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Is there a market failure in child care?

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Re: Is there a market failure in child care?

#81

Post by xyzelement »

As a markets guy this logic makes sense, but as a parent it misses enough context to not be useful.

First, the market for child care that we face as individuals is one largely of our chosing. In a macro sense, we make choices to live close or far from family, to be in a close knit community or not, etc.

In a micro sense, are we comfortable with an off the books nanny coming to the house, or dropping the kids off at some illegal community grandma's house every day?

In NYC, no poor person deals with the "$150 just to get on the waiting list" type of child care. The people who engage with that are people who chose to raise kids in the city and want a certain type of "formal" daycare. These people also make enough that the cost/benefit obviously makes sense to them.

These are also people who would never use a broker because they don't consider daycare a fungible good. It's not like sourcing a trading venue for your sovereign bonds - by the time you are playing this game, you have very specific expectations about the philosophy of education, setting, religious context, etc.

Meanwhile, the poor people already have grandma living in the house, she gets SSI so the daycare is subsidized. And if there's no grandma in your house, there's one next door who'll keep an eye on your kid too for a couple of bucks an hour.

This is a very interesting example of where religious communities outperform the secular. For example in NYC is not uncommon to meet Orthodox Jews with 10+ kids. The secular can't relate to what it's like to have to deal with child care for 10 kids. But in those communities, it's routine - your family and neighbors help you out and you get through it. The fact that as seculars we fail to achieve that for ourselves is an interesting signal in my opinion.

Re: Is there a market failure in child care?

#82

Post by AllegedAlec »

lazyasciiart wrote: post #58
AllegedAlec wrote: post #8

Earlier quoted context omitted.

Pretty much. Parents in my neighborhood pooled together and made sure that one of them always had a day off to pick up the kids from school and home and feed them until the other parents got off work.

How many nine-month-olds were among that group?

None. This started after we started going to kindergarden. Before that my grandparents came over to fill in.

Re: Is there a market failure in child care?

#83

Post by notahacker »

ljf wrote: post #39
kube-system wrote: post #20

> Suppose that the parents have two children who need child care. That is $540 per week. The parent salary has to be at least $540 per week to make the choice of child care economical. But that does not take into account taxes. Even worse than that, it doesn’t take into account commutes, and the opportunity cost of not spending time with your own kids. If you make just enough money at work to pay for childcare, what…

I agree - but have seen many families have to make this choice, as having too big a gap in your CV (to look after their kids) will impact there employability down the line. It is also hard to stay current and to retain confidence in your ability when you are out of the working world. Don't get me wrong - stay at home parents have amazing skills and learn loads, but few employers see that as a benefit when you are loo…

> I agree - but have seen many families have to make this choice, as having too big a gap in your CV (to look after their kids) will impact there employability down the line.

This is true, but does raise a couple of obvious points.

First, if there are implied future earnings returns from working with young child, those ought to be factored into the calculations for returns to work in the OP (with appropriate caveats about possible cashflow problems).

Secondly, should it be affecting future employability? The few career paths where absolute commitment to work and track record of continuous improvement and networking seem absolutely necessary signals (like trying to make partner at an accountancy or law firm) tend to pay pretty well anyway. Other career paths should - in theory at least - be less contingent on continuity, or even offer realistic opportunities to continue to work or use work related skills part time and remotely.

Re: Is there a market failure in child care?

#84

Post by danielvf »

wjamesg wrote: post #10
Eumenes wrote: post #2

The failure to me seems in outsourcing your child to a daycare, vs parents having flexible schedules to actually take care of your kid (either 1 with PT job or staying home FT, or both with flexible jobs). I understand this isn't popular in our culture these days, but I imagine it has many positive outcomes for the child and family.

Working parents send their kids to daycare out of necessity, it’s not a matter of being popular. Two working parents is also a necessity for many economically. Not everybody has the income and thus the convenience of having a stay at home parent. In your words, this is a failure of the parent, but I disagree.

The cost of childcare services per child has a fairly hard floor on it. Working class families tend to have more kids in the US. Thus, the total expenses of childcare approx nets out around the same for a working class family as for an upper-middle class family.

But the "higher class" family has a lot of extra income to be earned by having two parents working vs one. So its often bad economics for a poorer family to work two jobs and pay for regulated childcare. And good economics for a rich one.

And this is how it works out in reality too. I checked a bunch of census stats, and the percentage of children in childcare facilities in the US rises steadily with family income. (interestingly enough, the percentage of children watched by their grandparents also rises steadily with family income too)

Re: Is there a market failure in child care?

