Weekend Long Reads: The Real Costs of Child Care

by Kevin Schofield

This weekend's "long read" comes from investigative journalism organization InvestigateWest, and it dives into why childcare services are so expensive in Washington — and across the nation.

Childcare in our state can be ruinously expensive for families, costing anywhere from $11,000 per year for a 4-year-old in a program designed to meet the state's minimum standards, to over $30,000 for an infant in a "high quality" childcare center. But if you think providers are raking in the money, you'd be wrong; most of them are operating on thin margins.

A provider's largest expense by far is labor, making up 60%—80% of their total costs. Much of that is driven by the teacher-to-student ratios required in order to provide safe and nurturing environments for the children. The required ratios, set by the state, range from 1-to-10 for preschoolers, down to 1-to-4 for infants. And even though most childcare workers earn close to minimum wage, the costs still rack up quickly.

Another big cost is administrative overhead: finances, payroll, regulatory paperwork, signing up customers, hiring and training staff, and everything else that comes with running a business.

Providers also complain about real estate prices: Renting out enough space for all those kids to run around has become prohibitively expensive in Washington cities.

To deal with all of these expenses, the article discusses the "Iron Triangle" of tactics necessary for childcare providers to stay afloat: full enrollment, full payment collection, and accurate pricing. But all three of these bring their own issues. Some experts contend that a childcare provider needs to offer at least 100 slots, and preferably closer to 300, in order to achieve the economies of scale that make the administrative overhead acceptable. The experts also recommend that providers insist on direct debit from customers' bank accounts rather than accepting payments in cash or by check to ensure timely and full payment, though that may create equity issues for lower-income families.

Accurate pricing is also tricky, and creates its own equitable-access issues for low-income families, because state subsidies only cover about 85% of the true cost to provide childcare services.

The article also covers the discussions happening at the local, state, and national levels to create a better appreciation of the role of childcare in our society, and to rethink the way we fund and provide it to make it more affordable, more accessible, and more sustainable for providers.

The Real Costs of Child Care in America

Featured image is attributed to Fort George G. Meade Public Affairs Office (under a Creative Commons, CC BY 2.0 license).