Childcare Costs Force Parents to Quit Jobs: BofA

The Geographic Disparity in Childcare Costs

Analyzing card payment data nationwide, BofA researchers discovered that the heartland of America is experiencing the most dramatic increases in childcare costs, with a surge of 8.2 percent in September compared to the same period last year. New England also faces substantial increases, reporting a 6.6 percent rise in childcare payments.

Within these regions, certain cities are bearing the brunt of the financial burden. Nashville, Tennessee, leads the nation with a 6 percent year-over-year increase, followed closely by Columbia, South Carolina (over 5 percent), and Atlanta, Georgia (over 4 percent). These figures highlight a significant geographic disparity in the affordability of childcare.

The financial pressure is disproportionately affecting lower-income families, who are increasingly compelled to choose between career advancement and providing care for their children. This trend has led to a noticeable decline in dual-income households with childcare expenses, now representing approximately 35.5 percent year-to-date, according to BofA’s internal data.

According to the Department of Labor, American families dedicate between 9 and 16 percent of their median income to daycare expenses. In 2022, the most recent data available, full-day daycare costs ranged from $6,552 to $15,600 annually per child. However, these national averages mask the extreme costs in certain metropolitan areas.

California, for example, presents a particularly challenging landscape for parents. Data from the technology platform Tootris reveals an average annual cost of nearly $20,000 for infant care at licensed centers. Monthly expenses exceed $3,000 in major cities like Los Angeles, San Francisco, San Jose, Oakland, and Long Beach.

Similarly, Washington State faces high childcare costs. ChildCare Aware reports that daycare expenses account for 15.4 percent of median income for married couples and a staggering 51.4 percent for single mothers. In King County, where Seattle is located, annual infant care costs approach $30,000, decreasing to around $22,000 for preschoolers.

The Department of Health and Human Services considers childcare affordable if it constitutes 7 percent or less of a family’s annual income. However, for many families, the reality is far different, with childcare costs often exceeding monthly rent payments.

The Impact of Government Shutdowns and Potential Relief

The current government shutdown adds another layer of complexity to this already challenging situation. Families relying on Head Start programs for childcare subsidies face potential financial hardship, as funding to three states has already been disrupted, and over 40 states risk losing funding if the shutdown persists beyond November 1st, according to the First Five Years Fund report.

However, some states are taking proactive steps to alleviate the burden. New Mexico is set to launch a Universal Child Care program in November, offering no-cost childcare by eliminating income limits, copays, and expanding eligibility requirements, as announced by the state’s Early Childhood Education and Care Development department website. Participation requires legal U.S. residency or qualified immigration status.

What long-term solutions can address this growing crisis in childcare affordability? And how will the evolving economic landscape impact families’ ability to balance work and caregiving responsibilities?

Frequently Asked Questions About Rising Childcare Costs

1. What is driving the increase in childcare costs?
   Several factors contribute to rising childcare costs, including increased labor costs for childcare providers, stricter regulations requiring higher staff-to-child ratios, and limited availability of affordable childcare options.
2. How does the cost of childcare compare to other household expenses?
   For many families, childcare costs now rival or exceed expenses like housing and transportation, placing a significant strain on household budgets.
3. Are there any federal programs to help with childcare costs?
   Yes, the Child and Dependent Care Tax Credit and the Child Care and Development Fund are federal programs designed to assist families with childcare expenses, but eligibility requirements and funding levels vary.
4. What impact does the government shutdown have on childcare assistance?
   The government shutdown disrupts funding for programs like Head Start, leaving families who rely on these subsidies vulnerable to financial hardship.
5. What can states do to address the childcare affordability crisis?
   States can implement universal childcare programs, increase funding for childcare subsidies, and incentivize the creation of more affordable childcare options.
6. How does childcare affordability affect the workforce?
   Rising childcare costs force parents, particularly mothers, to leave the workforce or reduce their hours, impacting labor force participation and economic productivity.