By Kathryn A. Edwards / Bloomberg Opinion
There’s an economic calamity approaching: At the end of September, pandemic-era federal funding for child care will expire, potentially leaving more than 3 million kids without a spot; and forcing many of their parents to drop out of the workforce.
Policymakers have seen this coming a mile away. Yet in a stark illustration of indifference and inconsistency, Congress has yet to intervene.
Child care isn’t like the airlines, for which the pandemic interrupted an otherwise sustainable and functioning business. It’s a classic market failure: It’s labor-intensive and hence too expensive for many parents at the start of their careers, and it provides broader social benefits that aren’t reflected in the price. There is no recovery coming for child care, no market or technological breakthrough that will miraculously change the economics. Babies and toddlers need a lot of human attention.
By failing to act, U.S. leaders are effectively signaling that the impending labor-market disaster doesn’t matter. This contrasts starkly with their reaction back in 2021 to the end of another pandemic-related policy, the expanded Child Tax Credit. The credit had lifted millions of children out of poverty, reduced economic hardship and helped parents pay for basic necessities like food, rent and school supplies. Yet the concern that it might encourage some parents to leave the labor force, despite the lack of supporting evidence, proved reason enough to walk back a historic victory. This is America, people have to work.
But now, faced with the real prospect of millions leaving the workforce, neither Congress nor the Biden administration has acted to secure emergency child-care funding, despite the urgings of many legislators.
To be fair, the outcome is hard to predict. The child-care industry has never had this much federal support, which means it’s never had this much taken away. More than 80 percent of licensed providers received help of some kind over the past two years, reaching 9.6 million children. The 3 million-spot forecast emerges from statistics, not experience. Some parents might be able to rely on family or informal care. Others might be priced out, even if their providers stay in business: About half of centers have said they will raise prices, and mothers’ labor supply is highly sensitive to the price of care.
If most or all of the affected parents suddenly stop working, the labor force participation rate could quickly fall by a percentage point or more, an ominous development in a market where employers are already struggling to find workers. More likely, the effect will be subtle. The parents who lose care will be dispersed throughout the economy, across myriad industries, occupations, locations and employers. In the longer run, families will internalize the cost of child care the way they have for years: by having fewer children and working less.
Ultimately, only sustained government intervention can provide America with the child care it needs. Until its leaders recognize this and act, the entire country will pay the price; in missing workers, struggling families and prosperity lost.
Kathryn Anne Edwards is a labor economist and independent policy consultant.
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