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…
Who is down-voting a simple description of the economic phenomenon that plagues the industry, a description noting that it doesn't work for anyone?
> 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 an…
I just think the term "Baumol's cost disease" may not be appropriate, as it seems much of the rise in wages in the childcare industry is due to minimum wage laws. I'm probably being overly pedantic.
How is a backlog the sign of a market failure? If anything, this shows a responsible way to manage demand while still maintaining power over the transaction. It also serves as a subtle threat to parents: "Cooperate, or we will send you on your way and contact the next person on the waiting list".
Also: Didn't Nintendo set out to create these dynamics with their console launches? Don't they intentionally manage overhead by creating a waiting list?
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 an…
I just think the term "Baumol's cost disease" may not be appropriate, as it seems much of the rise in wages in the childcare industry is due to minimum wage laws. I'm probably being overly pedantic.
If that is the case that min wage laws are a major cause then it is definitely a case of baumol, because the wages would be increasing beyond the underlying productivity due to external factors. We expect wages to rise with gains in productivity, but the sectors of the economy that don't have any gains will necessarily increase along with the ones that do, because of labor market competition, minimum wage laws, etc. It puts a strain on those industries, just like we are seeing in child care
I guess that's the state of the world today, where actual violence is rare enough that people start calling things that don't cause any bodily harm with the same term.
Question: if I stop paying my taxes will the sheriff come with guns and toss me out? How many people want to find out? This happens with social security and other taxes too, just usually takes a bit longer and they wait until you owe a lot more. The violence is there, it's just under the polite veneer of pay up or get got.
Depends on the kind of taxes you pay. They can put a lien on your house, garnish your wages, etc. Eventually, sure they may put you in prison, but generally they aren't going to hurt you doing it unless you try to hurt them. You're just renaming coercive measures violence.
Is it not a service that can be provided by someone outside of the immediate family? Should those caregivers not be paid? If yes to both, that is a market. If you provide it as an entitlement, you still need some mechanism to know how many (coarsely put) units of child care to produce. [*edit] for the down-voters, I'm curious what is your disagreement here?
The government can step in to fund areas that shouldn't be a free-for-all market. Parents struggling to pay for childcare is the government saying a parent's job is to stay at home if they can't cover childcare. It's a big issue in the UK and likely to be key in the next election as prices have gone sky-high.
There's still a market there. There's demand which will be HIGHLY sensitive to the price government sets, and labor which is in many OECD economies in short supply.
Is it not a service that can be provided by someone outside of the immediate family? Should those caregivers not be paid? If yes to both, that is a market. If you provide it as an entitlement, you still need some mechanism to know how many (coarsely put) units of child care to produce. [*edit] for the down-voters, I'm curious what is your disagreement here?
I would guess that some people are disagreeing that this particular service is seen by most purchasers of it as a commodity. Others are probably disagreeing because they're conflating "market" with "free market", and this sort of service has a bunch of constraints from all sides.
I don't know what to tell them. It is basically a commodity, especially for young children there isn't a lot of differentiation once health and safety concerns are taken care of as there isn't much "enrichment" a daycare can realistically supply for an infant or toddler. Moreover, any provider of a service like this will have to compete on the market for care-givers to do the labor.
> 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…
$540/week for 2 kids is a steal where I am. Local costs are >$600/wk for two kids near us, and I have friends in other metros that are closer to $800/wk. Nannies are more like $1k/wk no matter the family size.
How is a backlog the sign of a market failure? If anything, this shows a responsible way to manage demand while still maintaining power over the transaction. It also serves as a subtle threat to parents: "Cooperate, or we will send you on your way and contact the next person on the waiting list". Also: Didn't Nintendo set out to create these dynamics with their console launches? Don't they intentionally manage overhe…
Generally in economics, if there is a waitlist, then the business is not charging enough. Hence a failure.
The reasons for this failure are discussed by other people here.
One thing to keep in mind is that this is almost exclusively a US problem.
Nearly all other countries have significantly more time off for infant care. And as infant care is the most expensive part of daycare most other countries don't have such issues (toddlers subsidize infants in most daycares)