Child Care Expenses Rise Double That of Inflation: KPMG

Children sit in a classroom at the Bethel Day Care Center in Brooklyn, New York, on June 14, 2012. Benjamin Chasteen/The Epoch Times

Child care costs in the United States increased nearly twice as fast as overall inflation over the past three decades, according to a recent report by accounting firm KPMG.

“The childcare crisis, which was simmering prior to the pandemic, has come to a boil,” the May 28 report says. “A baseline estimate of childcare affordability is when the cost comprises up to 7 percent of family household income. Today, childcare costs are often in the 10-20 percent range.”

According to the report, in the 30 years between April 1994 and April 2024, overall inflation grew by around 112 percent, but during the same period, inflation for day care and preschool jumped by roughly 207 percent.

“Childcare is not available for many Americans where they live. As of 2018, some 51 percent of Americans lived in what is known as a ‘childcare desert.’ Those are areas where access to childcare facilities is either non-existent or the slots available at licensed daycare facilities are three times the number of children,” the report said.

KPMG pointed out that worker shortages in the child care sector were “acute.” With workers making less than $15 an hour, an amount lower than what is being offered in other low-income sectors, the quality of employees that can be attracted is questionable, the report noted.

While many U.S. states view the matter as a crucial issue and have introduced programs to address problems with childcare services, the programs are “still ramping up and large gaps remain.” Some states are yet to adopt similar policies while others only offer them for children who are 3 or 4 years old.

KPMG cited research from the American Enterprise Institute to point out that absences from school have increased among children and become chronic, especially among low-income households.

“One way that low-income parents are dealing with the need to work and the gap in childcare is having older children watch their younger siblings. That adds insult to injury to the learning lost during the pandemic and is yet another hurdle to social mobility,” KPMG said.

A March 25 report by LendingTree found that American families who pay for child care were spending almost a fifth of their income on it.

Nevada was found to be the state where families spend the highest income share on child care—more than 32 percent. This was roughly 10 percentage points higher than the next state, Montana, at 22.6 percent.

Iowan families spent the least percentage of their income on child care, at 10.1 percent. Utah came in second, at 13.5 percent.

Federal Measures on Child Care Costs

In April last year, the Biden administration announced an executive order aimed at lowering child care costs and increasing access to these services. The White House listed more than 50 directives across most Cabinet-level agencies.

The Biden administration called for “investments to support high-quality, affordable child care, preschool, and long-term care in their fiscal year 2024 budget,” a White House Fact Sheet said.

Federal agencies were urged to “identify which of their grant programs can support child care and long-term care for individuals working on federal projects, and consider requiring applicants seeking federal job-creating funds to expand access to care for their workers.”

In April this year, the White House said the administration intends to bring down the cost of child care for families to just $10 a day and increase wages for early childhood education workers.

Republicans have cautioned against excessive federal government involvement in child care. During a hearing in May last year, Sen. Bill Cassidy (R-La.) warned against pouring more federal dollars into the sector without carefully considering the matter.

He pointed out that similar federal assistance measures taken in the higher education sector have resulted in higher costs for students.

“As more federal assistance has gone toward student loans, the cost of higher education has skyrocketed,” the GOP lawmaker said.

“As [was] pointed out by Matthew Desmond in the book ‘Evicted: Poverty and Profit in the American City,’ when the federal government threw additional money at housing programs, the funding was largely swallowed up by the bureaucracy in charge rather than actually reaching those in need on the ground.”

According to an Oct. 27 report from the Bank of America (BofA), an average American family spent more than $700 a month on child care payments, 32 percent higher than the 2019 average.

BofA estimated that child care costs could “rise further” as the Child Care Stabilization program expired on Sept. 30, 2023. The program was part of the American Rescue Plan of 2021 and granted subsidies to childcare providers.

“This could have a meaningful impact on consumers because over 12 percent of US households pay for childcare on a regular basis, according to the Department of Health & Human Services, and any further increase in prices would disproportionally weigh on families with young children,” it stated.

The bank also raised concerns that the rising child care costs could affect the labor market. High costs may drive some parents out of the workforce to stay home and take care of their children, the institution said.