High cost of child care keeping parents at home, exacerbating labor shortage

WASHINGTON (TND) — December's jobs report revealed the nation's unemployment rate was again tied at a 50-year low of 3.5%. Deeper in the report was a statistic that's been troubling economists for the past year: a stagnant labor force participation rate of 62.3%.

The pandemic nearly halted immigration and brought on a wave of early retirements but another, less-talked-about source of the labor shortage is the high cost of childcare that's preventing parents — usually mothers — from returning to work.

As ZipRecruiter's chief economist Julia Pollak explains, it's a uniquely American problem.

“Despite continued growth in the labor force participation among women in the rest of the developed world, it has kind of plateaued and flattened here in the United States at a lower level. We were sort of leading the increase in women’s participation in the 60s, 70s and even early 80s and then at some point it just stagnated and stopped and that is sort of a mystery. The current situation could make that even worse," Pollak said.

When the labor force participation rate is low among females, Pollak explained, there is a direct effect on increasing GDP, per capita income, family well-being and closing the gender pay gap.

“One of the major reasons that women have lower wages on average than men is because they have more career interruptions and those resume gaps can hurt them. Whereas maintaining that sort of firm, specific capital, their networks, et cetera, can allow them to continue up the corporate ladder," Pollak said.

The Department of Health and Human Services recommends child care should cost no more than 7% of a household's income. In 2021, not a single state's average childcare expenses fell at or below that threshold, according to data compiled by Child Care Aware of America. That year, child care in the U.S. cost an average of $10,600 annually, taking up at least 10% of a married couple's average income or 35% of a single parent's average income. In 34 states and the District of Columbia, child care for an infant was more expensive than in-state university tuition.

The cost of child care has been rising particularly fast since 2019, outpacing inflation, Child Care Aware of America found. During the pandemic, the cost of child care rose in part because of a reduced supply of caregivers and the added expenses of operating with COVID precautions, according to a report by the Federal Reserve Bank of Richmond.

“That is why so many people are working less than they actually would want to or like to," Pollak said. Because too often, it doesn't make financial sense to pay for child care in order to go to work.

According to a ZipRecruiter survey of jobseekers, 54% of those with young children said they would choose to work more hours if their employer or the government provided more childcare assistance.

Brian Deese, director of the White House's National Economic Council told the Wall Street Journal last month the Biden administration is considering a renewed push for policies aimed at attracting Americans back to the workforce, including an enhanced child tax credit.

The White House credited the enhanced credit in American Rescue Plan with cutting childhood poverty in half in 2021. According to Census data from that year, child poverty rates were the lowest ever recorded, falling by 46% from 2020.

Some Republicans, like Sen. Marco Rubio of Florida and Sen. Mitt Romney of Utah, have their own proposals for versions of an enhanced child tax credit but the party hasn't come to a consensus on the issue. In the new Republican House majority, with a looming battle over the debt ceiling, many in the GOP are instead focused on cutting benefits or entitlement programs.

Another solution, which is commonplace in almost every other country in the world, is guaranteed paid family leave.

“Providing the right amount of family leave pay, so perhaps 12 to 16 weeks, does tend to increase parental attachment to the labor force and reduce career interruptions," Pollak said.

Generally, employers haven't offered much help. In the war for talent, companies have eased requirements for education or experience and offered higher wages to attract workers but Pollak said there's been almost no movement on childcare benefits.

“Employers just seem reluctant to weigh in on, on issues regarding their employees’ families," Pollak said. "I think you know, they fear that it could be seen as discrimination against workers without children so they just generally seem to want to avoid that issue.”