High-quality child care gives parents the flexibility to pursue work or additional education, but the costs of it are straining families.1 Since 1990, child care expenses have more than tripled, outpacing wages, groceries, and even housing.2 Child care is one of the most expensive items in family budgets. The median amount parents pay has reached $800 per month, increasing to $1,100 for those who require 20 hours or more of child care each week.3 These costs are typically around 50 percent to 70 percent of families’ total housing payments, often making them the top expense for households.4
Learn more about the cost of child care in the United States
High child care costs can have disastrous effects, particularly for lower-income families already struggling to make ends meet. Analysis from the Center for American Progress finds that the cost of care has significant impacts on the financial security of families, pushing many into lower income brackets or even into poverty. This can force families to turn to a safety net that is not equipped to withstand the consequences of the child care crisis. While ensuring access to such assistance is essential, policies such as the Child Care for Working Families Act (CCWFA) that would expand access to affordable, high-quality child care have the potential to protect families from falling into poverty and strengthen the middle class.5
Key findings on the child care affordability crisis
- Among impoverished families who have children under age 6 and who pay for child care, 35 percent were pushed into poverty by these expenses, totaling about 134,000 families per year.
- Each year, an average of around 446,000 middle-class families are pushed into a lower income quintile by child care costs.
- The CCWFA could significantly reduce or eliminate these costs for the large majority of low- and middle-income families and could cut the median cost of care that families pay annually by two-thirds, from roughly $7,500 to $2,500.
- The CCWFA could reduce child care expenses for nearly 3.4 million families with young children each year, and nearly 5.4 million families who do not currently pay for care could be eligible for a full subsidy.
Child care expenses harm low-income families most
CAP analysis updating research published in 2017 by the University of New Hampshire Carsey School of Public Policy finds that child care expenses push 35 percent of impoverished families with young children who pay for care into poverty, totaling about 134,000 per year. (see methodology for details)6 This percentage of families remains at a similar level to the original analysis, which suggests that the financial burden of child care expenses continues to present a significant problem for American families; this is the case even though the number of families pushed into poverty from child care expenses each year fell from 177,000, reflecting an overall decrease in poverty since the early- and mid-2010s.7 Living in poverty during early childhood can negatively affect children’s health and developmental outcomes, thus undermining the benefits of child care.8
Impact of the child care affordability crisis on family poverty rates
35%
Share of impoverished families with young children paying for child care who are pushed into poverty by these expenses annually
134K
Number of families who are estimated to be pushed into poverty by child care expenses annually
Of the more than 5.1 million families with young children that pay for child care each year, on average 2.2 million—or about 43 percent—pay unaffordable rates,9 defined by the U.S. Department of Health and Human Services (HHS) as more than 7 percent of income.10 Among families in the bottom quintile of the income distribution, 70 percent pay unaffordable rates for child care, meaning poorer families are more likely to struggle to find affordable options.11 In fact, families pushed into poverty from these expenses typically spend almost 28 percent of their income on child care.12
High child care costs increase strain on safety net programs
To help plug the gaps in household budgets caused by unaffordable child care costs, families pushed into lower income brackets can turn to government safety net programs for assistance with other basic living expenses. Government transfer programs such as the Supplemental Nutrition Assistance Program (SNAP),13 Temporary Assistance for Needy Families (TANF),14and federal rental assistance programs account for the expenses families incur from child care costs and deduct them from an applicant’s income.15 These deductions allow low-income applicants to factor in child care costs to lower their reported income, which increases the benefits they receive. For instance, for every $10 in child care costs that SNAP applicants claim, their SNAP benefits increase by $3.16
However, the safety net system is not designed to bear the weight of the child care affordability crisis. Despite the vital lifeline that many programs provide low-income Americans, they often reach only a fraction of those eligible to receive assistance. Administrative burdens at the federal and state levels, such as strict eligibility standards, constant funding constraints, and complex application requirements, leave many families without help.17
A 2023 study by the Urban Institute found that at an 18 percent participation rate, TANF had the lowest participation rate across seven safety net programs.18 Public and subsidized housing programs reach 25 percent of eligible families, yet the process of receiving benefits often takes years due in part to lengthy wait lists.19 SNAP has a comparatively high participation rate of 56 percent,20 but data show few applicants deduct child care expenses from their income: Only 2 percent of families receiving SNAP benefits claim the dependent care deduction, despite 66 percent of participants having a child in the home.21 While recent efforts to address administrative burdens—including steps to streamline eligibility and the application process for housing assistance programs22 and SNAP23—have made important progress toward making these programs easier to navigate, more can be done to ensure that families receive the support they need.
The safety net system is not designed to bear the weight of the child care affordability crisis.