#85

Post by jderick »

mlsu wrote: post #77

With nearly any of our social ills, the answer is housing. - The people taking care of children at daycare make pennies; most of the revenue goes to a landlord. It's very expensive because you can't just move the daycare 1.5 hours out to the outskirts of town; you actually need to pay for real estate near where people live. - Grandparents, extended family cannot afford to live near their working children. - Anyone wi…

Or even better, remote work.

Re: Is there a market failure in child care?

#86

Post by creaturemachine »

notch898a wrote: post #29
monero-xmr wrote: post #25

We paid a lot of money for childcare when there was a (possibly illegal) daycare a few apartments down with a lady watching a bunch of kids. She only wanted $500 a month but we paid $2000 to an expensive one. Imagine advocating for cut rate care for your own children . Considering I’m leaving my most priceless thing with strangers it isn’t crazy to me that it’s expensive.

A significant part of what you were paying out is liability insurance etc and not necessarily better care.

And some nice fat corporate profits. The lady down at the corner might not be as illegal as you think. Many jurisdictions allow for at-home day care, usually capped at a certain number of kids per caregiver, and it's much lower than the head-count at the corporate ones.

Re: Is there a market failure in child care?

#87

Post by wjamesg »

mariojv wrote: post #48

Costs are really out of control. My friends in a relatively low cost of living city (San Antonio, TX) are going to pay upwards of $1200/month for daycare for their soon to be 6 month old, once their family member providing childcare needs to return home. That's essentially an extra mortgage payment in this part of the state. There are also very long waiting lists, so long that my friends are encouraging families to g…

I pay $1200/mo per kid in NC

Re: Is there a market failure in child care?

#88

Post by ROTMetro »

notch898a wrote: post #7
vkou wrote: post #3

Earlier quoted context omitted.

Parents never did this when both of them worked. Grandparents did this. Unfortunately, these days, parents can't afford to keep living near the grandparents (because home prices have gone up too much, or because the grandparents are in a dead-end no-jobs town). Your options are to fix the housing market (By which, I mean, utterly destroy the value of existing homes[1]), or to make it possible for a single breadwinner…

Grandparents are now paid out via violence against the children (aka taxes) once they grow up. Why would they participate in raising the kid when the unspoken quid-pro-quo is no longer present and their benefits are guaranteed? There used to be significant bilateral benefit.

And this is super abused by older people that didn't even bother adding their own children to society. Childless and less expenses their whole life, then the same societal benefits provided in old age as provided to people that contributed to society via childrearing.

Re: Is there a market failure in child care?

#89

Post by blactuary »

Rafuino wrote: post #24
blactuary wrote: post #19

This is a classic case of Baumol's cost disease. There isn't really a way for productivity to increase in the child care sector, you're always going to need a similar ratio of workers to children, but those workers also need their wages to keep up with inflation. The way it plays out in the US is everyone loses: the employees are underpaid, the employers are low-margin, and it is still too expensive for families. Chi…

Sounds like it's an industry that should be provided as a public service then (or at least subsidized), not something that a free market can sustain. https://www.nytimes.com/2021/10/06/upshot/child-care-biden.h...

I agree, given what I laid out it's not something the market can provide

Re: Is there a market failure in child care?

#90

Post by blactuary »

anonymouskimmer wrote: post #70
blactuary wrote: post #19

This is a classic case of Baumol's cost disease. There isn't really a way for productivity to increase in the child care sector, you're always going to need a similar ratio of workers to children, but those workers also need their wages to keep up with inflation. The way it plays out in the US is everyone loses: the employees are underpaid, the employers are low-margin, and it is still too expensive for families. Chi…

> Baumol's cost disease. I don't think wages in the childcare industry are increasing noticeable relative to wages in other sectors. As a person mentioned elsewhere, other factors such as rental prices and insurance probably add more to the cost than wages.

Of course they aren't, like I said above the workers are way underpaid. The Baumol effect means that wages have risen more than the underlying increase in productivity, which like I said can't really increase in child care, you need X workers for Y kids, there's no productivity gains to be had.

And that's not on the workers themselves, it's just basic arithmetic.

Needing to increase the wages of the workers beyond any increase in productivity either means higher prices for parents or lower profits for the business. In this case we have both, which is why the market can't really sustain itself. Daycare companies have to give their workers some increase in wages over time, without getting more work out of them, but in order to charge parents even more than the already insane prices, they've held them down to some extent. So like I said, everyone loses.

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