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The Rising Cost of Child Care in the United States: A Reassessment of the Evidence

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  • Herbst, Chris M.

    () (Arizona State University)

Abstract

Anecdotal evidence suggests that the cost of child care in the U.S. has increased substantially over the past few decades. This paper marshals data from a variety of sources to rigorously assess the issue. It begins by using nationally representative survey data to trace the evolution in families' child care expenditures. I find that the typical family currently spends 14 percent more on child care than it did in 1990. This is less than half the increase documented in previous work. Interestingly, low-income families spend the same amount or less on child care, while their high-income counterparts spend considerably more. Despite this divergence, families at all income levels allocate the same share of income to child care as they did several decades ago. The next section of the paper draws on establishment- and individual-level data to examine trends in the market price of child care. The evidence suggests that after persistent, albeit modest, growth throughout the 1990s, market prices have been essentially flat for at least a decade. In the paper's final section, I analyze several features of the child care market that may have implications for prices, including the demand for child care, the skill-level of the child care workforce, and state regulations. A few findings are noteworthy. First, I show that child care demand stagnated around the same time that market prices leveled-off. Second, although the skill-level of the child care workforce increased in absolute terms, highly-educated women increasingly find child care employment less attractive than other occupations. Finally, child care regulations have not systematically increased in stringency, and they appear to have small and inconsistent effects on market prices. Together, these results indicate that the production of child care has not become more costly, which may explain the recent stagnation in market prices.

Suggested Citation

  • Herbst, Chris M., 2015. "The Rising Cost of Child Care in the United States: A Reassessment of the Evidence," IZA Discussion Papers 9072, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9072
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    References listed on IDEAS

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    Cited by:

    1. Herbst, Chris M., 2018. "The rising cost of child care in the United States: A reassessment of the evidence," Economics of Education Review, Elsevier, vol. 64(C), pages 13-30.
    2. Aaronson, Daniel & Dehejia, Rajeev & Jordan, Andrew & Pop-Eleches, Cristian & Samii, Cyrus & Schulze, Karl, 2017. "The Effect of Fertility on Mothers' Labor Supply over the Last Two Centuries," IZA Discussion Papers 10559, Institute of Labor Economics (IZA).
    3. Herbst, Chris M., 2018. "The impact of quality rating and improvement systems on families’ child care choices and the supply of child care labor," Labour Economics, Elsevier, vol. 54(C), pages 172-190.
    4. Herbst, Chris M., 2016. "The Impact of Quality Rating and Improvement Systems on Families' Child Care Choices and the Supply of Child Care Labor," IZA Discussion Papers 10383, Institute of Labor Economics (IZA).
    5. Boyd-Swan, Casey & Herbst, Chris M., 2018. "The demand for teacher characteristics in the market for child care: Evidence from a field experiment," Journal of Public Economics, Elsevier, vol. 159(C), pages 183-202.

    More about this item

    Keywords

    child care costs; child care demand; child care regulations; parental employment;

    JEL classification:

    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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