Several programs provide no-cost child care for low-income families, yet they do not reach all eligible families. Head Start, the nation’s longest-running publicly funded early learning program—which provides children in poverty with critical access to high-quality early learning opportunities, intervention services, and wraparound family supports—served around 35.4 percent of poor children ages 3 and 4 in 2023.24 Early Head Start, which provides services to infants, toddlers, and pregnant women, served only 10.7 percent of poor infants and toddlers in 2023.25 The Child Care Development Fund (CCDF) program, which supports low-income families with subsidies for child care expenses, served only 20 percent of eligible families in 2022.26 To address some of these gaps in service, a 2024 final rule making regulatory changes to the CCDF will require states to limit copayments to 7 percent of family income and will encourage states to waive copayments for families who are 150 percent or below the federal poverty line, families who have children with disabilities, and families who are homeless.27 The rule also simplifies and streamlines enrollment to increase accessibility,28 but more funding is needed to properly meet demand.
Additionally, the child tax credit (CTC) and the child and dependent care tax credit (CDCTC) are benefits provided through the tax code that are designed to help families manage the high cost of raising children.29During the height of the COVID-19 pandemic, the maximum amount of these credits for one child increased to $3,600 for the CTC and $4,000 for the CDCTC, and both credits were made fully refundable; however, these enhancements have since expired, and the credits have returned to their prepandemic structure.30 Due to being partly refundable, the CTC still helps many low-income families, but it does not reach some of the poorest families in need.31 Meanwhile, the CDCTC is nonrefundable, meaning families in poverty who often do not owe income taxes cannot benefit from it since it does not contribute to a tax refund.32 While these credits should be changed to increase the assistance provided to low-income families, they are not a comprehensive solution. Any proposal to solve the child care crisis must include reforms to address supply-side problems that currently prevent families from finding a care arrangement that meets their needs.33
If more families had access to affordable, high-quality child care, safety net programs would spend less funds acting as a patchwork system of financial relief that fills household budget holes created by child care costs for families who may not otherwise be eligible for assistance. Food, income, and housing assistance programs are largely designed to help people facing financial difficulties at certain points in their lives, not as a necessity to raising a young child. Comprehensive, sustained investments in affordable and accessible child care would improve family financial security, reduce the rate of children living in poverty, and reduce strains on the social safety net system.
The CCWFA would make child care more affordable
To receive assistance from means-tested programs such as SNAP, housing assistance, and TANF, applicants must demonstrate that they are already struggling. This means that in the context of burdensome child care expenses, they are already paying for care and are being pushed into or near poverty without a guarantee they will receive the financial assistance they need. To minimize the risk of people falling through the cracks and remaining stuck in poverty, policymakers should increase access to affordable, high-quality child care. To that end, Sen. Patty Murray (D-WA) and Rep. Bobby Scott (D-VA) reintroduced the CCWFA in April 2023.34
Read more about the CCWFA
In addition to improving child care supply and quality; paying workers in the field a living wage; expanding access to preschool; and supporting the Head Start program by providing funding needed for full-day, full-year programming and higher staff wages, the bill offers a path to guaranteeing affordable child care.35 Its implementation would dramatically reduce or even eliminate the financial burden child care expenses impose on household budgets, particularly for those with lower incomes. As Figure 1 shows, the typical lower-, lower-middle-, and middle-income family could have their child care costs reduced to nothing.
How the CCWFA would reduce child care costs
The CCWFA would determine the amount of child care assistance a family receives based on a sliding income scale, detailed below. Those who earn less than 85 percent of the state median income for their family size would not pay anything for child care, while those making more than 150 percent of the state median income would pay no more than 7 percent of their family income.36 Specifically:
- Families earning up to 85 percent of the state median income by family size would not pay a copayment.
- Those earning between 85 percent and 100 percent of the state median income by family size would pay a copayment of between 0 percent and 2 percent of their total family income.
- Those earning between 100 percent and 125 percent of the state median income by family size would pay a copayment of between 2 percent and 4 percent of their total family income.
- Those earning between 125 percent and 150 percent of the state median income by family size would pay a copayment of between 4 percent and 7 percent of their total family income.
- Those earning more than 150 percent of the state median income by family size would pay a copayment not greater than 7 percent of their total family income.
While CCWFA eligibility requires that parents are engaged in an “eligible activity” such as part- or full-time work, job training, job search activities, or school, the bill also includes categorical eligibility for children with disabilities, children experiencing homelessness, children in foster or kinship care, and children who are eligible for other financial assistance programs.37
Under the CCWFA, the percentage of poor families pushed into poverty by child care expenses could fall from 35 percent to nearly 0 percent. (see Figure 2) Even if costs were capped at 7 percent for everyone, the HHS standard threshold of what is considered affordable,38 more than 12 percent of these families could still be pushed into poverty from these expenses.
This policy would also be important for middle-class families. In fact, roughly 446,000 lower-middle-, middle-, and upper-middle-income families are currently pushed into a lower income quintile each year due to child care expenses. (see Figure 3) This makes up 15.7 percent of all families with young children paying for care in the middle three-fifths of the income distribution.39 Capping child care expenses to 7 percent of family income could reduce the number of middle-class families pushed into a lower income quintile to around 241,000 and reduce to 0 percent the 43 percent of families with young children paying unaffordable rates for care per HHS standards.40 However, implementing the CCWFA would go beyond the 7 percent cap HHS suggests is affordable to reduce the number of middle-class families pushed into a lower income quintile by child care expenses down to an estimated 25,000, a nearly 95 percent reduction from the status quo.
