With Harris’ economic plan, the US family and child care crisis is playing out in the election
When Kamala Harris chose Minnesota Gov. Tim Walz, a former teacher, as her running mate, experts noted that he could bring a new policy focus to child care and early childhood. As governor, Walz expanded the state’s child tax credits and created a paid family leave program. Walz also allocated money to increase wages for child care professionals and build provider capacity. Harris is “double down” on child carean expert said.
In the country economic foundation The Harris administration announced Friday that restoring expanded federal child tax credits introduced during the Covid pandemic is a key priority and is tied to the financial strain many families with young children in need of care are facing.
Describing the current economy as one where “many families are spending the most — on cribs, diapers, car seats and more,” Harris proposed expanding the tax credit for families with newborns to $6,000. Donald Trump’s running mate JD Vance has also proposed nearly double the current child tax credit up to $5,000 on CBS last Sunday.
One of the biggest spending areas is child care subsidies, and it’s not just a concern for government policymakers and candidates for office. As companies look to maintain recent growth and stay ahead of a long-term tightening in the labor market, child care policies are a concern for employers in the United States. Child care is less accessible more than ever for families across the economic spectrum, with costs 32% higher today than in 2019, according to research from Bank of America. Child care centers incur high costs to provide care — costs that weigh heavily on families. Many parents are considering quitting their jobs because of the economy, and parents have missed days of work without access to child care.
According to a recent study by the Boston Consulting Group, only 12% of workers and just 6% of part-time and low-wage workers have access to child care at work. The study found that for every dollar an employer spends on child care, the company gets a $4.25 return on investment. The study, conducted in 2019 by the nonprofit arm of the largest corporate lobbying group, the U.S. Chamber of Commerce, underscored the importance of employer support for more child care services.
Jessica TruongThe founder of childcare startup Upwards, which partners with employers including Amazon and the US Army to provide benefits, told CNBC that childcare should no longer be viewed as just a social issue but an economic one.
The challenge of child care supply and demand
A forthcoming study from Upwards points to a paradox in the child care industry: both shortages and underutilization. Data from the U.S. Bureau of Labor Statistics shows that 51% of Americans live in areas with three children for every available child care slot, but only 11% of providers will be at full capacity at any given time in 2023. Massive emergency investments during the pandemic have dried up, leaving the child care industry vulnerable, with low wages and a shrinking workforce.
Bringing child care benefits directly into the workplace can help connect workers with the services they need and help child care providers increase their capacity to serve more children and families.
“We just thought, ‘Oh, this is really expensive, but what would it cost if you didn’t do it?’” Chang said. “We learned that the cost of replacing an employee can sometimes be four times their annual salary.”
In Upwards’ case studies, retention rates for employees using childcare benefits were five times higher than for the average employee at the same workplace, which she said reinforces the argument that employers need to focus on the costs and benefits lost when they don’t provide childcare.
Over $100 billion lost every year
ONE estimated $122 billion The U.S. economy is losing years of income, revenue, and productivity due to the child care crisis. Costs to families, businesses, and taxpayers nearly doubled from 2018 to 2023. Companies are also losing billions of dollars related to recruiting and retaining talent, according to a 2023 study by the national child care advocacy nonprofit ReadyNation.
According to ReadyNationNearly 85% of primary caregiver parents reported that challenges finding childcare hindered their efforts to work, and more than a quarter had been reprimanded for facing these challenges. More than half of parents with young children who faced childcare challenges discussed leaving early or late and missing days of work.
“We all benefit when people who want to work are able to work,” said Nancy Fishman, senior advisor at ReadyNation.
The challenges of childcare disproportionately impact mothers, often referred to as the “motherhood penalty,” causing them to leave work in droves and remain there for years after having children.
According to “Latest report on motherhood” 66% of women in the United States have considered leaving the workplace due to lack of child care, an all-time high in the annual study. As child care costs rise, that percentage is likely to increase.
Upwards research finds a multiplier effect on the economic benefits of allowing more women to stay in the workforce by supporting and subsidizing childcare. The study combines women’s average annual wages, absenteeism and productivity savings for employers, and average turnover savings for employers, showing the enormous economic impact of childcare and working mothers.
Government policy barriers
Harris’s goal of an expanded child tax credit won’t be easy. And it appears that getting all employers to offer child care benefits will present another challenge. The Biden administration’s CHIPS Act, which subsidizes corporations setting up semiconductor facilities in the United States, requires applicants to have more than $150 million in funding to provide access to child care benefits, a policy concept that has not been tried in the United States before, though it is popular abroad. Secretary of Commerce Gina Raimondo called the politicization of these interests in the United States a “grave mistake” and negative for the economy.
The Biden administration has repeatedly failed to pass an expanded child tax credit and corporate tax cuts, even with initial bipartisan support for the legislation. As all eyes turn to the policies of both potential presidential administrations for working families, the private and public sectors have yet to resolve the tax and benefit debates that have stymied previous efforts. The inaction and gridlock are likely to continue, even as research shows that the financial well-being of working parents with young children is not improving.
