Why Day Care in America Costs More Than College Tuition

CHRISTIANE AMANPOUR: Earlier we discussed the watershed moment for abortion rights in the U.S. A related issue is child care in America, which many parents recognize as dysfunctional. Only 40 percent of 3-year-olds are in preschool in the United States, compared to over 90 percent in countries like France, Germany, South Korea, and the U.K. “Bloomberg Businessweek’s” senior writer, Claire Suddath, has examined why this is the case in her recent piece. It’s called, “How Child Care Became the Most Broken Business in America.” Here, she’s speaking to Hari Sreenivasan about her findings and how U.S. leadership should address the crisis.

(BEGIN VIDEOTAPE)

HARI SREENIVASAN: Christiane, thanks. Claire Suddath, thanks for joining us. Did the pandemic make things worse in the context of child care or did it reveal how dysfunctional our existing infrastructure is?

SUDDATH: I think both. Things were kind of a hot mess to begin with. And then it made it immeasurably worse. But in doing that, it happened so suddenly. The pandemic lasting for so long. But if you think back to 2020, our lives were upended in a matter of days or weeks. And in doing that, the sudden shift is what made people realize, oh, we actually need child care for our economy to function.

SREENIVASAN: There were attempts by the federal government to ease the burden on parents. From your perspective, from the money going out to parents, how much of the costs did it cover? How significant are child care costs today?

SUDDATH: It’s so expensive, so very expensive, the number or the fact that jumped out at me researching this, in most states, putting a baby in day care for one year, costs more than in-state college tuition. So if you think about people early on in their careers, you know, you’re having children in their 20s and 30s. And you’re essentially going to pay college tuition in order to keep working? That’s sort of where we were before the pandemic. Infant care in some parts of the country is over $20,000 a year, about 13 percent of the average two- parent household income, with both working parents. Single parents are paying like 36 percent of their income, which is such a large number that you start to wonder, well, how are you affording rent, health care, you know, groceries. And the answer is that they’re not. So the money that went to sort of shore up the industry in these various COVID-19 relief bills is mostly, actually, for providers, because providers are struggling as well. But I think when you tally it up, it was about $53 billion. But all total, it wasn’t that much compared to other industries. The CARES Act gave more money to Delta Air Lines, that one company, than the entire child care industry as a whole.

SUDDATH: And one in 55 working women in the U.S. works in early education child care. So one in 55 working woman in the U.S. getting not as much at Delta Air Lines. It was not enough.

SREENIVASAN: How do other countries deal with this and what kinds of advantage or disadvantage does that put us in?

SUDDATH: Most other countries have some sort of subsidy program in place or a government run system. I think the gold standard, when I talk to anyone in early education or child care, always points to France. They’re like, France is the best. We wish we had what France has. And France has an incredibly comprehensive both child care program and early education program. It starts when a baby is about three months old, because women in France get maternity leave fully paid. So at three months, there is what’s called a crush (ph) system, a government run program, essentially child care or day care. And it goes until a child is about three years old then they enter preschool and continue on through school. It’s not perfect obviously. If you talk to someone who lives in France, they have plenty of complaints. If you live in a place like Paris, there aren’t enough spots for children. If you get a spot and the government runs crush (ph), that’s paid for. But if you don’t get one and you have to go the private route, you pay out of pocket and you get a huge percentage of that back from the government. People who I talk to who actually live in France have said, you know, being a parent is stressful in every country. There’s not a great solution to the parenting work/life balance. But the one thing they don’t worry about is actually affording child care. That’s off the table for them. I talk to a woman; she and her husband pay a few hundred dollars a month for child care; whereas, I’m in New York and paying, you know, $2,000- $3,000 a month.

SREENIVASAN: Right now, there are efforts underway in the Build Back Better act to try to address some of this. Is it — first of all, we don’t know whether it will make it through and in what form. But of what is proposed today, what kind of impact would that have?

SUDDATH: That is a huge question and I think the answer to that depends on what exactly is passed and how it is adopted and what state you live in, essentially, because I think the most important thing to understand about the child care provisions within the Build Back Better act is it’s not creating a whole new federal system from scratch. All it’s doing is making money available to states, should they decide to opt into the program and, you know, try to fix child care on their own, which is a really big ask, because it’s an incredibly complex problem. But also, you know, we have 12 states in this country that still have not expanded Medicaid under the Affordable Care Act. And I think you might expect something like that to happen with child care, where some states lock into it, some states will fix it, others might not quite get it right and others might not do it at all. So you’ll end up with a really patchwork system and the success rate really will depend on, you know, if states can get their act together.

SREENIVASAN: Best case scenario, let’s say everything that the administration is asking for in terms of money toward child care gets passed. Then are we still likely to have the equivalent of a patchwork of states, doing different things?

SUDDATH: I think, you know, the Build Back Better Act has a bunch of points in it, saying if you are a state and you want this money, these are the things you have to do. The ones getting the most media attention and biggest gamechangers are, you know, bringing down costs for parents, making child care completely free for low-income families, capping it at about 7 percent of the parents’ income, given parameters. And then also really raising those wages of caregivers and offering them a living wage. The issue with doing this is it doesn’t quite explain how a state should make this happen. So you know, there’s wording in there, that a state should provide sufficient resources to providers to be able to raise their employees’ wages. But the thing is, every state has a low-income subsidy program for child care that exists today. And, yes, it’s chronically underfunded and only 14 percent of people who even qualify for it get any money at all. But there are guidelines.

SUDDATH: And you have to do certain things as a state. And only two states actually meet those federal guidelines. You’re supposed to reimburse families at 75 percent of child care costs. But most of them are reimbursing at 50 percent, sometimes as low as 25 percent because there’s not a mechanism in place to hold states accountable. And it’s not clear to me, if you make more requirements of states, how do we know they’re going to get this right?

