has been used to boost wages to keep workers. But with money running out, many childcare providers may be left with two options: Cut back on wage increases and risk that their workers will leave, or raise prices to fund wage increases, and risk that parents will decide to pull their children out of childcare.
"There's still some funding that will carry over, which will continue to help the industry," Cindy Lehnhoff, Director of the National Childcare Association, told Insider. "But when it runs out, we're going to be right back where we were before."
In 2018, the Center for American Progress found that over half of Americans lived in a childcare desert, where the number of children outnumber licensed care slots by at least three to one. The shortage has only grown worse during the pandemic as workers missed time due to illness, left for higher-paying jobs at companies in other industries, or were forced to stay home to care for their own children.
Today, employment in the childcare industry is still down 8% — or 80,000 workers — compared to pre-pandemic levels, and with federal funds drying up, returning to prior employment levels could become even more challenging.
Childcare is going to "become even more unaffordable for the middle class families"
For parents who manage to find childcare, it's likely to cost them heavily. National childcare costs average between $9,000 and $9,600 annually, per the advocacy organization Child Care Aware, a rate that's unaffordable for nearly two-thirds of working parents in the US. Since 2000, the cost of childcare has risen 115%, well exceeding the 74% growth in overall inflation.
Faced with the decision to cut wages or raise prices, Lehnhoff says most providers won't have much of a choice due to the challenges many have had retaining workers.
"Now that childcare funds are going to start fading away, the cost of childcare is going to go up again and become even more unaffordable for the middle class families," she said.
Per the NAEYC survey, the end of the ARP funding will cause 43% of child care providers to raise prices.
If inflation remains elevated and wage growth continues to trail behind it for most workers, more parents may decide the cost is too steep for their families. Declining enrollment numbers would then create yet another obstacle for childcare providers — thousands of which have already closed over the last few years.
And it's not just childcare providers that would feel the pain. When parents have to drop out of the workforce to care for their children, it means less income for their families — and further exacerbates the labor shortage the US economy is experiencing.
"We had a workforce shortage prior to the pandemic, and the pandemic just made the situation that was already desperate really critical," Wanzi Muruvi, senior research and policy associate at the Center for the Study of Child Care Employment at the University of California at Berkeley, told Bloomberg. "With the drying up of these other funds, the question now is, how are we going to really recover?"
Moving forward, it's uncertain whether the federal government will dedicate more funds to the childcare industry. Additional funding would have been provided through the Build Back Better legislation in 2021 but was ultimately cut from the final legislation — the Inflation Reduction Act — which directed spending to climate, health, energy, and tax initiatives.
In the meantime, some US corporations have begun offering various childcare benefits to attract workers.