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Day care is one of the most important economic issues of our time

Babies playing with toys indoors at a daycare. (iStock)
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At this point, it seems pretty clear that our 20th-century institutions are failing our 21st-century families.

Maybe the best way to tell is this: In 1990, 74 percent of American women between the ages of 25 and 54 either had a job or were looking for one, the sixth-highest rate among 22 rich countries. By 2017, though, that number had risen to 75 percent, by then the fourth-lowest share among the same group of wealthy nations.

What in the name of Rosie the Riveter is going on? Well, it’s hard to say for sure, but it seems like the fact that our educational system wasn’t set up with dual-earning households in mind is a big part of the problem. Parents, after all, are on their own in those first five years when it comes to finding someone to watch their kids while they’re at work. Which, if they aren’t lucky enough to live near extended family members who can help, means one thing: day care. That, though, isn’t cheap. In fact, as Democratic presidential candidate Sen. Elizabeth Warren (D-Mass.) points out, day care costs more than in-state college tuition does in over half the country. It should be no surprise, then, that a lot of working mothers — and it almost always falls on the mothers — end up not working anymore to take care of their kids instead. It can seem like the smart (or only) choice in cases where their after-tax earnings wouldn’t even cover the cost of child care.

Warren proposes universal child care, paid for by tax on ultra-millionaires

This is bad for moms who want to work, and for the economy that’s losing them. To say nothing of the big day-care bills that families are stuck with — which, worst of all, they incur before they’re anywhere near their peak earning years — if both parents do decide to keep working outside the home. Fortunately, though, there’s a simple enough solution to all this: subsidizing and expanding child care. We know this can work, because it has in other countries, even ones that have much more traditional gender roles than our own. Take Japan. It’s infamous for how inhospitable its “salaryman” corporate culture is toward female employees. That has started to change, though, after the government finally figured out that helping women who want to work do is is not only good for them individually, but also for the country’s (still somewhat stagnant) economy. So it has built more day-care centers, and exhorted companies to promote more women. That last part admittedly still has a long way to go — most of Japan’s new female workers are only part-time — but at least a lot of them are coming back. It’s gotten to the point where Japan, which only had 64 percent of its 25-to-54-year-old women in the workforce back in 1990, actually has a higher share than we do today.

All of which is to say that Warren’s proposal to subsidize day-care on a sliding scale so that it’s free for couples making $50,000 or less, and no more than 7 percent of their income for everybody else makes a lot of sense. It would give parents some help when they needed it the most — it’s the financial stress of having kids, rather than kids themselves, that seems to be behind the rise of any dissatisfaction among parents — and provide the economy with a boost too. Indeed, as Slate’s Jordan Weissmann reports, Moody’s Analytics estimates that, by keeping more women into the workforce, the plan would make the economy grow by an extra 0.8 percent over the course of a decade. Now, that may not sound like much, but it’s actually pretty good as far as policy changes go. As point of comparison, they only think that the Trump tax cuts would have added half that much to growth even if they’d been paid for, which, of course, they weren’t.

That said, there are still three big questions here:

1. Could we create enough new, high-quality child-care centers to meet the demand for them? Just like good day care can make a lasting difference in a child’s life, bad day care can too. That, at least, is what Quebec has shown us. It set up a system to subsidize child care very much like what Warren wants to do, only more generous: It set costs at first $5-, and then $7-a-day for all parents regardless of income. Which, in a lot of ways, was a success. The number of high-quality day-care centers nearly tripled, and the number of women in the workforce went up as well. The dark cloud to all of these silver linings, though, is that even this increase in the supply of child-care wasn’t anywhere near enough to keep up with the demand for it now that it was so heavily subsidized. Lots of kids, then, ended up in home-care centers that didn’t meet the same standards. The result, economists Michael Baker, Jonathan Gruber and Kevin Milligan have found, is that while their test scores later in life were pretty much the same, many of the boys who went through this program ended up having more behavioral problems and less life satisfaction by the time they were teenagers.

Warren, for her part, says that she would only allow subsidies for day-care centers that did pass muster — but would there be enough of them?

2. Would day-care costs spiral out of control? Maybe the biggest flaw in Warren’s plan is that there’s no obvious cost-control mechanism. Parents wouldn’t have any incentive to “shop around” since their costs would be capped, providers wouldn’t have any reason to control their own costs since their customers wouldn’t care, and the government wouldn’t be able to pressure them to do so since it wouldn’t be directly running day-care centers itself to compete with them. Add it all up, and there’s a real chance that Uncle Sam would have to spend a lot more than the $1 trillion that Warren thinks it would over the next 10 years to keep child-care affordable for everyone.

3. How many more women would work? This is hard to predict, because it depends on so many things. Those include how expensive child care is where they live, how many of them would want to work if it was cheaper, and what kinds of jobs are available. For all of these reasons, it’s hard to generalize from any one experience, but we do know that Washington D.C.'s recent experiment with universal pre-K seems to have increased women’s workforce participation by a full 10 percentage points. It’s enough that Warren thinks the taxes women will pay on money they wouldn’t have made if there hadn’t been cheap child care would cover about 30 percent of the program’s total costs.


These are the types of things, that whether it’s Warren’s plan or something else, we’re going to have to answer we want to come close to reaching our economic potential. It’s not 1950 anymore. It’s about time we figured that out.