Cengiz Adabag News: Family Finances


Showing posts with label Family Finances. Show all posts
Showing posts with label Family Finances. Show all posts

Wednesday, November 1, 2023

As child care costs soar, more parents may have to exit the workforce

 The soaring cost of child care in recent years has created an alarming situation where some parents find themselves unable to afford working. According to a recent report from the Bank of America Institute, as of September, the average household expenditure on child care surpassed $700 per month, marking a 32% increase from 2019. These exorbitant expenses are forcing numerous parents to exit the workforce, opting instead to care for their children themselves.

As child care costs soar, more parents may have to exit the workforce

Simultaneously, families that do manage to pay for child care are often dipping into their savings, a trend that could potentially hamper economic growth, as noted by BofA. The report emphasizes that while their data only reflects payrolls deposited into Bank of America accounts, the decline in spending still indicates the likelihood of working parents leaving their jobs due to rapidly escalating child care prices.

Child care costs encompass the out-of-pocket expenses parents incur for daycare, babysitters, or nannies. These costs typically diminish or vanish once a child enters preschool or kindergarten, typically around ages 3 to 5.

A study by ReadyNation in February estimated that the U.S. economy suffers a staggering annual loss of $122 billion when parents either quit their jobs or reduce their working hours to stay home with young children. Inflation and a recent reduction in federal funding are exacerbating the situation. The 2021 American Rescue Plan Act (ARPA) allocated nearly $40 billion to child care centers nationwide, aiming to stabilize their operations during the pandemic and keep costs affordable for parents. However, these funds expired on September 30, leading to a further spike in child care expenses.

Experts warn that child care service costs are poised to rise even higher, pushing the nation closer to a concerning scenario referred to as the "child care cliff." Currently, approximately two-thirds of families requiring child care already allocate over 20% of their annual household income to cover these expenses, according to Care.com.

In response to this crisis, Democratic lawmakers in Washington have introduced the Child Care Stabilization Act (CCSA) in an attempt to restore some of the lost ARPA funds. The legislation proposes an annual allocation of $16 billion in mandatory funding to child care centers for the next five years, among other provisions. Advocates of the bill cite a study by The Century Foundation, a progressive public policy group, which estimated that households could lose $9 billion in annual earnings due to parents leaving work or reducing their hours to care for their children.

Despite the urgency of the matter, the CCSA faces a challenging path in Congress, with Republicans opposing the legislation, leaving the fate of affordable child care hanging precariously in the balance.

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