Ambitious Investments Will Boost Economy and Reduce Inequality

Back • April 14, 2016 • Uncategorized

Last week, the Economic Policy Institute (EPI) released a report describing the high costs of child care in all 50 states, and the benefits of public investment in early childhood care and education. The authors of ‘It’s Time For An Ambitious National Investment in America’s Children’ propose an expansion of subsidies (known in Connecticut as Care 4 Kids) to allow parents access to affordable high quality child care, investments in high quality early education, and funding for before-and-after childbirth home visits – all of which will benefit children, families and the economy.

In their report, EPI finds that high quality child care is simply out of reach of many low- and middle income families. For example, in Connecticut, the annual cost for infant care is 6th highest in the nation at $13,880. This breaks down to $1,157 per month and is 37 percent more than in-state tuition at a four-year public college. Families with more than one child (an infant and a 4-year-old) would have to spend 29% of their income on childcare ($25,382 annually).

Annual Cost in Connecticut

Annual Cost Chart

Source: Economic Policy Institute: The Cost of Child Care in the United States

For too many families, the rising cost of childcare is prohibitive – particularly at a time of stagnating incomes. A full time minimum wage worker earning $19,968 annually would have to spend close to 70 percent of her annual income to afford high quality infant care for one child. Child care workers – low-wage workers themselves, earning on average just $21,840 yearly—would have to spent 63.6 percent of their annual earnings to put their own baby in infant care. Even for Connecticut families earning the median family income of $86,981, the cost of infant care amounts to 16 percent of household earnings, exceeding the recommendations of the US Department of Health and Human Services that child care costs should account for 10 percent or less of a family’s budget.

Expanding access to affordable care through subsidies and tax credits – such as the child and dependent care tax credit (CDCTC) – has enormous potential to improve the economic security of Connecticut families and the state’s economy. Among the findings:

  • Capping child care expenses at 10 percent of income would save the average Connecticut family with an infant $5,182 annually (it would save those with an infant and 4-year old $16,684 annually).
  • Decreasing child care costs by 1 percent would increase labor force participation by 0.2 percent, meaning more parents would be able to go back to work. The authors calculate that Connecticut’s gross state product (GSP) would increase by 1.2 percent or more than $3 billion annually.
  • Professionalization of the child care workforce would improve the economic well-being of providers and their families. Child care workers are disproportionately women and workers of color, meaning that higher wages among child care workers would help to close Connecticut’s gender-based wage-gap and vast racial pay gaps. By attracting and retaining a trained workforce, professionalization would in turn improve the quality of care.

Unfortunately, Connecticut, in response to structural budget challenges, is cutting investments in child care subsidy programs at a time when families can ill afford it; child poverty is at a record-high, low-wage work is replacing middle- to high-income work, and fewer families are being served by Care 4 Kids. The benefits to families and the state economy cannot be clearer. EPI is calling for an ambitious national investment in early childhood care and education, and we need the same here in Connecticut.