Subsidizing child care, a key part of President Joe Biden’s pandemic stimulus legislation that has so far not been signed into law, would increase the number of mothers in the workforce and boost workers’ wages industry, among other social and economic benefits, according to a new study.
For households representing up to 250% of the national median income—$90,657 for a family of four—a federal program covering child care costs exceeding 7% of that family’s income would increase the employment of mothers by 6 percentage points, and 10 percentage points for those working full time, economists led by Jonathan Borowsky, a postdoctoral associate at the University of Minnesota, said in a paper.
“The model estimates suggest that expanding child care subsidies would mitigate family income gaps in access to licensed care facilities, shifting families from unlicensed care to center care in particular,” according to the document released by the National Bureau of Economic Research. . “These changes are also facilitating significant increases in maternal employment and implying improvements in the quality of care provided to children.”
The United States is an exception among rich countries in that it does not guarantee childcare assistance for working parents. The pandemic has pushed up already high settling costs, affecting children’s school readiness and forcing more women than men out of the workforce.
The authors of the paper created three models, each reflecting different degrees of subsidies, based on the legislation. The broader one, which includes capping the amount of money a family spends on childcare at 7% of income, is based on Biden’s proposal in the Build Back Better Act. In this scenario, labor market gains would be driven by low-income mothers, whose full-time employment would likely increase by 18.2 percentage points.
Some 68% of American mothers with children ages 3 to 5 are employed, only more than eight of the world’s 40 richest countries, the authors found. A broad expansion of child care subsidies would increase that share to 78%, which would propel the United States to ninth place in maternal employment among those countries.
By increasing demand for services, child care subsidies would increase the hourly wages of workers in the industry, who earn an average of $12.12 an hour and are disproportionately women of color. Salaries could increase by up to 29% for teachers with bachelor’s degrees and 14% for those without, according to the authors.
Although some legislation includes a wage floor, or minimum wage level, for childcare staff, the authors of the article found that this would not necessarily be necessary as market forces would push wages up.
Child care workers have been slow to return to the industry since the pandemic. The availability of higher wages in other jobs led many workers to leave the industry altogether.
While some federal grant programs already exist, such as Head Start, insufficient funding means they reach only a fraction of eligible children, the authors found.