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Child Care in White House Economic Report of the President

Resource April 4, 2023

Last week, the White House released the “Economic Report of the President”, which prominently demonstrates the vital role that access to high-quality, affordable child care plays in supporting children’s healthy development and school readiness, as well as providing vital economic supports and allowing parents to participate and thrive in the workforce. 

Drawing on extensive analyses of the effectiveness of early childhood investments, the report outlines the critical role that federally funded early care and education programs play in generating long and short-term benefits to children, parents, and the economy. The White House notes that “increased access to [early childhood education], such as through policies to expand availability and reduce costs, would likely enable more parents to work, which could bolster long-run economic growth and expand the economy’s productive capacity.” 

The report also details the fundamental challenges in the current decentralized and patchwork child care market, which have only been further exacerbated by the COVID-19 pandemic. Given the child care sector responds “more strongly to negative economic shocks than other low-wage industries and takes longer to recover from recessions than the rest of economy,” it is particularly essential to promote and implement effective policies. The White House calls for policies to broaden access to child care, particularly to address disparities by race, ethnicity, and family socioeconomic status; incentivize supply building, including workforce support; and ensure quality.

Early Childhood Education (ECE) has demonstrable economic impacts

ECE produces substantial short-and long-term benefits to society and has some of the highest returns on human capital investments. The White House writes that “Policies and programs targeted at the earliest years of life have the greatest potential to generate large individual and societal returns, followed by investments in the preschool years, when children are three to five years of age.” Researchers analyzed the long-term benefits of specific ECE programs and found that there is an estimated $7 to $12 return on every $1 invested.

Positive Impacts on Workforce Participation

  • Access to high-quality, affordable child care helps parents enter and remain in the workforce. It can also reduce employee absenteeism and turnover, increase recruitment, and boost parent productivity in the workforce.
  • Access to child care produces particularly large, positive effects on maternal employment. The graph below demonstrates how maternal employment is higher among those living in areas with relatively more provider capacity supported by American Rescue Plan funding. This suggests that maternal employment has recovered quicker in areas with greater capacity supported by stabilization grants. Stabilization grants were not only effective in extending support to child care providers and children, but also to broader maternal workforce participation. The White House notes that child care is particularly important as a lever to bolster long-term economic growth and expand workforce productivity as many mothers left the workforce or reduced their hours during the COVID-19 pandemic. 
                  Source: Economic Report of the President

Despite widespread beneficial impacts, challenges remain

The White House emphasizes that the current child care system fails to provide adequate options for many families and ultimately hampers economic growth because of several fundamental challenges that affect both the supply and demand of child care services. Policies that lower the costs to parents and increase the availability of high-quality care options are critical for the U.S. to invest in a secure care infrastructure and ensure a robust workforce. Below are several challenges the White House emphasizes in the report. 

ECE Workforce Challenges

Unlike other industries that can be automated or outsourced, providing child care is a labor-intensive activity, and wages account for 60-80% of a provider’s expenses.

  • Low compensation. Challenges with recruiting and retaining a well-qualified ECE workforce largely stem from worker’s low compensation. According to one analysis, on average child care workers make 23% less than workers in other occupations with similar age, education, and other demographic characteristics. 
  • No to minimal benefits. Child care workers rarely receive employee benefits and only 15% belong to an employer- or union-sponsored health insurance plan, compared to 58% of all workers.
  • High Educator Turnover. Research shows that stable, attached child-caregiver relationships are crucial to children’s healthy development. However, early educators experience high levels of turnover in large part due to low compensation and benefits, and long hours. 17% of staff who work directly with young children left their program within the last year, with even higher turnover in centers paying low wages and for educators serving infants and toddlers. Many educators are leaving the industry entirely. ECE staff turnover negatively affects young children and is associated with weaker language and social skill development.

Parents Cannot Afford the High Cost of Child Care

  • Child care comprises a large fraction of a family’s budget at a time when they can least afford it. According to the Department of Labor’s National Database of Childcare Prices, pre-pandemic median childcare prices for one child account for between 8 and 19% of median family income in communities across the country, with even higher prices for infant care.
  • As demonstrated by the graph below, the lowest-income families spend one-third of their income on child care. 
Source: Economic Report of the President
  • Child care providers are put in a difficult financial situation: They often do not have sufficient funds to increase compensation and professional development opportunities because the true cost of high-quality care is simply too high to charge parents. Increased federal funding is foundational to closing this gap.

There is Not Enough Accessible Child Care 

  • In the U.S., the demand for child care far outweighs the supply. More than half of Americans live in a child care desert, where there are three or more young children for every available licensed child care slot.
  • According to 2019 data from the National Survey of Early Care and Education, 73% of center-based providers experienced excess demand for child care slots. Because of limited space or resources, providers are unable to accept families into the program or have to maintain long waiting lists.

There is a Lack of Sufficient Data

  • Given there are no systematically collected measures of ECE, the federal government can play a significant role in improving data infrastructure to help measure long-term effects. Improving real-time data collection on child care availability and participation will help inform how to effectively invest in young children and their families. 

FFYF commends the Biden administration for recognizing the vital role that child care and early learning play in our nation’s economy. We look forward to continuing our work with the administration as together we work toward mitigating these critical problems with increased federal funding and distinct policy improvements.

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