“According to the U.S. Department of Health and Human Services (HHS), child care is considered affordable if it costs families no more than 7 percent of their income… In fact, on average, working families paying for child care spend about 40 percent more than what is considered affordable.”

- Rasheed Malik, “Working Families Spending Big Money on Child Care”

The above quote is based on a misreading of the “Final Rule”, an HHS document that addresses childcare affordability for low-income families only - specifically, families eligible for childcare subsidies through the Child Care & Development Fund (CCDF). To quote:

“Lead Agencies retain the authority to establish their initial income eligibility threshold at or below 85 percent of SMI [State Median Income]…According to the U.S. Census Bureau, the percent of monthly income families spend on child care on average has stayed constant between 1997 and 2011 (most recent data available) at around seven percent…. It is our belief that CCDF families should not expected to pay a greater share of their income on child care than reflects the national average.”

- Department of Heath and Human Services, Childcare and Development Fund (CCDF) Program. Action: Final Rule. Federal Register/Vol. 81, No. 190, Friday, September 30, 2016

In other words, the US Department of Health and Human Services took the position that families with incomes at or below 85% of their state’s median income should not have to pay more than 7 percent of their own income on childcare. This rule says nothing about what better-off families should pay. For example, over a third of US households earn more than $100,000 a year. These households can afford to pay more than 7 percent of their income on childcare. However, less affluent families may struggle, even if they’re solidly middle-class. Check it out:

Note that my hypothetical family with a take-home income of $5,000 a month can barely save anything for emergencies, retirement or the kids’ education after high school. Their budget would still be tight if they paid just 7% of their income on childcare, but at least they wouldn’t be teetering on the brink. Now consider parents with net incomes of just $2000 a month. Even if these low-income families could afford to pay 7 percent of their income on childcare - a doubtful proposition - that wouldn’t get much childcare.

Families and children are defined as low-income if the family income is less than twice the federal poverty threshold. Under this definition, a family of four with two children and an annual income of less than $50,000 would be considered low income. There isn’t a standard definition for middle-income, but in this post I’m defining middle-income as between two- and four-times the federal poverty threshold. For a family of four, that would be between $50,000 and $100,000 a year.

Bottom line: Few low-income families can afford to pay for childcare in the US. The federal government should fully subsidize their childcare. Many middle-income families struggle to pay the full cost of childcare. The federal government should help them out. However, there is no need for the federal government to subsidize the childcare of affluent families - that is, those with incomes higher than four times the poverty threshold.

Next: Childcare Subsidies, Part II: The Bold Centrist has a Proposal

References:

“Fact Sheet” Office of Child Care/Department of Heath and Human Services

“Percent distribution of total annual expenditures by major category for all consumer units, 2016–19, Table B”. Consumer Expenditures, 2019. Bureau of Labor Statistics

 “United States Demographics of Low-Income Children” National Center for Children in Poverty

“Why the federal government should subsidize childcare and how to pay for it” Grover J. “Russ” Whitehurst/Brookings Institute March 9, 2017

“Working Families Spending Big Money on Child Care” By Rasheed Malik/American Progress June 20, 2019