The Cost of Childcare in the US: An International Comparison

The United States grapples with one of the most expensive childcare systems globally, according to a recent report by Bank of America. Released on February 22, the report sheds light on the impact of high childcare costs on women’s workforce participation in the US.

Key Findings

Using data from the OECD, Bank of America compared average childcare costs for couples with two children to their combined wages across 30 OECD countries. The analysis revealed that the average US couple spends over 30% of their combined wages on childcare, making it one of the costliest systems globally. Only New Zealand surpassed the US in terms of childcare expenses, with Germany and Austria offering more affordable options. On average, childcare costs accounted for less than 15% of a couple’s wages across all 30 countries analyzed.

Implications for Women in the Workforce

The rising cost of childcare poses significant concerns for women’s workforce participation rates. Traditionally, childcare responsibilities have disproportionately burdened mothers. As childcare expenses escalate, the progress of women in the workforce stagnates. While women in the US are working at near-record levels, they remain less likely to participate in the labor force compared to their counterparts in other OECD countries, partly due to differences in childcare costs.

Factors Driving High Childcare Costs

Several factors contribute to the exorbitant cost of childcare in the US. The labor-intensive nature of the childcare industry, driven by adult-to-child ratio requirements, significantly inflates expenses. However, this challenge is not unique to the US. A notable reason for the US’s high childcare costs compared to other developed nations is the lower share of government spending dedicated to childcare. While the US allocates approximately 0.4% of its GDP to early education and childcare, the average OECD country dedicates 0.8%, with Iceland leading at 1.7%.

Policy Implications and Solutions

Addressing the childcare affordability crisis requires a concerted effort from policymakers. Cindy Lehnhoff, director of the National Child Care Association, emphasizes the need for federal investment in early childhood and childcare. However, achieving this necessitates balancing childcare spending with other budget priorities. Although potential solutions were explored in legislation such as the Build Back Better Act in 2021, additional childcare funding was ultimately excluded from the final package.

Conclusion

High childcare costs not only impact women’s workforce participation but also influence family planning decisions. As evidenced by China’s low birth rate attributed in part to expensive childcare, reducing childcare expenses could incentivize couples to have children. Ultimately, addressing childcare affordability is essential for promoting gender equality in the workforce and fostering economic growth.