The Childcare Subsidies Will Increase Until Morale Improves

Family policy should deliver middle-class security, not progressive priorities

In 1974, the New York Times published an article titled, “In Soviet Union, Day Care Is the Norm.” The USSR heavily subsidized daycare, without which some families would have to “fend for themselves,” mothers would “quit their jobs in order to raise their children,” or some families might even “resort” to the “traditional” reliance on extended family. Some “middle-class intellectuals” didn't think the daycare was very good. They “disliked having children raised so much of the time by people outside of the family during the early, formative years.” But even they “conceded” these are niche concerns, inapplicable to most.

One center's director, the Times reported, “exudes enthusiasm” about “the benefits of children being able to grow up in a collective rather than being spoiled by doting parents and grandparents.” Generally, working-class women were “delighted.” Indeed, what other word could there be besides “delight” when “the vast majority of Soviet families require the salary of a working wife to make ends meet.” Soviet citizens “express astonishment when they learn that an American father can support a family of two, three or four children without his wife's working. Many are surprised that American women would willingly have more than one child.”

Imagine telling an American in 1974: 50 years from now, our families will face these same pressures and we’ll embrace this mandatory two-earner structure and push toward this kind of national daycare system... it’s what people want, and frankly we won’t have a choice. He'd assume we lost the Cold War and our economic system had collapsed. “No, no,” you tell him. “We won! And our economy has been growing by leaps and bounds! We're more prosperous than ever!” He’d shake his head, chuckle, and walk away. Because that’s just crazy.

Yet here we are. In recent decades, a fundamental shift occurred in the economic condition of the American family, largely unmeasured in the economic data. Whereas the typical male worker could comfortably provide middle-class security to a family of four in the 1980s, he is nowhere near able to do so today. American Compass’s Cost-of-Thriving Index, which measures the number of weeks of the median male worker’s income necessary to cover a family’s health care, housing, transportation, education, and food, climbed from 40 weeks in 1985 to 62 weeks in 2022. Unfortunately, the number of weeks in the year has remained at 52.

Families have responded by relying more on a second working parent’s income, which economists have tended to celebrate. More people working more hours means higher household incomes and GDP. But that perspective suffers from an enormous blindspot: the value of the non-market labor that parents perform at home and in their communities. Every time a parent spends an hour less caring for a child or preparing a meal or volunteering at school or coaching a team, and an hour more sitting at a desk earning a wage, we supposedly become “richer.” When the wage earned is then spent paying someone else to do that which the family once did for itself, GDP jumps yet again.

Of course, if parents given the free choice to allocate more of their time in the home or in the labor market are choosing the labor market, that hardly seems cause for concern. The problem is not the choices they are making, but rather the set of choices available. A parent’s choice to enter the workforce when the other parent’s income already supports the family has an entirely different character than a parent’s choice motivated by the need to make ends meet. In both cases, the parents are making the tradeoffs they believe best for themselves and their family. But whereas in one case the family has a genuine choice, in the other only one arrangement is plausible, and they are left to make the best of a bad situation.

This is why, in survey data, American parents overwhelmingly emphasize the importance of “being able to support your family on one parent’s income” to “being in the middle class,” ranking it alongside “owning your own home” and just behind “affording comprehensive health insurance.” Likewise, parents overwhelmingly consider it “a big problem” that “as the cost of a middle-class lifestyle has risen, families have responded by having both parents work full-time, even though many say they would prefer to have a parent at home with young children.”

The survey presented two options:

A. This is a big problem. Many families have lost the choice they want, and once had, to live a middle-class lifestyle on one income.

B. This is not a big problem. It is how the economy is supposed to work. Parents are choosing to work more and consume more, and if they want they can also choose to work less and consume less.

American parents chose option A by nearly three-to-one, with similar margins across all political parties and classes.

All this is critical to the ongoing debate over family policy and various proposals for directing public funds either to financial support for families or to subsidies and other programs that would make childcare more affordable. In general, conservatives are much more enthusiastic about financial support for families—Senators Hawley, Rubio, and Romney all have proposals that would increase cash payments to working families and Senator Vance has indicated his support as well. Progressives are much more enthusiastic about subsidizing childcare per se.

