The annual tuition for a child between the ages of three and six at a Montessori preschool in the northeast is almost $20,000, and that’s for a day that ends at five o’clock. Most likely, it’s a good school. The fact that the teachers in charge of those classrooms at that school and thousands of others around the nation make a median wage of about $14 per hour is what sticks out, though. The numbers don’t add up, and they haven’t for a while.
The childcare market in America is currently estimated to be worth $50 billion, which sounds like an unhealthy industry. It isn’t. That figure hides a system that is both unaffordable for families and financially unfeasible for the caregivers; as Janet Yellen once stated, this combination is a classic illustration of a broken market. For infant care, the typical family spends over $1,300 per month. Two children in daycare are more expensive than rent in eleven states. However, the employees who keep those centers open are eligible for public assistance at rates that would surprise most people; roughly half of the early educator workforce is enrolled in some kind of government safety net program.
The profit, if any, flows in a particular direction. KinderCare, Bright Horizons, and Primrose Schools are examples of large investor-backed chains that control about 10% of the licensed market and oversee margins of 15% to 20%. Private equity owns eight of the eleven biggest childcare chains. They focus on higher-income families in order to maintain those returns because state and federal subsidies are insufficient to cover the out-of-pocket expenses of wealthier parents. As a result, children are sorted by their parents’ income in a market that is nearly as effective as a policy intended to do just that.
This reasoning was momentarily disrupted by the pandemic. Between 2020 and 2023, the federal government invested over $50 billion in the childcare industry, reaching about 220,000 providers. Although it wasn’t flawless, it kept workers employed, stabilized centers that were on the verge of closing, and provided some advocates and researchers with an idea of what a properly funded system might look like. The funds eventually ran out. When the aid ended, some states lost between one-third and one-half of their childcare options, impacting an estimated 3.2 million children and resulting in an estimated $10.6 billion in lost economic activity per year. The date of the funding cliff was known well in advance, so it wasn’t unexpected, but the federal government did little to address it.
It’s difficult to ignore the fact that this isn’t a brand-new issue. President Nixon vetoed a bill that would have established a national childcare system in 1971, citing concerns about the American family. This was the last time the U.S. government took childcare seriously as a national priority. Since then, policy has been influenced by the precedent he established, which holds that childcare is a private matter rather than a public one. Additionally, it coincided with a significant increase in the number of women entering the workforce—a change that supply-side policymakers never fully considered.
Some models are effective. The Lanham Act provided funding for top-notch facilities during World War II, with parents paying between nine and fourteen dollars a day. Instead of just subsidizing private operators, New York City created partially public infrastructure to build universal pre-K for 70,000 four-year-olds in twenty months. Through a special pay equity fund, Washington, D.C. increased childcare workers’ wages by up to 40% without increasing family expenses. These experiments are not utopian. They took place. Simply put, no one built on them.
There is ongoing debate over the more fundamental question of whether childcare is a public good or a commodity. Corporate chains want the market to continue. Supporters want broadly accessible, quality-controlled, subsidized care that is independent of household income or zip code, similar to what the military offers its families. There is no chance of victory for either side. Meanwhile, educators with degrees in child development are quitting the field because, as one former Portland daycare worker put it, “being worked to the bone for $14 an hour isn’t something anyone sustains for long.” Parents in rural Indiana, for example, are piecing together half-day solutions.
