FatCamera | E + | Getty Images
Pushing for a higher federal minimum wage could help the underpaid, especially childcare workers.
However, increasing this minimum wage could also make childcare unaffordable for many families.
This is the catch-22 policymakers now face as they attempt to rebuild the economy after the Covid-19 pandemic, according to recent research by the Bipartisan Policy Center, a Washington-based think tank.
“The childcare business model is broken and Covid taught us that,” said Linda Smith, director of the early childhood education initiative at the bipartisan Policy Center.
More from Personal Finance:
The minimum wage of $ 7.25 cannot pay all bills in any state
What Delaware’s move to a $ 15 minimum wage would mean
Data suggests that there is an early end to the fringe benefits that don’t drive job hunting
In addition, raising the minimum wage could create a “vicious circle with no end in sight,” she said.
“When parents can no longer pay, basically more parents are excluded from childcare, not access to it,” said Smith.
The state minimum wage is currently $ 7.25 an hour. However, lawmakers have proposed increasing this hourly rate up to $ 10 per hour or up to $ 15 per hour.
In 2020, the average hourly wage for childcare workers was $ 12.24 an hour, or $ 25,460 per year. That’s below the federal poverty line of $ 26,200 for a family of four, according to the Bipartisan Policy Center.
Raising the minimum wage to $ 10 an hour would not help most childcare workers, according to the study, as 84% of these professionals already earn more than that rate. The remaining 16% earn within $ 1 of the proposed $ 10 rate.
However, a minimum wage of $ 15 an hour would spur more childcare workers as 71% of professionals now earn between $ 10 and $ 14 an hour. Another 16% would see a 50% wage increase as they are now making less than $ 10 an hour. Meanwhile, 9.8% earn wages within $ 1 of the suggested hourly rate of $ 15 and 3.9% earn more.
Many families are already having a hard time covering childcare costs, according to a recent survey by the bipartisan political center and Morning Consult.
Stabilizing childcare means putting money into some sort of grant or contract, and this, in turn, can help with staffing issues.
Director at the non-partisan Policy Center
About 47% of parents said that at most they can afford to pay less than $ 200 for childcare per week. Respondents most likely to fall into this group included parents below $ 50,000 and service and commercial workers.
Therefore, with regard to a minimum wage increase, the question arises as to what effect such an increase would have on the running costs of childcare facilities and who would pay for it, Smith said.
“Stabilizing childcare means putting money into some sort of grant or contract, and that, in turn, can help with staffing problems,” said Smith.
One way to offset these costs is with the Child and Dependent Tax Credit, which has been expanded for 2021 under the American Rescue Plan Act. The credit allows taxpayers to offset some of the expenses they incur while working or looking for a job and to pay for the care of a loved one.
However, according to the Bipartisan Policy Center and Morning Consult survey, 48% of parents said they didn’t know they could claim more childcare costs on this year’s tax return.
Parents were also somewhat divided on whether they would prefer a childcare tax refund only or a combination of government grants and tax refunds.
Ideally, companies should also get involved in making childcare more accessible as this will benefit them too.