The childcare plans are misguided, both aiming at the wrong problem and offering the wrong solution. The problem, as often stated by childcare advocates, is that childcare costs are so high that parents “can’t afford to work.” In this narrative, parents—typically mothers, in households where a father is already working—want to be in the workforce but the childcare expenses that this would trigger make the move prohibitively expensive. This is almost never true, as the stories themselves make clear.

Reporting from CBS News is representative: “Currently, the average family with at least one child under age 5 spends roughly 13% of their income on child care, making it unaffordable to most families.” But unless a second earner’s income is less than one-seventh the first earner’s, that income will add more than 13% of the household’s total. The family that earns an extra 20% in income and then spends 13% on childcare ends up with more money than if it foregoes the income and saves on the childcare. In dollar terms, the decision is obviously “affordable.”

Reporting from CNN provides a couple of concrete examples in a story titled “Moms: ‘I can’t afford to work’”:

Andrea Hayken, 34, made about $45,000 a year as a third grade teacher in the Fairfax, Va. county public school system. But licensed daycare for her now four-year-old son would have cost $2,000 a month, eating up nearly half of her before-tax income. Since her husband, an attorney, earned more money than she did, it made more sense for Hayken to be the one to stay home. “When all was said and done, there just wasn't enough money to make [working] worth it,” she said.

…

[Sunah] Hwang made $48,000 a year but brought home about $30,000 after taxes, health insurance and retirement contributions. Even though the Hwangs live in Virginia, where child care costs are among the lowest in the country, care for one child still would have cost $12,000 a year. “It wasn't worth $18,000 for us to let somebody else raise our son,” she said.

In both cases, the families would have had higher incomes (after childcare expenses) if both parents were working. Both women use almost exactly the same formulation in explaining why they chose not to work, essentially: “It wasn’t worth it.”

Implicit in this assessment is a preference for staying home with young children over working outside the home. After all, if families preferred having two parents working over having someone at home, they would make that choice even if it netted them no additional income at all. What parents mean when they say the income after childcare expenses isn’t “worth it” is that they are not being compensated sufficiently for a choice that, money aside, they would prefer not to make. This aligns with survey data showing that parenting-age Americans generally prefer to have one parent working full-time and one parent providing childcare at home when a family has children under the age of five, and that preference is strongest among married mothers.

To be clear, the point is not to minimize the very real financial struggles that so many families are facing; it is to locate them properly in hopes of addressing them effectively. The problem is not that childcare has become unaffordable, it is that the pincer of stagnating incomes and rising costs has made supporting a family on one income more difficult, pushing middle-class security out of reach. When reports tally up a household’s costs and show that there’s no room in the budget to cover the cost of childcare, what they are really showing is that the basic equation of one income supporting a family is broken, and adding a second income doesn’t make up for it when the costs of childcare are added as well. Childcare becomes “unaffordable” only as a byproduct of families needing a second income to fill a budget gap.

In this context, proposals for childcare subsidies make little sense. If we want to direct public resources toward helping working families make ends meet, we should do so with a cash-based family benefit that addresses the budget gap directly. A family could of course use those funds to help pay for childcare, but really what they would be doing is using the funds to make ends meet, and then choosing whether they wanted to have a second parent working as well, while taking full account of the extra market income that would come in and the extra childcare costs that would be created.

By contrast, a childcare subsidy represents a determined effort to get more second earners into the workforce—to make that specific choice “worth it,” notwithstanding the family’s preferences. Having trouble making ends meet? Public support is available, but only if you get a job and have someone else take care of your kids.

Hailey Gibbs, associate director of early childhood policy at the Center for American Progress, made this case explicitly in a recent interview with the New Republic. Just supporting families in their own choices “undervalues the crucial work of early educators in the field,” she argued, which is a nice way of saying that daycare is better for young children than being at home with a parent, and so public policy should put a thumb on the scale for it.

Gibbs also worried that the conservative emphasis on a direct family benefit is “a way to supplant other levers to support families’ access to care and really reinforce this [one] parent at home, [one] parent in the workforce family model.” Giving families resources to allocate as they see fit only reinforces their economic security and freedom to arrange their own lives. Progressives are right about what the arrangement will most often be, as both the survey data and the concerns about affordability make clear. Crafting policy to override that reality is, well, downright Soviet.

Understanding America will be taking a break on Friday. Enjoy the long weekend, and I’ll be back with more next Tuesday.

Oren