In her first visit to the Treasury Department since taking office, Vice President Kamala Harris urged Congress Wednesday to fund the largest-ever federal investment in affordable child care, wielding a new Treasury report on the positive economic impact of such caregiving.
Treasury Secretary Janet Yellen said enacting these and other plans in the administration’s “Build Back Better” package are “the single most important thing we can do to build a stronger economy over the next several decade.”
“It’s past time that we treat child care as what it is — an element whose contribution to economic growth is as essential as infrastructure or energy,” Yellen said in a statement released Wednesday morning.
The proposals are part of President Joe Biden's $3.5 trillion economic agenda, which includes overhauls to federal health care, education and safety net programs. The sweeping spending plan would be paid for in part by raising top corporate and individual tax rates.
“Some estimates suggest our GDP would be five points higher if women participated in the workforce at the same rate as men,” Harris said in remarks at the Treasury Department on Wednesday afternoon.
In order for the country to fully recover from the pandemic, “we need to bring child care costs down with a significant public investment,” she said.
Yellen said the child care system doesn’t work the way it’s supposed to.
“It doesn’t work at all,” she said at the joint briefing. “Those who provide child care aren’t paid well and those who need it can’t afford it.”
The pandemic has only underscored the nation’s existing child care crisis. Before the pandemic, over half of Americans already lived in areas with insufficient child care access, according to a 2018 report from the Center for American Progress, a liberal think tank.
Child care workers are paid on average $12.88 per hour, according to the Bureau of Labor Statistics. An estimated 40 percent of day care centers had to permanently close during the pandemic. Some of those workers have since left for occupations with higher starting pay and lower risks of Covid exposure, with many service jobs starting to offer $15 an hour and up in a bid to attract scarce workers.
David Redmond, a 43-year-old single father in Indiana, struggled this summer on partial unemployment after his hours as a floor cleaning technician for Kroger were cut. He tried to find child care so he could seek additional work, but was unable to.
“There’s really not a lot of child care, because of Covid,” Redmond said. “People don’t trust their kids around others that might get it.” Without enough paying families, the math doesn’t work for child care and day care providers, who are forced to cut available slots and staff.
Raising wages for workers would mean raising tuition for families, and put child care even further out of reach for some.
The scissoring effect means for-profit providers operate on razor-thin margins, often of 1 percent or less, according to the report. Over 15 percent of child care workers, many of whom are women of color, live below the poverty line in 41 states, and half rely on public assistance. The average salary of $25,000 puts the job in the bottom 2 percent in the nation, Yellen said in a briefing on Wednesday.
“I’ll be completely honest, we are at a loss,” Angela Garcia, who owns two child care centers in New Mexico, and has struggled to fill a dozen open positions, told CNBC. “We are not having any luck finding anyone that wants to return to the workforce at this point."
The average family with a child under 5 has to spend at least 13 percent of the family income toward child care, often at the beginning of their careers when their earnings are lower, according to the Treasury Department.
“This is an example of what economists describe as liquidity constraints, a classic market failure, which argues in favor of government support,” the department said.
After a certain point, families will opt instead to have one of the parents stay home and provide care, usually the woman.
There are currently 1.8 million fewer women in the workforce now than before the pandemic began.
“This mass exodus of women from the workforce is a national emergency, and it demands a national solution,” Vice President Harris said in February, a point she repeated in the press briefing on Wednesday.
Lack of affordable and available child care is one of the top reasons unemployed workers cite for not taking job offers, according to surveys from the Census Bureau.
“The current system is unworkable,” the report said.
Katie Holloway, 42, mother of three, lost her job as a restaurant general manager in Illinois during the pandemic. Then her husband lost his job too. While she wants to return to work full time, she doesn’t know who would watch her youngest, who isn’t in kindergarten yet.
“Child care is an additional hurdle,” she said. “We are in a tough spot, but we will figure it out. We always do.”
Lack of child care can have severe economic and social consequences.
Worker absences and turnover cost due to child care issues cost businesses an estimated $375 to $500 per year per working age adult, the report said.
Parents of 2 million children under the age of five had to quit their jobs, decline jobs, or change jobs because of child care problems, according to the 2018-2019 National Survey of Children’s Health.
The presence of affordable child care has positive socio-economic impacts, the report highlighted.
Children who are able to attend preschool and receive child care stay in school, are less likely to commit crimes, and have better health outcomes, according to the report. These “spillover” qualities “argue in favor of providing direct relief for families,” the Treasury said.
The affordable child care proposals are a combination of plans, each with a large price tag. Democrats estimate annual costs for universal preschool and child-care subsidies for low-income families at $450 billion, a national paid leave program at $500 billion, and a permanent expansion of the dependent care credit at $100 billion.
In addition, extending the enhanced child tax credit would cost an estimated $550 billion over a decade.
In March 2021, Congress passed the American Rescue Plan, which contained $39 billion in dedicated child relief funding, the largest one-time federal investment in child care relief in U.S. history.