Childcare Costs Are Soaring, But Workers’ Wages Are Not

U.S. childcare costs have risen significantly over the past decades, leaving parents struggling to ensure quality care for their children and making ends meet.

But it’s not high wages of childcare workers that are at fault for the high costs. The reality is actually quite different.

Wage Paradox

The median hourly wage for childcare workers is just $14.60, according to research from the Federal Reserve Bank of Chicago, putting the job in the bottom 5% of all occupations in terms of compensation. Paychecks in the industry grew 5.5% between 2019 and 2023, per the Chicago Fed, amounting to a mere $0.76 annual raise, when adjusted for inflation. In comparison, cashiers, waitstaff, housekeepers, and retail workers all saw their hourly wages increase more over that period.

This reality plays into the persistent shortage of childcare workers. By the end of 2023, childcare employment still lingered 9% below pre-pandemic levels.

Generally speaking, greater demand for services can offset labor shortages by driving up wages and attracting more workers. But this didn’t happen here. So why have costs gone up so much if workers aren’t paid more?

Dried-up government funding and the need for a low worker to children ratio are weighing on costs too. Plus, cost increases are hard to absorb by parents, many of whom are already stretched when it comes to paying for care. But the labor shortage is driving childcare costs up anyway, creating a double-edged sword: Daycares can’t attract sufficient staff, and parents can’t find affordable care.

Care Crunch

Childcare isn’t just crucial for the next generation’s development. It plays a critical role in the U.S. economy, by allowing parents to be productive participants in the workforce and boosting economic output.

But the ranks may continue to dwindle. In 2023, the average monthly transition rate for childcare workers exiting the workforce was 6.5%, said the Chicago Fed, more than twice the rate for all workers (2.9%). This trend doesn’t just threaten one sector, it’s a problem for the entire economy.

Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!

Check it out

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

Communication of SoFi Wealth LLC an SEC Registered Investment Advisor

SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

SOSS24070801