Why is childcare so @&%*! Expensive?
Ever looked at your bank account and seen one glaring cost balloon before your very eyes? A credit card charge or transfer titled “childcare” that seems to cost more than you spend on groceries? If you’ve been paying attention to the news lately, you know you’re not alone: the math ain’t mathin’ for parents across the country. So why is it so expensive – are caregivers and daycares just rolling in dough? Here’s what’s really going on with the runaway costs of childcare.
Running a daycare is expensive
You know how much comes out of your bank account each month to pay for your child’s daycare. You see loads of toddlers tumbling into the space each morning. That seems to add up to a lot of money, doesn’t it?
The truth is it’s expensive to run a daycare center, and the margins are surprisingly slim. Childcare doesn’t scale well (turns out children aren’t products!), and several factors make running a daycare an expensive, per-child cost.
Your child’s daycare tuition goes to:
Meeting legally mandated adult-to-child ratios (aka, the more children, the more staff needs to be hired, and payroll is a big expense for any business)
Staff salaries
Rental of space (the price of which can vary widely depending on where you are, but which is more expensive than most normal commercial spaces)
Fire suppression systems
Child-safe materials
Higher insurance premiums
Paid planning time
Payroll taxes
Workers’ comp
Health insurance (if offered)
Turnover costs (which are huge in childcare)
Insurance, licensing and compliance
Mandatory trainings
Inspections
At the end of the day, the daycare workers (who you may adore and wish got all of the piles of money you pay) are among the lowest-paid professional groups nationally. But daycares have to follow very strict legal guidelines about how much they can “optimize” expenses and still maintain decent quality – and follow the law.
On top of that, since a daycare is a business, there are costs for administrative services and additional staff. Data shows that most daycare centers operate on 2-5% margins, which is not the kind of numbers you are looking for if you’re trying to strike gold.
Hiring a babysitter or nanny can also feel expensive
So, you think, if a daycare is expensive, why don’t I just pay someone 15 bucks an hour like my neighbor does? You look into using a childcare service or nanny agency for peace of mind in a vetted nanny and find that $15 doesn’t get you far. What gives?
Historically, babysitting and nannying has been treated as side gigs for high schoolers looking to make a little extra cash, but they are forms of professional childcare in their own right. Most in-home providers, especially in urban areas, are showing up as reliable, trained, experienced professionals dedicated to the welfare and development of their charges.
Another issue is that so many of these jobs are paid off the books, which isn’t just illegal, it hurts both you and your sitter in the long run.
When you hire childcare through a childcare service or nanny agency and pay that service a price “per hour”, this is not the total ending up in the caregiver’s pocket. That hourly rate covers:
The sitter or nanny’s hourly rate
Payroll taxes
Liability insurance and worker’s comp
Background checks and vetting
Software charges if they have an app or similar
Backup coverage
Agency overhead
Legal risk
So when you’re eyeing your neighbor’s $15/hr cost, what you’re not seeing is risk, liability, and, uhm, tax fraud. (Plus, if you’re working with a good nanny agency, they’ll have found an experienced caregiver who suits your particular family, and hopefully they pay this caregiver a competitive wage for all they bring to the table!)
The childcare system is broken
Another thing you may have been hearing lately is that “the system is broken”. In other countries, for instance, childcare is more affordable because the government subsidizes the service. This means they can still uphold high standards of child-to-adult ratios and safe spaces but only pass a fraction of that cost on directly to the parent.
In contrast, currently in the US:
Parents pay directly
Workers are often underpaid or paid without other employment security like payroll taxes, health insurance, and Social Security
Providers barely break even
Basically, the long and short of it is, if you feel like childcare is a big expense, you’re not wrong. We understand that parents are frustrated – we hear it directly from so many of you.
For over 15 years, we’ve been trying to work out the equation of recognizing the professional status of nannies and sitters while also making it possible for parents to hire them. The problem rarely lies with the individual caregiver, or with the organization facilitating care, whether that’s a daycare or a service provider. This is a discussion that needs to be continued, and an endeavor worth working on. Until then, hang in there, parent! And if you have thoughts or ideas about the cost of childcare – send us a message on Instagram or Facebook, we’d love to hear your thoughts!
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