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Treasury Report Calls for Improved Child Care Access to Help Promote Economic Growth

  • Treasury Department releases report on current state of child care in the United States and the challenges facing the industry and working parents
  • Report argues that investment in child care is essential to support the nation’s economic growth
  • White House has floated several ideas to improve child care access, including funding for states to improve their child care networks

Summary by Dirk Langeveld

The Treasury Department has issued a 29-page report on the state of child care in the United States, saying investments in this industry can have both short-term and long-term economic benefits.

The report looks at the existing child care market, challenges within the industry and for working parents, and Biden administration proposals to address them. The White House’s “Build Back Better” agenda includes several initiatives to expand access to child care and make it more affordable.

“It’s past time that we treat childcare as what it is – an element whose contribution to economic growth is as essential as infrastructure or energy,” said Treasury Secretary Janet Yellen.

The Treasury says the existing child care system relies on private financing, which many families struggle to provide since they often rely on child care at the same time they’re paying other debts, such as a mortgage or student loans, and have limited ability to borrow against future savings. Working parents also tend to have less career experience and lower incomes. The average family with a child under the age of five spends 13 percent of their income on child care.

The ability to access child care plays an important role in a parent’s decision on whether they will continue working or focus solely on raising a child. The COVID-19 pandemic highlighted this issue, with a surge of women departing the workforce due to the closure of daycares and schools. However, child care access could be a challenge even before the pandemic, with parents having to consider the availability of high-quality facilities nearby, their cost, and whether the facility’s schedule would fit the parent’s schedule.

Parents who take extended leave due to child care or reduce their hours typically see negative effects, such as a significant loss in earning power or disqualification from employer benefits. The situation also results in challenges for employers, who incur costs due to employee absences or turnover.

More than half of working parents are in “child care deserts,” defined as census tracts where there are at least three young children for every available licensed child care spot. This situation is more likely in low-income and rural areas.

The report also highlights a number of challenges within the child care industry, including low wages and high employee turnover, thin profit margins, and poor maintenance in many child care facilities.

The Biden administration’s proposals to improve child care access include state funding to improve their child care networks, investments for training and increasing compensation for child care workers, the permanent expansion of the child and dependent care tax credit, expanded tax credits to encourage businesses to establish child care centers at the workplace, and universal prekindergarten for children ages three to four.

The White House has set the goal of bringing the average cost for child care down to 7 percent of a family’s income. It also says investing in child care will have long-term benefits, as it will result in better social outcomes and performances among children who receive such care early in life.

“While the existing system leads to chronic underinvestment in children and hinders many parents’ ability to contribute to the nation’s economy and make a solid living, a well-funded child care sector will help achieve more of our economic potential,” the Treasury says.

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