SREENIVASAN: So what’s been the resistance to try and increase funding for child care? Is there a concern that we’re lavishly subsidizing an industry? What’s the profit margin on this industry?

SUDDATH: I think the most important thing to understand about child care, it’s so expensive because, in order to offer good, quality child care, it has to be that expensive. So, you know, every state has requirements to be a licensed caregiving facility. And they vary from state to state. But the most I would say, the most expensive is for infants, children 2 and under. Every state requires one caregiver for every three to four infants. And the reason for that is pretty obvious, if you’ve ever had a baby. Like babies need constant attention. At about 3 or 4 babies that’s much as you can watch with your actual eyes at any time but that’s an incredibly labor-intensive job. If you watch babies, if you’re a child care business, you have to hire an awful lot of people. So even if families paying $20,000 a year and you have the average caregiver in the U.S. makes about $20,000 a year. I talked to one woman in Portland who runs child care facilities and she says, when she interviews people for jobs, she’s wanting people who are really passionate about this because she tells them, if you can go make more money being a barista at Starbucks, you should do that because you need to do this because you love it. Even with the low wages, the U.S. Treasury a few months ago released a report looking at the industry and why it’s in the state that it’s in and found that the average child care business is only making a 1 percent profit margin. And that’s before the pandemic. So like, they entered into all of this, being shuttered for months, people pulling their children out of their facilities and therefore not paying them. It’s like 1 percent wiggle room. That’s why, when you see these stories about a third of child care providers closed during the pandemic, it’s because they just couldn’t make the numbers work.

SREENIVASAN: One of the stats that jumped out at me from your story was that, today, 70 percent, almost 70 percent of children under 6 in the U.S. live in a home where all available adults work. I mean the scale of this is so enormous when it comes to how people figure out, lucky, perhaps, if they have a relative, a grandparent who might be able to pinch hit. But this is something that most American families are facing.

SUDDATH: Yes. You know, I think a lot of times in the past, the discussion and, even now, it’s oftentimes about women working. And that is a perfectly reasonable and a discussion we should be having. But also look at it from the other perspective of the children and say 70 percent of kids need someone to look after them. And if we don’t have affordable options for their parents and caregivers and families, whoever is taking care of them, then those kids are going to be put in situations that are not ideal. I talked to parents for this article about what you do when you literally cannot afford child care. And that doesn’t mean you don’t get child care; it means that you get cheap child care. So I talked to one woman, who, you know, she was a single mom and going to law school when her son was two. And she looked at day cares and it was $1,200 a month or something like that. So she looked and found a Craigslist ad for a woman who watched children in the home for $100 a week and said, OK, yes, I can do that. So she sent her kids to this woman’s home and everything was fine, seemingly, for a while. Then one day her son came home and said the woman had hit him. So obviously she pulled him out. And her story continues from there but, you know, that’s what we’re talking about, is people need child care.

SUDDATH: And the lack of affordable child care doesn’t just keep parents from working but it keeps kids from having access to that early education. And even with just, you know, kind care that children with parents do have money, you know, have.

SREENIVASAN: When you talk about these small businesses, often small businesses that are day care centers and child care centers, you point out that 95 percent of these are owned or employed by women: 40 percent are women of color. Do you think this plays a role in how we think of child care policies?

SUDDATH: Oh, certainly. I mean one thing I didn’t know before I started researching this was every child care provider I talked to was a woman. And also, she was a woman who went into child care and opened her own business because she herself was pressed out of child care with her own children. You know, there were women who were teachers or something like that and just didn’t make enough money. Their paychecks weren’t big enough to cover their own costs of child care but they thought, I work with kids, I’ll open my own business. I even talked to a woman who was 20 years into a career in the music industry but she had two kids and was looking at over $45,000 a year. She also was working with kids and though, you know what, I’ll just do this myself. Not to say it’s easy but this is an industry of woman price out of other industries, trying to make it so they can care for other women’s children so that those women can work and, like you said, 40 percent are women of color, many of them are new to this country, maybe English is not their first language. These are not people that have the ear of a senator who can get them, to listen to them in the way that an airline industry, coal industry can do. Obviously, there are national organizations but these are not people with a ton of political clout.

SREENIVASAN: Finally, I also wonder about how much of this, like everything else these days, has been politicized.

SUDDATH: Yes, this has been politicized now but it has been for, you know, as long as we’ve had politicians essentially. You know, I think when this really started becoming part of the national conversation, first of all, was during World War II, when women entered the workforce in unprecedented numbers. And because there wasn’t this bias against working women at the time, because this was your patriotic duty and you’re the Rosie the Riveter and you’re going to save America, Congress got its act together and passed the land mack (ph), which, starting in 1942, create I think a little bit over 3,000 federally subsidized day care centers in the U.S. for women who were working in factories and other wartime jobs. And they were federally subsidized but locally administered so they could be tailored to people’s needs. But those places only existed for 2.5 years because as soon as the war ended, the funds were withdrawn and all the centers closed. But women didn’t leave the workforce and stop working again. They continued over the decades to just enter the workforce in ever-growing numbers. And even as early as 1960, the commissioner for the Bureau of Labor Statistics, he gave a speech at a conference and sort of laid out the facts. He was like, you know, women are not only a growing part of our workforce but they are a permanent part of our workforce and if we don’t do anything about what he called the day care problem at the time, we will find ourselves in deeper trouble by 1970, is what he was looking at. Obviously, we didn’t do anything, so by 1970, it was bad. Then we didn’t do anything again and it has gotten worse. And here we are in 2021 and we’re still talking about it.

SREENIVASAN: Claire Suddath, thank you so much for joining us.

SUDDATH: Thank you.