Press Release Economic Crisis and Recovery Health and Social Programs United States

STUDY: Proposed Federal Child Care and Pre-K Investments Would Create $60 Billion in Gains for Businesses, State Revenues

March 21, 2022

Contact: McKenzie Maxson (TCF) or KL Conner (CEPR), 937-789-4606 (TCF) or 202-281-4159 (CEPR)Mail_Outline

New 50-state analysis finds federal child care and pre-K investments would allow 3 million parents to return to work or increase hours, boosting parental earnings and economic output by $48 billion annually

(New York, NY) — A new study published today by The Century Foundation and Center for Economic and Policy Research finds that families, businesses, and state governments would see tremendous economic benefits from the passage of federal child care and pre-K legislation, with annual parental earnings increasing by $48 billion. In addition, the study finds that employers and state revenues will also benefit from reduced business disruptions, to the tune of $60 billion annually, and from the expansion of the child care sector and jobs, to the tune of $30 billion annually. 

“The pandemic has only highlighted a decades-old issue: the United States does not have a child care and early education system,” said Julie Kashen, TCF director of women’s economic justice and senior fellow, and one of the report’s authors. “Families are struggling to meet the high cost of care, while facing rising costs of other necessities, and it’s harder than ever to find quality care when and where they need it. But this isn’t just a problem for families—it’s holding businesses and our economy back. Our study shows that federal investments in child care and pre-K are a win-win-win. It’s arguably the single most important thing we can do for families emerging from the pandemic and returning to work.”

Impact of Child Care, Pre-k Policies on Labor Force Participation + Earnings

  • Roughly 3 million parents—mostly mothers—will enter the labor force or increase their work hours nationally, generating an additional $48 billion in annual earnings
    • About 1.1 million parents would join or rejoin the labor force, and another 2 million would increase their work hours
  • On a state-by-state basis, the annual earnings increase among parents ranges from around $70 million in Vermont and $190 million in West Virginia to $1 billion in Arizona and $4.5 billion in Texas

Impact on Businesses and State Revenues 

  • Employers would save $46 billion annually from reduced care-related turnover and absenteeism
  • Annual state tax revenues would increase by more than $13 billion

Impact on Child Care Sector + Jobs

  • Investments would create or support roughly 850,000 jobs in child care nationwide, yielding more than $30 billion in new annual labor income
  • Increases to the child care workforce will range from 16.1 percent in Alabama to 175.4 percent in Louisiana

“Even before the pandemic, businesses faced substantial losses when parents had to leave work due to child care disruptions,” said Julie Cai, an economist at Center for Economic and Policy Research and one of the report’s authors. “A significant federal economic package would substantially reduce disruptions, leading to an annual $46 billion in economic gains for businesses as well as an additional $13 billion in state income tax revenue.”

When the pandemic began, the child care crisis only worsened, leaving parents with few options and creating ripple effects throughout our economy. Lack of access to stable child care has serious consequences for families, and particularly mothers, including reduced working hours, lost promotions and raises, and leaving the workforce altogether. Black, Latina, Indigenous, and immigrant mothers face the most acute consequences, as racism compounds these work-related challenges, and working-class mothers face additional barriers. Even as the economy has improved, employment among prime age working-class mothers of young children remains lower than it was pre-pandemic, and the employment gap between mothers with and without bachelor’s degrees has grown by over 25 percent. 

Crucially, the child care and pre-K policies passed by the House would also address the significant disconnect between the high cost of child care and the low wages educators and child care staff are paid. Retaining a talented child care workforce has been extremely difficult, as early educators and staff (nearly all of whom are women, and disproportionately Black and Latina women) are underpaid and receive few to no benefits. Prioritizing child care and pre-K in the economic package would allow for better retention and training of additional early educators and care providers to meet the significant demand, as well as reducing costs for families. 

As the pandemic lingers on, the child care sector remains one of the hardest hit industries. If implemented, the report’s authors write, the child care and pre-K policies included in the Build Back Better Act would have a tremendous positive impact on two generations of Americans while also bringing significant gains to our economy that will touch all of our lives.


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