According to Kirstie, her child care costs of $1,167 per month jumped to a staggering $2,334, which forced her family to withdraw funds from savings to cover the expense.
Child care has always been necessary to the function of our community but during the pandemic, we all discovered just how critical child care is to continuing essential business operations. Many essential workers were faced with the same predicament as Kirstie, though not all of them had the same financial resources. It’s now clear that working families need not only the support of our local, state and federal governments to continue working, but also the backing of their employers.
The need for child care is great. Throughout 2020, Child Care Resource Center had a waiting list of 40,000 eligible families with 75% of them working primarily in health care and other essential services.
In recent weeks, California’s governor has signed several budget bills designed to increase by 120,000 the number of children receiving subsidized care immediately and up to 200,000 slots over the next few years. But many families struggling to afford child care likely still won’t qualify for these new slots.
To be eligible for state support a family of three must earn an income of $78,132 or less. Since agencies like CCRC are required to accept the lowest income earners first, there remain over 2 million eligible children who would not receive state support. Even with the 200,000 child care openings approved by the governor, still 1.8 million – or 81% of eligible children – won't be served.
When we analyzed who employs the parents and care givers of these affected children, we discovered some of the largest employers in the state: Target, Walmart, Costco, Wells Fargo, Bank of America, and Los Angeles County.
The American Rescue Plan Act provides a temporary refundable child tax credit of up to $8,000 for a first child and another $8,000 for a second child. The average cost for infant care is $1,450 per month, while preschool care averages $1,000 per month. So even after receiving the full tax credit for their two children, a family with one infant and one preschool aged child would have a remaining child care cost of over $21,400. While some believe plans for free Universal Transitional Kindergarten (UTK) for all 4-year-olds would eliminate this burden, parents will still have to pay for child care to cover the remaining time their child is not in the 3-hour UTK program.
According to the U.S. Department of Health and Human Services and most experts, child care is considered affordable if it costs families no more than 7% of their income. For a family with an income of $125,000, an affordable child care rate would be $8,750. For a family earning $80,000, affordable child care would cost $5,600. There is a second dependent care child tax credit of $3,600 per child, which leaves a gap of $5,700 for the lower end family and $3,450 for the upper end family.
These examples only reflect average costs. Quality child care – which may include language development and other educational curriculum – is usually more expensive and therefore even more out of reach for many families.
A human resources survey found that only 6% of companies offer child care benefits despite the fact that 63% of the workforce has children. So what can business do to help?
- Offer the Dependent Care Assistance Program, which allows employers to provide eligible employees up to $5,000 per year in tax-free child care benefits.
- Create an on-site child care option for the children of employees or reserve spaces in a local family child care program.
- Business owners can also join the call for a permanent refundable tax credit for all families needing child care until they reach the limit of affordability of 7%. This would give all families earning less than $391,429 a tax credit.
If more families could afford child care, a higher rate could be charged by child care providers, which would bring to the market more licensed providers across both home- and center-based facilities. More options for families and a stronger, more stable child care industry promotes improved consistency and efficiency in the workplace. Investing in families is an investment in your business.