Overall, the CCWFA could reduce child care expenses for more than 3.4 million families with young children every year.41 Median annual child care expenses could plummet by two-thirds, from $7,500 to $2,500.42 Families with lower incomes would pay even less, and an estimated 34 percent would not pay anything at all.43 The CCWFA also would make essential investments to address the insufficient supply of child care across the country to ensure families can access high-quality, affordable child care options that meet their needs, with a particular focus on increasing supply and capacity in child care deserts. The plan’s Building an Affordable System for Early Education grants would promote the stability of the sector through educator wage increases and benefits, stable funding to offset program operating costs, and support for states to expand access in communities facing particular shortages of child care options—including child care for infants and toddlers, care during nontraditional hours, and developmentally appropriate and inclusive child care for children with disabilities.44
How the CCWFA could affect child care affordability
$7.5K
Median annual child care expenses for families
$2.5K
Median annual child care expenses for families under the CCWFA
446K
Number of lower-middle, middle-, and upper-middle-income families who are pushed into a lower income quintile by child care expenses each year
+3.4M
Number of families with young children who could see their child care expenses reduced under the CCWFA every year
Nearly 5.4 million families with young children who do not pay for child care could be eligible for a full subsidy under the CCWFA.45 While some of these families may already receive child care assistance from another program such as Head Start or prefer another child care arrangement such as unpaid friend, family, or neighbor care, the CCWFA would expand family choice and increase flexibility in child care options. This is particularly important for millions of caregivers, disproportionately women, who have been forced out of the workforce or made other career sacrifices due to unaffordable child care costs or lack of access to professional care.46 Bold solutions are required to ensure that the care economy provides the freedom and flexibility that families need, and passing the CCWFA would mark significant progress toward that end.
Conclusion
Child care remains unaffordable and inaccessible for far too many families across the United States; these high costs alone push an estimated 134,000 families with young children into poverty each year. Various government assistance programs—as well as eligibility calculations that allow families to deduct child care expenses from their income—are critical supports for ensuring families with young children are able to fulfill their basic needs. However, the level of need for this assistance is far from being met. It should not be an accepted standard that lower-income families must rely on this system, often for years, just to afford access to quality care for their children. Using public investments in affordable care as a tool to combat poverty would make it easier to absorb the many expenses parents face during early childhood and would be more effective at reducing burdensome costs directly rather than depending on the safety net to pick up the slack. Investing in child care now will lessen the heavy load of these programs while strengthening the middle class.
The authors would like to thank Casey Peeks, Allie Schneider, Natalie Baker, Jared Bass, Emily Gee, Mimla Wardak, Carl Chancellor, Beatrice Aronson, Shanée Simhoni, Bill Rapp, and Keenan Alexander for their feedback and contributions. Additionally, the authors would like to thank Christopher Wimer from the Center on Poverty and Social Policy at the Columbia University’s School of Social Work and Marybeth Mattingly from the Federal Reserve Bank of Boston for their valuable review.
Methodology
The analysis in this issue brief updates analysis conducted in 2017 by Marybeth J. Mattingly and Christopher T. Wimer at the University of New Hampshire Carsey School of Public Policy. While the original fact sheet analyzed data from the U.S. Census Bureau’s Current Population Survey Annual Social and Economic Supplement (CPS ASEC) for 2011 to 2015, this brief uses data collected in the following years: 2017, 2018, 2019, 2022, and 2023, excluding 2020 and 2021 due to the COVID-19 pandemic’s impact on child care program closures and the temporary increase in resources provided to help families weather the crisis.47 Child care expenses are treated as a part of the work expenses category when calculating the supplemental poverty measure (SPM). To look at the impact of child care on poverty specifically, the value of total work expenses must be added to the resource measure, and then uncapped out-of-pocket child care expenses are subtracted out to create a new adjusted SPM. All incomes, resources levels, poverty thresholds, and expenses used in this analysis have been adjusted for inflation to September 2024 dollars.
When analyzing the impact of the CCWFA, the authors incorporated as many eligibility criteria as were available in CPS ASEC data, but some elements could not be included. Specifically, this analysis determined eligibility for a subsidy based on a parent’s employment status, job search status, age, whether they were in school, and if they were caring for a foster child. Other eligibility factors present in the CCWFA—such as enrollment in job training; using family or medical leave; or a household’s eligibility for SNAP, TANF, or the federal Special Supplemental Nutrition Program for Women, Infants and Children (WIC)—could not be determined through the available Census Bureau data, so some families that could likely receive a subsidy under the CCWFA were not captured. Additionally, the bill uses a sliding scale to determine parental copays based on income, but each segment of the scale may be subject to a range of copayments, such as families between 85 percent to 100 percent of the state median income being required to pay between 0 percent and 2 percent of their income. In these cases, the median percentage was used for each applicable family in the analysis, equaling 1 percent in this example.
Each income class was assigned to a quintile along the income distribution. The thresholds for the quintiles were calculated based on the incomes for all families, including those without children. Child care expenses were then subtracted from income to see how many families were pushed into a lower quintile.