US child care is a gray rhino we can’t ignore
As economists continue to dissect the current labor market shortage, the term “gray rhino” came to mind. Author Michele Wucker first introduced the concept at the World Economic Forum in 2013 in Davos, Switzerland, and later developed it into a bestselling 2016 book, “The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore.”
The gray rhino serves as a compliment to Nassim Nicholas Taleb’s “Black Swan,” which was a way to discuss unforeseen events, especially those that economists could not predict. Wucker’s gray rhino is a metaphor for “a highly probable, high impact yet neglected threat … Gray rhinos are not random surprises but occur after a series of warnings and visible evidence.”
Examples of gray rhinos include the 2008 housing bubble crash, the Greek debt crisis, various natural disasters and income inequality, all of which were given little attention as risks, despite their potential for enormous and sometimes lasting damage.
I would like to add another gray rhino to the list: U.S. child care, a long-ignored threat to family finances and economic growth that lurks in plain sight.
A recent report from the U.S. Treasury noted that “the average family with at least one child under age 5 would need to devote about 13% of family income to pay for child care, a number that is unaffordable for most families.”
In fact, the Department of Health and Human Services (HHS) deems child care affordable when it costs families no more than 7% of household income. (Median household income was $67,521 in 2020, according to the Census Bureau, a drop of 2.9% from the 2019 median of $69,560. The COVID-19 recession caused the first statistically significant decline in median household income since 2011.)
Anyone with children will tell you that they are forking over a ton of money for others to take care of their kids. The 2021 Care.com annual Cost of Care survey found “more than half of families (57%) spent over $10,000 on child care in 2020, and 59% plan to spend more than $10,000 in 2021.” And that presumes families can find care. Amid COVID, as thousands of day care centers closed, many care workers had no choice but to leave the industry in order to earn more money and secure benefits.
Making more should not have been too hard, considering that in 2020, the median annual pay for child care workers was $25,460 ($12.24 per hour), well below the $35,830 per year that customer service representatives earn, who, like child care workers, do not need a college degree — let alone the $60,660 per year, not including robust benefits, that elementary school teachers make.
Given the high cost and difficulty in finding caretakers, many parents, especially mothers, are choosing to leave the labor force to look after their own children. That decision is in turn limiting the post-pandemic economic recovery. Nearly 300,000 women exited the labor force in September, continuing the COVID trend — since the pandemic began, 3 million women have left the job market.
The Biden administration is attempting to meet the child care problem in its Build Back Better plan, which would cap child care costs at 7% of income for kids up to age 5 on a sliding scale depending on the state of residence. As negotiations continue, parents who are scrambling should investigate the government’s ChildCare.gov website, which provides direct links to child care information and resources to help both families and providers stay informed about the pandemic and its impact on child care.